01/22/20

Legacy Companies Are Not Stupid

Comes now one of my least favorite companies: Blue Apron. I have been a critic of Blue Apron for an extended period of time. Today, we talk disruption and its push back implications.

We have spoken of them thrice before:

Blue Apron Stormy Waters Ahead

Blue Apron And The Meal Kit Delivery Genie

Blue Apron V Red Apron

I will not whip up on Blue Apron as I have before. Today, I will use it for another purpose.

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01/11/20

Kickstarter Union — Woke Or A Joke?

It was 79F yesterday in the ATX and 46F this morning. We’ll see 60F by the afternoon. Winter is brutal in Austin By God Texas, y’all. Brutal.

So, I have been reading up on efforts to create unions at tech firms — talking to you Kickstarter, Uber, Google. While I used “Kickstarter” as the click bait title, there has been a lot of such activity in the tech world.

I am a huge fan of Kickstarter and the entire crowdfunding industry. It was an industry that was invented from the whole cloth and I love it, but as a company, their ham handed response to an effort to unionize their 160 person workforce has been a study in how not to do things.

Buzzfeed is another example of a company who saw the writing on the wall, read it, translated it, and acted upon it.

This union formation effort happens and is happening for a number of reasons:

 1. First, we are at full employment. When you arrive at full employment, the power at the negotiating table swings to the employee side. READ THIS AGAIN

This is the most basic, fundamental change in the market. If you ignore this simple fact, then you are hopelessly lost. Anybody who is resisting the creation of unions has to face up to this reality.

 2. Unionized employees get higher pay, better benefits, and better understanding of the employee-employer relationship.

When companies like We Work — and a slew of other SoftBank funded goliaths — layoff thousands of employees in a single day, workers are going to look for a port in that storm. When they arrive, they will be wet and pissed off. That pissed offness will generate energy.

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12/15/19

The Feel For Running A Business

There are a great many things in life in which there is an element of earthy knowledge that I call “The Feel.” The Feel is real.

In my own life, I’ve run businesses for more than 33 years and have advised others for 8 years, ran Army units for 5 years. One of the big differences I find is the comfort with which a CEO is able to settle into the job and run the business, not solely by feel, but with a sense of feeling they know what they are doing.

I experienced this notion in a number of different undertakings:

There is a moment when you are sailing a largish sailboat when the wind, the sails, the heel of the boat, the current, the swells, the point of sail are all in perfect equilibrium. You can hear the wind wind singing in the shrouds. You are in the slot and you can feel it. If you let the wheel go, the boat stays obediently on that point of sail until one of those elements change. This is The Feel and, baby, you’ve got it.

When you are landing an airplane in a crosswind, you have to dip the upwind wing, you stand on the rudder, you control the speed, you manage the angle of attack, you tease the throttle — done well, the plane obeys and while it is wont to move about on short final because of the crosswind, it does not. The plane touches the upwind wheel, gently puts the other one down, you keep a bit of that rudder in, and you roll down the centerline of that runway. Because you have mastered The Feel of it.

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12/13/19

Delta Airlines Amex Credit Card

Since 2010, Delta Airlines and American Express have had a co-branded credit card arrangement. Not such a big deal, say you?

You would be wrong, dear reader. It is a huge deal.

 1. In 2018, eight percent — 8% — of all Amex traffic was on this card.

 2. The Delta Skymiles/Amex card came out of the gate hot making more than $1.4B in gross revenue for Delta in 2010.

 3. In 2018, that revenue number is $4B.

 4. That percentage of Delta’s profits is more than 35%!

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11/4/19

McDonalds CEO And His Consensual Romantic Relationship

This guy, this divorced Steve Easterbrook guy, was the Chief Executive Officer of McDonalds, by all accounts a good one.

So, he admits to having a “consensual romantic relationship” with an employee who is below him in the food chain at McDonalds. [Get it. The food chain. At McDonalds.]

Everybody is below the CEO in the food chain at McDonalds — well, except for Mickey. Mickey is above the CEO. Maybe the Hamburglar?

Easterbrook was a good CEO at McDonalds and is credited with having introduced a number of initiatives (all day breakfast, delivery, tech innovations) that had the stock solidly in the win column, but he exercised poor judgment and managed to get himself fired from a job that paid him $21.8MM in 2017. Ouch.

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10/11/19

Tootsie Roll — A Curious Story

Comes now the curious story of Tootsie Roll. I love Tootsie Rolls. My local Wells Fargo Bank used to have free Tootsie Rolls.

The Tootsie Roll was invented and manufactured for the first time in 1907 (this date is in dispute). Yesterday, and every day for the last few years, they made 64,000,000 Tootsie Rolls at the Tootsie Roll Industries plant in Chicago.

64,000,000 Tootsie Rolls per day

The Tootsie Roll was named after the daughter of the inventor, who died in a tragic suicide when his candy company failed.

The company is public and has been a damn good performer. Look at this chart. [We need a better chart, Big Red Car. This one is a little fuzzy. Shut up.]

In addition, the company has paid a dividend that has increased for the last fifty years. Hello, America!

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10/2/19

We Work — What Did We Learn?

I have been a skeptical voice on We Work since the beginning — meaning since I read their S-1, understood their business model, and learned about Adam Neumann, who I accused of being a toxic force on the company as a leader and a manager.

This was long before the guy got fired. Never liked him. Thought he was a poseur. Real estate as a service, my ass.

What I am not skeptical about is the market for co-working spaces as a real estate product. I think they are good.

In my personal real estate career, we had some vacancy in a suburban mid-rise office building and converted it to what was then a co-working space. We used to use the term “office suites.” It turned out very well for us.

 1. We collected (earned) 2X the market rental after expensing all operating costs. Meaning when we added up the individual small office rentals, subtracted all the costs — we got twice the rent we would have gotten had we rented it to an arms length, independent third party.

 2. We sold the business, as an operating entity subject to a lease, to a third party, Regus.

 3. We got a solid tenant in Regus paying a slightly above market rent and did not have to spend a penny in tenant improvements.

This was back in the 1990s.

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