Memo: The Failing Fundamentals


On supply constraints and leading indicators. We have never seen such volatility as what November 2020 is shaping up to bring. To understand it, we have to go back 101 years to the depression that we rarely discuss (1920-1921).

We focused on the wrong war in those years. We are focusing on the wrong war now.

Just four years old, the Great War (WWI) shared attention with the Spanish Influenza by 1918. In the United States, President Woodrow Wilson made no public statements with regard to the Spanish Influenza. Rather, the 28th President and his administration focused on boosting morale and national wartime cooperation. According to the U.S. President, there was a war to win and there was no tolerance for distraction. Here he spoke of a military campaign and not a ravaging pandemic.

Wilson arrived in France in December of 1918 to take part in six months of peace negotiations in France. By then, the disease had killed 50-100 million globally, with a death toll that reached 675,000 in America. The world’s real war was fought in hospitals, not in battlefields. Wilson’s own experiences would prove so. Despite a wildly shared sentiment to slow transmission by wearing a mask, you won’t find a single image of Wilson or his delegation complying with these norms. These men were credited with ending one of the World’s Wars but they ignored the other.

France and Britain tried to appease Wilson by consenting to the establishment of his League of Nations. However, because isolationist sentiment was strong in the United States, and some of the articles in the League’s charter conflicted with the United States Constitution, the United States never did ratify the Treaty of Versailles nor join the League of Nations. [1]

Within the year, President Wilson contracted the same strain of the influenza and within months, he’d suffer from a debilitating stroke that incapacitated him for the rest of his life. Notably weakened by the influenza, Wilson notably agreed with French demands that would set the groundwork for yet another war. The final year of Wilson’s term brought a depression that we rarely cite (1920-1921). Beginning in January 1920, the Axe-Houghton Index of Trade and Industrial Activity cited a volume of business decline of 28.6%. Globally, the GDP fell 6-8% in this time. The end of Wilson’s term would see a man who found (a temporary) resolution to the Great War while being leveled by an even greater one. He left office in March of 1921.

A 2012 academic paper by Keynesian economist Daniel Keuhn cited the downsizing of government (and the services that it can provide) as one of the factors that led to the 1920-1921 depression. But more importantly, he felt that supply constraints were the majority of the issue:

The evidence suggests that the 1920–21 depression was the result of a variety of supply constraints, rather than a deficiency of effective demand, and is therefore a poor test of the efficacy of Keynesian fiscal policy. [2]

Supply constraints can be cited as infrastructure shortages: (1) a lack of debt available to businesses, (2) an inadequate labor market, (3) inadequate technology, and (4) government fundamentals. We focused on the wrong war in those years. We are focusing on the wrong war, now. I will cite each of the above supply constraint concerns with the (x) format.

Small business is the engine for American growth and the predictability of government services is the frame that the engine sits upon. Both the engine and the mount are at risk, moving into a period of economic uncertainty that rivals the conclusion of Wilson’s second term.

The American credit system is complex. To account for that, I will cite an illuminating 24-part thread by a pseudonymous American lawyer and consultant whose business is facilitating debt for franchisees. This excerpt stood out:

The chains I work with many of you will be familiar with: Dominos, Jersey Mike’s, Massage Envy, European Wax Center, The Joint, Club Pilates, Jimmy John’s, Wingston, Orangetheory, Moe’s Southwest and many others. I have broad spectrum national exposure to many industries.

I fund $400-500 million in loans per year through these banks. In February we were on pace to fund well over $500 million and potentially $750 million — growing exponentially year over year. Since April 1st we have funded $5 million (in loans) through only two banks.

Retail franchises (1) are of the most predictable cash flow businesses in America. The lack of debt available to owners is noteworthy and as shortfalls in foot traffic continue to impact retail real estate, the franchise business seems due to exacerbate these concerns. Once considered a stalwart of the U.S. economy and our base of wage labor, this model has never been more at risk.

Meanwhile, the benefits cliff (2) has begun to impact consumer confidence. And fewer of the employment alternatives that existed pre-credit shortage are available for those who are impacted.

[The] benefits cliff is here, as most of the unemployed received their final infusion of the extra $600 from the federal government last week. Workers will still receive payments from their home states, but the loss of the extra $600 will slash payments by more than half for many, and in some cases significantly more for workers in states that offer only meager unemployment benefits. [3]

In U.S. school districts, teachers have no firm understanding for what the fall may bring. Nearly 3% of the American workforce are facing uncertainty. Will schools exist in its traditional format? What effect would remote learning have on education?

