When you decide to take your company public, you buy into a system that is far, far bigger than you. And as much as you may want to change the system, as a public company, you have to focus on your business and your shareholders first. That’s the law, enshrined in all corporate governance documents.
Now, governance can be rewritten, and Etsy, subject of a major Times profile this past weekend, had done just that. Before it went public, Etsy was a B Corporation, but as it prepared for the public markets, it decided to forgo the most stringent part of B Corp. certification — enshrining itself as a “PBC” — a public benefit corporation. Publicly traded PBCs are rarer than unicorns — there’s only one, Laureate Education, and, well, its stock isn’t exactly encouraging others to join the fray.
Look, we all see the same notifications, and figure, eh, we’ll get to that. But these pieces are really worth your time.
It was a good week for new stuff at NewCo Shift. We’ve got a surfeit of thoughtful commentary on AI, Valley culture, tech regulation, the non profit and NGO world, and much more.
NewCo Shift also sources and edits extraordinary stories into Medium’s membership area, which is on a “metered paywall” similar to the New York Times. Anyone can read them, until they hit their limit. We’re including them in our roundup so you know about this great work.
Let us know what you’re interested in us covering or pitch your own stories at editorial@newco.co. And thanks for reading. It means a lot to us.
Our new series takes a hard look at how venture capital works, and finds positives — and plenty of negatives.
Our latest Medium Premium series from author (and software company founder) Luke Kanies delves into the details of how venture capital firms work, from how they raise and return capital to their investors, to why the best companies tend to partner with the most successful investors, causing the gains to accumulate in the top firms. The series also focuses on venture’s lack of diversity, and argues for new approaches to fix what has become a glaring deficiency.
Kanies’ work does not pull punches. He warns founders against raising capital unless they truly understand the deal they are agreeing to: You must manage your company to grow toward a highly unlikely exit, and in doing so, you will likely run your company into the ground. Venture capital, he argues, is structured in such a way as to deliver trauma to everyone involved. After all, this is an industry built around making many bets, but expecting most to fail. The first series warns that If You Take Venture Capital, You’re Forcing Your Company To Exit, while the second piece explains how the spoils of success will keep accumulating at the top. The next installment, due early next week, examines the problem of diversity in the sector.
But all is not gloom and doom in the world of venture capital. The series will soon shift to how we might build a more open market around investment and company creation. That way, venture capital can include, enrich, and benefit all parts of the economy.
The Senate drops ill-conceived stock option language after Valley uproar. We should roar some more.
The Senate version of the tax bill, already groaning under the weight of an entire government’s failure to function, just got a bit lighter. According to a post by a prominent San Francisco VC, the bill’s proposal to change how option compensation is taxed has been scrapped. This may seem like an obscure issue for most, but to anyone involved in the world of high-risk startups, it’s existential. Startup compensation is for the most part terrible, many analysts put CEO pay, for example, at below minimum wage if you actually count the number of hours a founder puts in trying to win the entrepreneurial lottery. I’ve actually won that lottery a few times, and honestly, as much as I’d like to claim it’s because I’m a genius, it’s really because I got lucky, found a great team, then closed my eyes and worked like a madman. And why? Because I held equity, and that equity just might be worth a lot some day.
Some claim it’s time to rethink the way the Valley’s ecosystem compensates its workers — stock options allow wealthy VCs to keep cash burn low by dangling mostly worthless paper in front of poorly compensated startup teams. And there’s certainly some merit to that argument. I got lucky in my startup career, but the truth is, most don’t, and cash compensation is almost always well below market. But that’s the trade off of a high risk venture, and without it, you don’t have a culture that pushes the edge of what’s possible in business. And that edge deserves to be pushed. I’m glad the Senate has come to its senses.
Just a year ago, GE was the poster child for corporate transformation, turning jet engines into digital data, running whimsical ads that attracted top tech talent to the century-plus old industrial giant. Today, the company’s stock has plummeted, its top executives have all been canned, and the new CEO is promising the kind of austerity only a corporate raider could love. So what happened? To be honest, it’s not clear. At some point, the full GE story will be written, but that day is not today. Today GE announced its plan to respond to Wall Street criticism, including cutting its dividend for the second time since WWII. Money quote: “GE is the worst-performing Dow component this year, down 35 percent through Friday’s close. GE stock has effectively been dead money since September 2001, when recently retired Chief Executive Jeff Immelt took over, posting a negative total return even after reinvesting its juicy dividends.”
Babies and children are most vulnerable to our current consumption model. They’re also the key to building a better one.
