A Memo: On Optimism and Big Ideas

Stonks

By now, your company has been impacted by an historic period of health risk and economic uncertainty.  It’s for this very reason that I hope that you take a moment to unfurl yourself from the anxiety of it. This is a memo on making time for optimism, connectivity, and opportunity. It’s also about the power of ideas. Like many other 2PM reports: it’s one part practicality, one part historical context, and two parts analyses.

The first 2PM letter published four years ago, this week. You’ll notice a few things when you look back at it. If by chance 2PM gives off the impression of amateurism today, we didn’t stand a chance in March of 2016. But objectively speaking, you’ll see that the publication, its depth, and the polish have come a long way.

The majority of the operation rests on my shoulders and even so, there is a tremendous amount of work left to be done on a weekly basis. Four brilliant associates join me in refining the 2PM product. Andrew Johnson, Andrew Haynes, Hilary Milnes, and Vincenzo Landino help to professionalize a product that competes with venture-backed publishers and well-run media companies that employ dozens. And Tracey Wallace has been pivotal to its maturation.

Each week, I focus on a number of tasks to keep costs sustainable: I publish two longer-form essays (4,000+ words / week), maintain twelve databases, manually curate and publish three newsletters, direct creative, research and build new databases, and I manage 2PM’s Polymathic community. Additionally, I work with a number of companies in which 2PM is connected. In the past year, those relationships included: Alibaba, Verizon Media Group, The Chernin Group, #Paid, and BigCommerce. And lastly, on any given week, I answer 200-350 emails from founders, executives, and other operators. This model works because Executive Members invest in the future of the company. That said, the past week was one of the hardest that I’ve experienced in the company’s four years. Not only did growth come to a halt, attrition spiked.

What I’ve learned from our current circumstances isn’t so different than what I learned in 2009 after the downturn came after the best professional shot that I had. Losing that job meant that any hope for normality for my then-family of three was on pause. For a time, it felt like it would always be that way. It was my first job out of school. And only had that job for 19 months and with a two-year old in tow. The weight of it all would push us to our cognitive and spiritual limits. Anyone who experienced The Great Recession understands this; it was horrible time. To power through professionally, I would lean on five important lessons.

  • No. 1: Optimism is a talent.
  • No. 2: Dynamism is required because inaction is failure.
  • No. 3: Calmness is a valuable tool.
  • No. 4: The job is to seek out opportunity in everything.
  • No. 5: Deep generalism provides clarity.

This is a time for optimism, connectivity, opportunity, and the power of ideas. Though we don’t know how long these circumstances will last, we can be certain that history has minted winners in previous periods of adversity. There are a number of examples that you can research. Begin with: The Great Wars, 1918’s Pandemic, The Great Depression, and The Great Recession.

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A fascinating look at recession-era entrepreneurship from a 2009 Kaufman study. 51% of Fortune’s 500 started in recessionary periods. It is 57% if you consider that the National Bureau of Economic Research (NBER) didn’t begin tracking until 1855. ~ 40 of the 500 are pre-1855.

There is something that rewires us for the better during these times. At least that’s the optimistic take. When things went awry in 2008 and on, a former schoolmate forwarded a Kaufman Foundation study. It’s lengthy but this one part stood out.

There are good reasons to expect recessions and bear markets to be fertile periods for new firms and, possibly, their subsequent success. Although many new firms don’t rely on external financing in their early stages, a suppressed financial climate may be less immediately relevant to a person’s propensity to found a new company versus the person’s later ability to grow the company.

Rising unemployment, because it is often concentrated among large or established companies, can free up pools of human capital in two ways. An unemployed individual, with some measure of experience (and, in some cases, a vested pension), may perceive a competitive opportunity to start a new company, and feel there’s nothing to lose.Entrepreneurs may also target the unemployed as a potential pool of employees. The matter of longer-term success is a bit murkier—although there is some evidence that recession-era companies may end up slightly more successful, it remains an open question. [1]

I had little desire to read an academic paper at that time but I am glad that I did. History anchors you in ways that modern commentary cannot. It instills an optimism, calm, and – for certain people – a pursuit of dynamism [2]. In the majority of recession-era venture narratives that I read, I found the aforementioned traits in each of their founders. At the time, generalism was a foreign concept to me. Like a “General Studies” degree, it was something that left a negative mark on your career. But studying generalists changed that.

No. 5: On Deep Generalism

To identify and capitalize on an opportunity, it helps to have a wide and deep knowledge of industries and how they interact. Everything changes, new rules are formed, new coalitions are forge, and new boundaries are set. Deep generalists have the advantage. They’re more open to understanding new fields, new developments, new combinations of information, growth in one field, and contractions in others. David Epstein wrote it best:

The more varied your training is, the better able you’ll be to apply your skills flexibly to situations you haven’t seen.