Of the nearly 80 million Americans (3) who will attend school in the fall, how many will be properly prepared for the technological requirements associated with distance education? From west coast to east, wealthier parents are angling for short-term fixes at the expense of longer-term consequences. Our educational systems are incapable of managing the stress test of the “venture-fication” of education.

No Title

Looking for the best 4-6th grade teacher in Bay Area who wants a 1-year contract, that will beat whatever they are getting paid, to teach 2-7 students in my back yard#microschool If you know this teacher, refer them & we hire them, I will give you a $2k UberEats gift card

Lastly, government fundamentals are at risk and there are few greater examples of this than the United States Postal Service, a nearly 250 year old organization that has never faced the headwinds that it is facing now. In a recent interview with CNN, the American Postal Workers Union President delved into his recent concerns:

The American Postal Workers Union’s president, Mark Dimondstein, told CNN in an interview Friday that the union has received a number of reports from postal workers and customers over the last two weeks that mail delivery has slowed and “degraded.” The union represents more than 200,000 Postal Service employees and retirees. [4]

With the current administration threatening to cut funding to the postal service, mail-in balloting is at risk of disruption. This is a key service of the USPS. And though the recent spike in online retail volume has mitigated funding gaps for the USPS, the uncertainty going into election season places another stalwart service at risk. Without the postal service, eCommerce cannot run. And with that, smaller retailers are due for additional concern. Many are facing the added costs of shifting business to UPS, DHL and Federal Express.

And here is where the circle closes for the online retail industry, an indicator of greater economic health and progress.


A paradox for Black Friday and smaller retailers is that the gross merchandising volume (GMV) in online retail for the month of November will achieve a record high. Most of this volume will be attributed to Walmart, Target, Dick’s Sporting Goods, Academy, Best Buy, and Amazon’s decision to emphasize eCommerce before (and potentially on) the biggest shopping day of the year. By closing all physical stores for Thanksgiving, the market can anticipate digital ad spend of historic proportions. This spend, in turn, may lead to a rise in customer acquisition cost (CAC) for smaller retailers.

Consider November for the early-stage retailer or small business. Unemployment is at an all-time high, the state of childhood education is uncertain, consumer confidence is on the decline, and we will be in the midst of the most contentious election in recent history. Advertising performance may suffer due to the influx of new and back loaded enterprise spend on digital platforms. And on top of it all, margins will be further diminished by increased logistics costs. In 2020, eCommerce has been a bright spot of hope for a shaken economy. But surviving the next months despite all of this uncertainty will be a tough task, even for an industry that seems inevitable.

I’ve long compared this presidency to Woodrow Wilson’s. Historians look back on the 28th President with conflicting analyses. Some herald his performance and others have been critical. One thing is for certain, we are once again fighting the wrong war. Infrastructure, consistency, and access to credit have never been more important as Americans shift from traditional work to a generation-defining sense of dynamism. Objectively speaking, Woodrow Wilson’s presidency was one of grandeur and neglect. By choosing the wrong war to fight (or not realizing that he could fight two – at once), he guaranteed an economic depression by fracturing the country’s foundation when it needed foundation, the most. A decision on the war we fight (and how its fought) will determine the fundamentals of our evolving digital economy. One of those wars should be to regain the fundamentals that allow dynamism to thrive.

November should be a win for entrepreneurs, small business owners, and high-growth brands who’ve long been ahead of the online retail curve. They will need that win. To achieve it, they’ll need market fundamentals on their side.

By Web Smith | Editor: Hilary Milnes | Art: Alex Remy | About 2PM

Memo: Introducing “The Study”



Over the past few weeks, 2PM has designed, developed, and implemented a new way for you to keep track of our most critical briefs and memos. Today, we are launching the first stage of The Study, a central location for evergreen essays and the concepts that can help operators move their industries forward.

We’ve long had two archives: the Weekly Report Archive and Member Briefs. But chronological order is not the best format for identifying concepts, common threads, and shared principles. As such, we’ve designed a place for many of 2PM’s thoughts, concepts, laws, and theses to call home. Each category row can infinitely scroll from left to right. We can also add as many rows as possible.