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In my previous post, I explained why our consumption model is broken, and how we can build a new one. If you haven’t read it, here’s a quick summary (or watch the short video below):
Our consumption model is hurting our environment, our physical and mental health. We’re over-using natural resources, exposing children to toxic products, and creating too much waste. This is unsustainable.
A big part of the problem is ingrained in the fabric of our lifestyle. The changes needed go beyond what products we choose. We need to redesign our behaviors: Why and how we consume.
We can evolve to a new, higher form of consumption. When we do that, we create endless opportunities to re-imagine and improve our lives.
Re-Designing Consumption
We have to come up with new ways to provide everyday products and services. These new ways should solve the challenges we face:
To reduce overconsumption → help us understand what we really need.
To avoid toxic products → ensure the highest sustainability standard.
To limit waste → offer after-use options such as take-back or re-sell.
Understanding the distinction between the two is crucial for high performing teams, in particular as “flat” orgs come into fashion
By John O’Sullivan and Michael VanBruaene
We’ve read innumerable articles, books and commentary on leading and managing, and all of them emphasize the importance of leadership rather than management in an organization. And when we search the internet for “attributes of a good manager” and “attributes of a good leader,” the results are articles, essays and commentary that apply to a lot of the same characteristics in both disciplines.
Incumbents who dominate vast markets for decades and then lose their grip echo Hemingway’s depiction of sliding into bankruptcy: they do so gradually, then suddenly. Major network dominance of programming was an eternal fact of life when Netflix launched its first original show in 2013. But next year, the streaming leviathan’s $8 billion content budget will dwarf that of any broadcast network. Similarly, just a few years after launching in San Francisco, Uber eclipsed the revenues of the cab companies which had jointly monopolized that market for decades by a factor of 350%.
Shifts this big only happen when network effects are in play. Which is to say, that virtuous cycle in which more users make a platform more valuable, which draws more users, who make the platform more valuable still, which summons still more users, etc. In the digital era, we’ve seen network effects fuel the rise of messaging apps, social networks, and dating sites; as well as two-sided markets for Beanie Babies, handicrafts, and (of course) short-haul rides, to name but a few.
Imagining a better consumption model is key to a good future.
Courtesy of Warner Bros. Pictures
On August 2, 2017, we started using more from nature than our planet can renew in the whole year. Every natural resource we used from that day onward resulted in “ecological overspending.” Think of it as your bank account. For the first 7 months of the year, you lived on your regular salary. After that, you started using your savings and increasing your credit card debt. Currently, humanity lives at credit and consumes resources equal to that of 1.7 planets a year. That’s compared to 1.4 a decade ago and 0.8 in 1963. If population and consumption trends continue, this figure will rise to 2 planets by 2030. This puts us — and our children — on an unsustainable path.
The Climate Crisis Is Embedded in Our Consumerist Culture
This ecological overspending contributes to the warming of our planet. It accelerated in the past 35 years — 2016 was the hottest year since record-keeping began. Most scientists agree that the leading cause of the warming is human pollution. The burning of fossil fuels and the clearing of forests are the main contributors. Clean energy and protecting our forests are critical parts of the solution. But we must look at the challenge in a more holistic manner. The climate crisis is rooted in our modern lifestyle, and in the economic model that supports it.
A recent study in the Journal of Industrial Ecology looked at the impact of consumption. It calculated that, in 2007, consumers contributed to more than 60 percent of greenhouse gas emissions. They also contributed between 50 and 80 percent of total land, material, and water use. US households alone contributed to a quarter of global emissions. Only 20 percent were direct emissions from the use of public transport and household fuel. The bigger part was indirect emissions from consumption of products and services. These included housing, transportation, food, manufactured products, and clothing.
The internet giant’s stocks are based on a reality that no longer exists, argues author Rick Webb
In our latest Medium Premium story, Rick Webb examines the future revenue of digital advertising, and how the current valuations of our largest digital media companies don’t add up. Webb writes that the only thing that Google — and Facebook — have going for them in the battle for advertising dollars is their massive P/E (stock price-to-earnings ratio) ratios, which helps them acquire suddenly popular, smaller content developers. However, the high valuation of the stock prices are based in realities that are no longer applicable. Brand dollars aren’t moving to digital, and the content that attracts those dollars doesn’t obey the same economic principles as software.
Other content creators like Disney and Time Warner have stocks valued much lower than tech companies with similar business models — for a reason. Those traditional media companies are valued against the very real cost and scaling realities of high quality content creation. Will this reality catch up to Facebook and Google, who count on digital media dollars for the vast majority of their valuations? Read the entire article here:
