The NewCo Daily: Today’s Top Stories
Amazon’s 20-year story of innovation and customer-oriented growth has had its ups (like a focus on long-term planning over short-term results that has paid off for investors) and downs (like reports of a brutal culture that chews employees up). Jeff Bezos offers a fascinating glimpse of the thinking and mindset behind the company’s ascent in his annual letter to shareholders, which Recode reprinted last week.
Bezos’s mantra: Hold onto “day 1” as long as possible. Fight the idea that “day 2” has arrived. “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
For Bezos, “Day 2” is when companies start managing to “proxies,” like perfecting processes instead of judging by outcomes. He says Amazon fights “Day 2” thinking by “embracing external trends” (most recently, machine learning and AI) and by promoting “high-velocity decision-making.” The key to that, he says, is a willingness by both leaders and employees to “disagree and commit.” Trying to get everyone to agree on a course of action is paralyzing; say your part and then go with the plan.
Bezos’s letter is bracing reading. For a thoughtful gloss on it, read Dan Hon’s take. Hon points out that managers like Bezos who hope to keep outcomes front and center and prevent processes from ossifying are going to love machine learning programs; in their world, “We tell them the outcome and then they say, ‘forget about the process!’ “
In other words, automation is coming not just for the assembly-line worker but for the middle-management decision maker. “Humans might still have a role,” Hon concludes, “where there’s not enough data to train a network.” Whew.
Vanguard’s Investing Mission: Low Costs, Less Picking
The story of U.S. investing, increasingly, is the story of one company. In the last three years, Vanguard — the investor-owned home of low-cost index funds — took in a “staggering” $823 billion in new investments (Landon Thomas Jr. in The New York Times). The rest of the mutual fund industry, combined? $97 billion.
Vanguard’s popularity stems in part from its “passive investing” model, where funds track whole markets rather than pick individual stocks. Historically, this approach favors long-term investors. But the other key to Vanguard’s success is that it takes the money it saves by not having managers actively pick stocks (and not needing splashy ad campaigns) and hands most of it directly to its customers. Vanguard has the lowest overhead fees in the industry, and in an era of low interest rates and moderate returns, every tenth of a percent counts.
One thing that’s crystal clear from the Times piece is that Vanguard’s leaders and employees view their approach not just as an efficient tactic but as a philosophical mission. When you go to work at Vanguard, “you absorb the culture and you join the cause,” one executive says. That includes using nautical language — employees are “crew,” the cafeteria is “the galley,” and so on. The firm took its name from Admiral Nelson’s Napoleonic-era flagship, the HMS Vanguard. Can anyone overcome its lead?
Why We Need Economists Who Think Like Gardeners
The field of computer programming knows all about “physics envy” — the yearning in various disciplines to formulate immutable mathematical principles that govern their worlds. Economics, too, has suffered from this malady (Kate Raworth in The Guardian). But the belief that economic behavior could be reduced to a magnificent set of formulas that would then tell us what to do to keep the engines of growth humming has failed, over and over again, most recently in the financial crisis of 2007–8.
It’s time, Raworth argues, to stop thinking of economics like physics and start treating it like gardening: “Let’s take off the hard hat and give up on reaching for the economy’s control levers because they simply don’t exist. Instead, put on some gardening gloves…and start to steward the economic garden.” A biological vision of economics isn’t just more accurate; it’s more resilient and more sustainable.
“Nobody’s Got To Use the Internet”
Back in the stone age when television was young, irate conservatives made a habit of complaining that we shouldn’t be giving government “handouts” to anyone who could afford a TV. Never mind that TV had become the chief conduit for news and information as well as (of course) mindless entertainment. Today this dynamic is repeating itself, with the internet in TV’s place.
Confronting questions about the Trump administration’s rollback of online privacy regulations, Rep. James Sensenbrenner (R-Wis.) told his constituents, “Nobody’s got to use the internet” (Talking Points Memo). Well, sure. Nobody’s got to read, either.
But if you’re a citizen participating in public life today, or just a householder trying to keep life together, you’re going to have a rough time without some kind of online connection. Telling people to just give it up announces how out of touch you are.