The first categories include: The Law of Linear Commerce, Bifurcation and New Luxury, Malls and Over-Retail, H.E.N.R.Y and Brand Sociology, Digitally Native Brands, the DTC-Fication of Economies, The New Infrastructure, and Audiences and Communities. Each section features a summary of the category’s scope. Each essay features a short summary to pique reader interest. Over the coming months, we plan on standardizing each of the featured essays with new graphics and styling – all while maintaining their original thoughts. And of course, we will be adding new and relevant categories.

Screen Shot 2020-07-30 at 11.09.16 PM
2PM’s category design process.

We consider this to be the first of many functional improvements to 2PM. While existing members will never pay a dime more, we will be sunsetting the option for monthly subscription in the coming weeks. The cost of the Yearly Membership will increase, as well. Beginning September 1, the annual commitment for new Executive Members will be $200. Existing Members (and those who join before September 1) will never see an increase in their pricing.

The best part is that, like each of the quarterly developments to 2PM, The Study was fully funded by 2PM’s members. As a bootstrapped media company, these forward-looking investments are both necessary and extremely risky. As the 2PM platform, databases, and the thrice-weekly newsletters continue to evolve for more effective use, please understand that it couldn’t be done without you.

The Study

You can find this content library on each menu tab and the footer. The site is accessible to all readers, however member briefs are noted with a lock symbol. Full site access is available with an Executive Membership. Over ten days of coordination and a few late nights, this new format was built with a small team of folks from 2PM’s Polymathic community: 2PM’s Andrew Johnson, Andrew Haynes, and Grace Garcia Clarke. We hope that you find The Study worth your time.

By Web Smith

Memo: The Type House



Bundle and unbundle, bundle and unbundle, bundle and unbundle – but then generate profits on both. These weren’t his exact words but that was the message. In one sentence, my father described his industry. At 12, I sat in a cubicle in a Houston industrial park, an unofficial intern of his Time Warner Communications division. I would go on to work the traditional work weeks, each summer, between that year and my graduating year of high school. I was paid in perspective, and I mean that sincerely.

At the time, my father was the senior executive in charge of a fledgling broadband internet project called “RoadRunner.” (It would later go on to power Texas’ residential internet needs, but that’s a different story.) His words were transcendent to me because they explained that the value of a product could be amplified by how it’s packaged.

By now, you’ve heard of the TikTok influencer craze. (You may have even felt a twinge of fatigue by the momentum of it all. There is new terminology, dance moves and global political implications to keep up with, along with the excessive screen time required to digest it all.) This creative platform has further popularized the concept of the “collaborative house” made popular by YouTube creators David Dobrik (Vlog Squad) and Jake Paul (Team 10). For the most marketable of these houses, the platform began to matter less. Dobrik, a videographer and philanthropist who began on YouTube, nearly duplicated the magnitude of his audience on TikTok in just a month’s time. New members join, old members leave as their profiles grow. Collaborative groups are reminiscent of the cable industry’s intrigue: bundle, unbundle, bundle, unbundle.

In the land of TikTok, the Hype House is a particular group of 20-something content creators who live in or around Los Angeles; many of whom cohabitate. The group includes a number of the best and brightest creators in the space, including former members Charli D’Amelio and her sister Dixie. Together, the sisters have amassed 10s of millions of subscribers across TikTok, YouTube, Twitter and Instagram. Some industry analysts argue that the D’Amelio family is the next Kardashian clan. Objectively speaking, that anointing is the golden calf of media and commerce opportunities.

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D’Amelio family is the new Kardashian family.@charlidamelio + @dixiedamelio + @marcdamelio + @heididamelio

The TikTok house seems like it exists in an entirely different media universe than the email newsletter, but there are more similarities than it would appear. Critics of the newsletter industry say its missing the above frameworks: collaborative houses, bundling, unbundling, platform agnostic growth, and the power of media-driven commerce. There aren’t many venture-funded companies with as much raw potential as Charli D’Amelio or David Dobrik. In both cases, the young entrepreneurs mastered the physics of new media. In its own way, the newsletter industry is hoping to crown their own winners. Those winners will accomplish the same.

Consider the inevitability of “subscription fatigue.” It’s a common refrain made by critics of the burgeoning newsletter industry, one that Substack has helped to democratize and Ben Thompson’s Stratechery has helped to inspire. In 2019, Gartner’s Laurie Wurster wrote:

By 2020, all new entrants and 80% of historical vendors will offer subscription-based business models.

