Open Letter: The Downside And The Up

The newsletter began as a hobby and became something greater. I’d do it for free if I could.

My intentional attempts at entrepreneurship were peppered with failure. This one was unintentional – it just sort of happened. For that reason, maybe it would work.

2PM was born out of the desire to understand commerce and how it interacted with other industries and professions. The concept was simple: Understand it well enough to anticipate how it will impact our markets over time. Arguably, there is no greater economic force, art form, or science today than commerce. Our world is being redefined by the intersections of commerce, technology, art, media, and economic policy. NFTs anyone?

Web Smith on Twitter: “Deep generalists are thriving and specialists are working to understand why art, science, media, finance, economic theory, commerce, religion, and software engineering are suddenly converging. / Twitter”

Deep generalists are thriving and specialists are working to understand why art, science, media, finance, economic theory, commerce, religion, and software engineering are suddenly converging.

The goal of the newsletter was to connect ideas and foster new ones. Many readers chime in happy with their heightened ability to replace abstract thoughts with actionable, practical strategy. The niche audience of 2PM is the deep generalist: The type of “beginner mind” who understands the value of finding meaningful connections between unrelated ideas (also called apophenia). At first, I could only find 12 of you who were interested. I sent letter No. 1 to each of them on March 22, 2016.

Today’s essay isn’t about growth hacks, monetization, or the joys of the creator-market fit. Rather, it’s about the mental and emotional cost of doing business as a solo creator.

Nearly two years after I sent the first newsletter in 2016, I still had a day job. I’d just driven my weekly three hours to Pittsburgh for an urgent meeting. My right leg was in a full-length cast following a catastrophic injury and a reconstructive surgery, and had to be propped in the passenger seat for the ride. At the meeting, I was told that my salary would be cut to 50% for the foreseeable future. In an instant, $120,000 became $60,000. The company was struggling and measures needed to be taken. I certainly understood this and I didn’t fight it. The acute problem was that I was on the hook for $37,000 in medical bills.

I was at a turning point. By then, I’d emailed over 200 free issues of 2PM. The writing had improved, the following slowly grew and the production process tightened with repetition. The list was peppered with industry leaders who would have never given me the time of day. Letting 2PM die wasn’t an option. In some ways, it was my best shot at really doing what I wanted: Make an impact on the industry that I love.

I made one call to a former boss of mine named Eric Yang, the founder of Gear Patrol. Over my time there he beat the Japanese concept of kaizen into my consciousness: “continuous improvement.” I knew that he’d have a practical take. His words continue to resonate:

You know that your head is with 2PM. Go all in.

My previous attempt at entrepreneurship had nearly bankrupted me and I had $17,000 in my savings account. While paltry, that figure represented tremendous progress. This made the next decision symbolic in ways. My intentional attempts at entrepreneurship were peppered with failure. This one was unintentional – it just sort of happened. For that reason –  maybe it would work, I thought.

I invested in the technical replatforming of 2PM.inc. The new stack was hosted by WordPress and I selected Mailchimp for email distribution. (Substack hadn’t yet made the waves that it is known for today.) For nearly 10 days straight, and in my spare time, I transferred 200+ email posts to the new site’s archives. A colleague of mine designed the 2PM mark and assets for $4,000. The rest of the savings went to subscription software, additional build outs, and legal documents. At the end, I had $1,026 remaining. It wouldn’t even cover our mortgage. I incorporated, I recruited the services of Memberful, and then I sent the monetization announcement.

The first issue on Mailchimp (No. 252) featured the original, cookie-cutter artwork. By No. 283, my coworker delivered on the brand standards, and the 2PM that you know today was born. By then, I felt that I’d done enough to prepare for the paid membership announcement. The stakes couldn’t have been higher. At my day job, salary cuts had escalated to company-wide layoffs, and I had about four weeks of runway. As a father of two, with depleted savings, I had a newsletter, a self-designed website, and 18,000 Twitter followers to promote them both. I remember looking at my then 10-year-old daughter and promising her that everything was okay. I was saying it for myself. At the time, it was not okay.

But there’s no way else to say it: 2PM actually saved us.

The first member essay published on February 23, 2018, two years after the initial newsletter reached inboxes. I published a short thesis on an idea that I coined Linear Commerce. Within a few weeks, I was covering costs and reinvesting what I could into further professionalizing the platform. By January 2019, I was able to host dinners and other gatherings. Meeting readers in real life became what drove me forward. And then, just one year later, a considerable part of 2PM’s growth engine, our monthly roundtable dinners, halted with the rest of the world’s meetings in February 2020.

Between February 2020 and today, the entire world changed. Customer acquisition strategies had to evolve with the constraints. Newsletters became an industry of its own thanks to Substack’s genius. Industry leaders The Hustle and Morning Brew exited. And outfits like Every, Not Boring, The Plug, and Trapital became forces in their own rights. The power of amateur-run media gave way to the professionalization of the industry. Readers began to expect perfection and consistency. With every letter, I sought to improve on the last. Today’s depth and quality of newsletter is representative of that commitment. But it comes at a cost.

Six amazing, dedicated, and consistently great part-time contractors assist in the creation of what you see. They are a cohesive unit. We’re honest with one another, and I am proud of the work environment. Each week, I read and curate over 40 articles. I write and publish 3,000 to 4,000 words. We send three letters. We manage a community of deep generalists. And with the help of 2PM’s crack team, we commit to 10-15 hours of weekly industry research that enables us to improve the reliability of our top databases. A DTC database that began with 700 cells is now a ranking system spanning 10,000 cells of constantly updating data.

With every email sent comes greater responsibility and greater feedback. Negative responses, trolls, and bad actors rise with every send. As more subscribers become paid members, the more I work to assure the quality of their monthly or annual investment into 2PM.

There is an unspoken truth. The intensity of five years of treading water, taking flight, and handling setbacks takes a toll on the soul. There is a mental and emotional weathering that begins to impact the people who matter most. If I struggle, the team around me is impacted. Over time, I’ve learned how to compartmentalize for their sake. A number of tough lessons litter that path.

If I had to do it again, I would have prioritized balance and superior communication. I would have spent more energy improving as a leader and less as a creator. I would have operationalized the company much faster. I would have delegated better, freeing myself to give more to the business owners and thinkers who email in with questions or requests.

And I would have found the time to take more breaks, at the cost of disgruntled emails or the loss of the precious momentum.

The creator economy needs a conversation around the pressures associated with the joys of the industry. The 2PM that I want to finish building is one that is even better every day, inside and out. What began as a hobby became my life’s professional pursuit. As more novice creators achieve the same, they will need support and empathy. The work is never as easy as it appears. Our oldest daughter was 10 years old when she nodded and gently replied to my promise that everything would be okay, saying “I know, Dad” as if promises always stick the landing. But for all of the strain that comes with building in public, it’s good to know that – at least for now – she was right.

Por Web Smith

A special thank you to: Hilary, Andrew, Alex, Brad, Vincenzo, Joe, Katie, Grace, Meghan, and Tracey for your contributions to this first five years. 

Memo: Spring 2021

The SoHo streets roared on a Saturday night. Joggers and Allbirds were no longer in sight. Long-past solitude and endless fright, fashion returned in all of its might.

This weekend, after a year of pandemic restrictions, the streets of Lower Manhattan were lively. A celebration could be found in the streets. With warmer weather, every sidewalk table was inhabited. While indoor dining returned on February 12, contact tracing and restrictions still apply. The street car-like “outdoor dining” solutions that kept the city alive during 20 degree weather were packed at every restaurant.

Athleisure, tennis shoes, and Canada Goose coats had been set aside for the type of understated yet casually elegant fashion that Manhattan is known for. It felt like the release of pent up energy manifested through consumer behavior, a roaring scene of jubilation and free spending. But I wanted to quantify it in as simple a way as I could find.

The “Roaring Twenties” of the 20th Century was a boom period in new construction, new infrastructure, pent up demand, and new forms of art. The “Roaring Twenties” of this century will see a similar boom in new construction, high speed internet and commerce adoption, pent-up demand, and creator-driven dynamism. What our internal data explores may indicate that Roaring 2.0 may be well on its way for the fashion industry.

The DTC Power List tracks 465 modern brands, marketplaces, and retailers. Of those, nearly 280 are manufacturers or resellers of fashion products. For the first time since the list has tracked growth data, 75% or more of the top 20 growth positions are apparel and accessories retailers.

The direct-to-consumer industry has quietly served as a leading indicator for how the greater economy will change. Apparel and accessories retail has nearly completed its return to form and the timing couldn’t be better for an ailing sector. According to 2PM analyst Hilary Milnes:

Retail store openings are outpacing store closures for the first time in years, following 2020’s record year for shutterings, as companies rebound from the worst of the pandemic.

As more consumers prepare to return to their social lives, the apparel retailers that hold onto two key insights will regain momentum lost over the previous year: (1) there is pent up luxury consumer demand and (2) eCommerce is an applied science. A recent quote by Ministry of Supply Co-Founder and CEO Aman Advani encapsulated a sentiment shared by many across the retail industry who struggled to navigate:

We’ve been close to tears more times than I can count over the past 11 months. There’s a class of people killing it right now that makes Pelotons, but there’s a lot of people in our shoes. [1]

Soon enough, the tables may turn. With warm weather and a desire to connect in person, gyms like Williamsburg’s Equinox were packed with members returning to their old haunts (albeit with masks). It’s the Pelotons, Mirrors, and Tonals who may have to re-establish value propositions as North American consumers look to take a break from our virtual-first lives.

Roaring 2.0s

Few brands seem to understand the two key insights of pent-up demand and eCommerce as applied science like Ralph Lauren. The generational lifestyle brand is advertising a timely experiment that may come to define the application of lessons learned through the pandemic and how they may impact physical retail. On March 25, the brand is hosting an immersive fashion experience led by star musician Janelle Monae called “All or Nothing At All.” The company has hosted live stream events before. This time, Ralph Lauren is layering an eCommerce opportunity atop the experience.

This one promises to be similarly cinematic, only with guests invited to experience it from home, as well as purchase the see-now-buy-now collections from the same screen. [2]

This is the first of many pandemic lessons to be applied to life after lockdown. By broadcasting the in-store experience and making it available to online shoppers, Ralph Lauren is shaping how brands can safely re-engage casual fans of the brand while attracting new ones. In May 2020’s “DTC Ideas Taking Shape”, I explained the appeal of this linear commerce strategy:

Pioneered by Taobao and introduced to America through companies like ShopShops, live streaming is due to become the next great acquisition channel. [2PM, 3]

The Spring of 2020 represented a period of forced innovation as many brands and retailers, both modern and incumbent, wrestled with how to survive a once-in-a-century disruption. The Spring of 2021 is shaping up to reveal how well many of those retailers will apply the lessons learned. For many of those who are well-positioned to maintain (or regain) momentum, their new strategies will likely resemble a blend of the old and the new.

eCommerce is an applied science, blending proven strategies with new-age methods. The hybrid strategy of customer engagement has a role in capturing the pent up demand of Roaring 2.0. It’s neither “all” or “nothing at all” any longer. It is a somewhere in between, where online and offline is blurred for good.

Por Web Smith | Editor: Hilary Milnes | Arte: Alex Remy

Memo: The Economy of One

Há alguns anos, no Harvard Hall do clube homônimo de Nova York, tive o privilégio de ouvir uma conversa entre Vernon Davis, Arian Foster e John Elway. Juntos, o Hall of Famer e os dois grandes nomes da NFL estavam promovendo um novo empreendimento chamado Fantex, que, meses depois, seria publicado pelo New York Times.

Through Fantex, fans could buy stock in star athletes they supported, granting them rights to their share of the athlete’s future earnings. As contract values increase, so do endorsement deals, and the stockholder would be paid a greater dividend in step with that growth. They could also sell their holdings in the secondary market to another potential shareholder and profit. The value proposition was said to be the first of its kind.

Not everyone was convinced. One older gentlemen in the room argued that the value proposition wasn’t, in fact, the first of its kind. He witnessed the internet’s role in the demise of Fantex’s predecessor, the Bowie bond. In 1997, famed musician David Bowie and banker David Pullman marketed and sold asset-backed securities that gave investors a 10-year stake in future royalties.

The securities, which were bought by US insurance giant Prudential Financial for $55m (£38m), committed Mr Bowie to repay his new creditors out of future income, and gave a fixed annual return of 7.9%. He struck a deal with record label EMI which allowed him to package up and sell bonds on royalties for 25 albums released between 1969 and 1990 – which included classics such as The Man Who Sold The World, Ziggy Stardust, and Heroes, according to the Financial Times. [1]

Timing was against the success of the Bowie bond. By 2001, Napster launched and would soon change music forever by commoditizing it and making it freely and readily available. Pirated music pummeled the music industry and the record sales required to mint royalties for music’s biggest acts. As Bowie bonds sold and rose in value, the market closed to many of the other musicians hoping to duplicate Bowie’s efforts. Then Bowie bonds tanked.

In 2004 rating agency Moody’s Investors Services downgraded Bowie bonds to only one level above “junk”, the lowest rating, after a downturn in the music industry. Mr Bowie had himself predicted the decline in traditional music sales, telling the New York Times in 2002 that music would become “like running water or electricity”. [1]

The gentleman finished his brandy, placed his glass on a wooden table and left with a parting shot to Fantex. If I remember correctly, he said, “I have seen this before. The market is not ready for this bullshit.”

Nearly 20 years after the Bowie bond, it appears to be ready. The Bowie bond walked so that Fantex could fly. Fantex flew so that today’s creator economy could take orbit.

The same internet that commoditized music is today its own commerce destination. Where Napster once diminished value, today’s internet is capable of taking a commodity as irrelevant as a .jpg file and turning it into a multimillion dollar asset. We’ve witnessed a fundamental shift in how we monetize the value of digital creation. Through technologies like non-fungible tokens (NFTs), new wealth is being minted through the sale of digital art and properties. In the process, it is making creators the revenue that they’ve long desired. But there’s a much bigger picture to understand.

Consider 2PM’s Law of Linear Commerce: “the lines of demarcation between media and commerce are fading. For the brands that are most suited to the modern retail economy: media and commerce operations work to optimize for audience and sales conversion. This is the efficient path for sustained growth, retention, and profitability” [2PM, 2]

Linear commerce is now a business model for everyday individuals. The digital economy that once rewarded media companies or professional creators with eCommerce opportunities has made its way to the individual by allowing them to market themselves as growth opportunities.

The Economy of One

In a recent report by New York Times technology reporter Taylor Lorenz, she highlights a third wave of the shareholder creator economy pioneered by David Bowie and then Fantex, this time with a unique spin. Consider NewNew, a creator platform that allows users to sell moments in their own lives to fans. Lorenz writes:

Courtne Smith, the founder and chief executive of NewNew, said the company was “similar to the stock market” in that “you can buy shares, which are essentially votes, to be able to control a certain level of a person’s life.” “We’re building an economy of attention where you purchase moments in other people’s lives, and we take it a step further by allowing and enabling people to control those moments,” she said.

While NewNew received most of the attention, Rally.io is the closest analog to the shareholder system that Bowie once pioneered. Lorenz highlights Bomani X, a Clubhouse icon who recently launched his own coin with the hope of monetizing his trajectory as a creator.

With 25,000 followers on Twitter, you would expect that the digital strategist and musician would not have the audience to live solely as an “Economy of One” creator. The difference is that today, the velocity of creator development has never been faster. Bomani X boasts 3.4 million listeners on Clubhouse. And with creation comes the constant need for activity and access that Courtne Smith of NewNew seems to be working towards remedying.

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I’m off @joinClubhouse for a bit

The Rally coin allows you to buy futures in the individual much like a bet on the value of an NFT presents the opportunity for the art or its creator to grow in esteem, increasing the value of the NFT itself. For Bomani X, his temporary departure from Clubhouse led to a succession of sell orders on Rally, a short-sighted action but an indicator that even a creator’s 100 fans can be fickle.

The Incredible Kat Cole

When I stood in Harvard Hall, I listened to a stodgy older gentleman explain why the individualization of the stock market would never appeal to retail investors.  Perhaps the best example of why he was wrong lies in the well-earned trajectory of former retail executive Kat Cole’s transition from COO and President of FOCUS brands to coveted speaker, board member, and creator.

Cole has accumulated 1.2 million listeners on Clubhouse and became a cultural icon in her own right. You can find Cole on a Clubhouse stage with R&B singers, rappers, startup icons, mentors, investors, and even spiritual leaders. She seems to be the one person that has found a way to belong wherever she speaks. As a result, the New York Times recently published a report on the creator house she helped found, Audio Collective.

Audio Collective’s founding members produce all kinds of content. Mir Harris produced a performance of the Disney musical “The Lion King” on Clubhouse. Leiti Hsu runs a popular dinner party variety show. Kat Cole, a former business executive, hosts rooms focused on leadership. [3]

Her recent departure from Focus Brands allowed her to contribute more of her time to the genuine and caring mentorship that has become her trademark. With a platform opportunity, Cole was able to maximize her abilities in ways she couldn’t on Twitter, YouTube, or Facebook. This is what shareholders are betting on as platforms arise and monetization opportunities continue to evolve.

Cole is exactly the type of creator that our new culture seems to be looking for – one that sort of comes out of nowhere. It’s often the banter found on Twitter or in private forums where you would hear mentees, friends, and colleagues suggest:

If I could buy stock in anyone, it would be Kat Cole.

Bowie bonds and Fantex were before their time. Thanks to newly popularized technologies like NFTs and platforms like Rally and NewNew, consumers technically could buy stock in Kat Cole. The commerce and decentralized finance technologies of today have enabled us to monetize our belief in the potential of others. Though, knowing Kat, it’s unlikely that she’d profit off her potential as a creative icon or media personality. Her generosity is what’s helped her transition from inspiring retail executive to a solo creator and professional mentor known beyond the confines of retail or business.

It’ll be her sincerity and generosity that sends her rocketing beyond where she is today. She’s become an economy of one by positively impacting many.

Por Web Smith | Editor: Hilary Milnes | Arte: Alex Remy