Epstein’s Range wasn’t around before Great Recession of 2008 but I found myself wishing that it was. The book succinctly summarizes the tactical advantages owned by a majority of entrepreneurs during that time. Here are a few of the advantages to generalism that I compiled. Deep generalists:

  • are able to make knowledgeable connections
  • are sufficient in the art of information synthesis, not just analysis
  • are effective conversationalists
  • are effective at putting talents, products, services in the context of a potential partner’s goals and strategies.

It’s with the above advantages and the aforementioned lessons that give me confidence that we’ll do more than recover from our recent adversities.

On Optimism and Big Ideas

It was at the peak of the Great Depression in Winter Haven, Florida. George Jenkins left one of the few remaining grocery jobs in his region to launch his own version of a grocery shopping experience. He would do so by mastering a number of separate, professional disciplines before eventually reaching the scale to delegate each role. What I’ve found most interesting about this story is that he chose to address a relatively big idea during a period of great consequence. Florida’s shoppers responded positively.

A “food palace” of marble, glass and stucco, this store included innovations such as air conditioning, fluorescent lighting, electric eye doors and terrazzo floors. In 1945, he acquired a warehouse and 19 All American stores from the Lakeland Grocery Company. He began replacing these small stores with larger supermarkets. [3]

And today, the late George Jenkin’s company employs over 120,000 Floridians. That company is Publix and if you know anything about the Southeastern United States, it’s a revered institution.

Publix Super Markets Inc. on Friday announced it wants to hire thousands of people by the end of the month to work in its 1,243 stores and nine distribution centers in seven Southeastern states. [4]

As uplifting as this story is, it isn’t unique. Optimism and big ideas go hand in hand. There are a number of big thinkers with the leverage to forge new partnerships and I’d invite you to consider those ideas for consideration by submitting a reply to your Weekly Letters or Executive Member Briefs. The most meaningful responses will be added. Below, you will find a few examples of my own:

No. 1: Amazon and DTC Brand Inventory

Amazon is in position to make a short-term investment with long-term implications. For decades, consumer packaged goods (CPG) were bought and sold through wholesale operators like Target, Walmart, Costco, and the like. While each of those companies will remain in great shape during this downturn, Amazon is in unique position to attract future brand advertisers by gaining their loyalties in the coming months. Amazon should commit to purchase orders. An example of this would be an agreement to purchase $5 billion (GMV) worth of direct-to-consumer (DTC) retail over the next two years.

Of all of the retail sectors to see growth, online marketplaces will see the most of it (read here). According to agency directors and holding company executives, many of these brands are facing a two-fold challenge: sluggish ad performance and the deafening noise of the moment. Amazon can provide stimulus to a number of retailers reliant on Shopify, BigCommerce, and Magento.

By providing visibility and cash flow to DTC brands, Amazon will position themselves as a wholesale partner to a consumer segment that tends to shun Amazon’s olive branch. If effective, Amazon will open a new door to a thriving segment of modern brands that have thus far ignored the online retailer’s search engine marketing (SEM) and display offerings. It’s a win/win for Jeff Bezos and a win/win for Shopify merchants.

No. 2: A Partnership between Faire Wholesale and DoorDash

Katie Carer’s tremendous document deserves wide praise. Shopify’s Senior Product Lead built an enormously effective document called How To Build a “Buy Online, Pick Up Curbside” Store. It’s one of those big ideas that comes about in times like these. It was also a wonderful advertisement for her platform.

Independent retailers are struggling to find a solution to halting physical mobility. And within two days of writing her 56 slide technical document for mom and pop stores, many American cities were ordered to shelter in place. Needless to say, this hinders the curbside pick up model for non-essential businesses.

A hedge against the stay at home order is last mile delivery. And here, Postmates and DoorDash are best positioned to succeed (though Google has a solution of its own). Of the two, I’d choose DoorDash. It is better capitalized, better run (according to mutual investors), and more widely used. A partnership with Faire Wholesale would equip the mobile platform with data that it can’t access on its own. Faire, a tremendous company in its own right, powers thousands of retailer’s wholesale purchasing catalogues. This means that Faire has an intimate understanding of thousands of retailers’ inventories.

What used to be done by .json web calls and manual inventory updates, could be accomplished with an API call for real-time inventory. This would supply an altogether new business for DoorDash and a unique user experience for Main St. retailers. This would allow the last-mile service to feature and fulfill the orders from thousands of urban stores. Many of these have little to no digital retail presences.


If history is any indication, these lessons and principles will separate those who succumb to the uncertainties from those who outwit them. For 2PM and the readers that have invested in its future, I’ve chosen to pursue the latter. Each of the recessionary periods in U.S. history saw two things: (1) great innovations spurred by the pursuit of big ideas (2) and a recovery accomplished by outlasting negative market forces.

Recovery is typically a collective outcome with more variables that can be covered in 2,000 word essay. But within that recovery is an untold number of big ideas executed by entrepreneurial thinkers. In each of those instances, you’d find: intellectual curiosity, dynamism, calm, and an eye for opportunity. But before the big ideas or the execution, there was optimism.

By Web Smith | About 2PM

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