But the fear of paid subscription fatigue may be overstated. There are two categories of monthly subscriptions:

Category No. 1: entertainment, distraction, or light enrichment.

Category No. 2: helps to build a new world by enabling education, professional growth, or networking opportunities.

Each of our paid subscriptions can be placed, primarily, into one of the above categories. The first category has dwindling demand elasticity. This may explain Quibi’s current trouble: consumers can only tolerate so many distractions. There’s infinite substitutes for entertainment, sensationalism, dopamine hits. The subscription ecosystem becomes finite at a certain extent. This category includes streaming services, games, digital entertainment.

The second category has demand elasticity that may hold steady. This group of subscriptions may also compete with continued education, social clubs, or corporate networking. Certain newsletters may improve or outright replace certain social or professional functions. Some of the best newsletters are also building communities around ideas, possibility, and navigating the future of the industry.

A play on the TikTok craze, the newsletter industry has its own brand of collaborative house. In it: great ideas have been ideated, concepted, and executed.

Founded by Nathan Baschez, The Type House is a group of 40 newsletter publishers: former A16Z associate Li Jin, Turner Novak, David Perrell, Sriram Krishnan, Lenny Rachitsky, Brett Bivens, Blake Robbins, Ian Kar, Alex Kantrowitz, Cherie Hu, Packy McCormick, Adam Keesling, Dan Shipper, Polina Marinova, Sari Azout, Nikhil Trivedi, Nikhil Krishnan, Brad Wolverton, Josh Constine, Sid Jha, Laura Chau, Morning Brew CEO Alex Lieberman, Trapital‘s Dan Runcie, Byrne Hobart, Allen Gannett, Sarah Nockel, Brett G, Paul Smalera,’s Dru Riley, Justin Gage, Rui Ma, Cat Lee, Can Duruk, Alex Taussig, Seyi Taylor, and myself.

Bundle and unbundle, bundle and unbundle, bundle and unbundle – but then generate profits on both.

The group is diverse in every sense of the term. Within it, you can observe the mechanics of media-driven commerce at work. Of the highlights, consider David Perrell. The writer-turned-teacher has monetized with educational courses. His company is now generating seven-figures in annual revenue. Morning Brew is one of the most promising newsletter-driven companies in business today. Dan Runcie has pivoted from media to consulting those in the hip hop industry. In doing so, his existing Trapital product has become top-of-funnel for lucrative consulting projects. 2PM continues to successfully navigate high level consulting and the growth of its own paid community of senior executives, artists, scientist, and independent thinkers. Polymathic is nearing its first year in existence. But, perhaps, the greatest indication of what’s to come is a throwback to my time in the Houston cubicle. Bundle and unbundle, bundle and unbundle.


Of Substack’s brightest opportunities to solidify its place in the creator ecosystem, the Everything Bundle began as an experiment between Nathan Baschez and Dan Shipper. It has since grown to include Adam Keesling, Li Jin, and Tiago Forte’s work. By bundling their individual efforts, they’ve developed a flywheel of business that has propelled them to Substack’s famed leaderboard. Though each of them are very capable of self-promotion, its their collective works that seem to drive new consumers to sign on for $20 per month or $200 per year. With each new property that is added to Everything, a new wave of subscriptions follow suit. I’ve likened the pivot to Basche and Shipper building The Athletic of business and intellectualism. And it just might work.

The value of prolific writing and creativity is that you’re always in a pattern of thought. You’re constantly assessing beliefs and designing paths to further your understanding of a topic. When entrepreneurial thinkers begin a newsletter on the platform of their choosing, they are doing so out of sheer passion. Their minds are always thinking of enrichment, improvement, development, and progress. Like the YouTube videographers of yesterday, or the TikTok minds of today, or any creator of tomorrow, the art is rarely contained by the platform. The great secret of creativity is that it can evolve. Many of today’s brightest businesses were yesterday’s projects-turned-ventures.

There is great potential for any subscription-driven media company to grow beyond its early intentions. If and when subscription fatigue begins to hinder the newsletter industry’s growth, the best and brightest will identify new mediums for their message and their engaged communities will follow. From YouTube to Vine to TikTok, this is what great digital creators have always done. They’ve outworked fatigue. It’s due time to place newsletter entrepreneurs in this coveted category.

By Web Smith | Editor: Hilary Milnes | Art: Andrew Haynes | About 2PM