Weekend Briefing No. 260

Welcome to the weekend. This briefing marks the 5th year of the Weekend Briefing! It’s a significant milestone. Creating the Weekend Briefing has become a part of my weekly rhythm, and it’s genuinely something I love doing. The fact that more and more people continue to subscribe and engage with the content has been really encouraging. I love the feedback and wisdom you share with me. I’m truly grateful for your continued support and engagement.

Here’s my February playlist for your listening enjoyment.

Prime Numbers

324,480 – Number of words in 5 years of the Weekend Briefing.

2,554 – Number of articles in 5 years of the Weekend Briefing.

0 – Weeks missed in 5 years of the Weekend Briefing.

Purpose & Profit

Four years ago I wrote a book called Profit & Purpose. Being an optimist, of course I hoped that these concepts would influence business practices for the better, but I assumed that would be a very slow and a bottom up movement, beginning with startups and working up to big business. So, when the CEO of BlackRock (which manages more than $6 trillion in assets, making it the largest investor in the world) released his annual letter this year entitled Purpose and Profit: An Inextricable Link, I was very pleasantly surprised. He notes: Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being – what it does every day to create value for its stakeholders. Purpose is not the sole pursuit of profits but the animating force for achieving them. Profits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked. Profits are essential if a company is to effectively serve all of its stakeholders over time – not only shareholders, but also employees, customers, and communities. Similarly, when a company truly understands and expresses its purpose, it functions with the focus and strategic discipline that drive long-term profitability. Purpose unifies management, employees, and communities. It drives ethical behavior and creates an essential check on actions that go against the best interests of stakeholders. Purpose guides culture, provides a framework for consistent decision-making, and, ultimately, helps sustain long-term financial returns for the shareholders of your company. BlackRock (7 minutes)

Capitalist Reformation

Capitalism is the most powerful institution in the world. As did the Catholic Church in the Middle Ages, capitalism shapes every part of our lives in myriad ways, from the beautiful to the destructive. Growing populist anger and the internet’s potential for radical transparency in the decade since the global financial crisis are elevating a fundamental public debate about the role of business in society and whether business should put purpose before profit. Others across the ideological spectrum have pointed out the obvious: hyper-individualism and its offspring, winners-take-all-capitalism, have together become an economic system that is in desperate need of reformation if it is to deliver on its unfulfilled promise to create prosperity for all, and for the long term. But who will accelerate the necessary culture shift today and nail 21st Century Theses to capitalism’s door? As it required a monk to reform the Church, it will require business leaders to reform capitalism. Today every business leader in the world has the power to unleash a new reformation—a Capitalist Reformation—that has the potential to shape our history for the next 500 years. Forbes (11 minutes)

Saving Humanity, But What About the Humans?

At Tesla’s production facilities Elon Musk would terminate people; other times he would simply intimidate them. One manager had a name for these outbursts—Elon’s rage firings—and had forbidden subordinates from walking too close to Musk’s desk at the Gigafactory out of concern that a chance encounter, an unexpected question answered incorrectly, might endanger a career. Everyone came to work each day wondering if that was going to be their last day. Musk seems callous because what’s one person’s feelings compared to the fate of billions? Elon cares a lot about humanity, but he doesn’t really care about individual people all that much. In my experience it’s fairly common for heavily mission-driven organizations with charismatic leaders (whether it be non-profits, big companies or political campaign) to crush people in pursuit of changing the world. WIRED (26 minutes)

Rev Share

Typical VC equity investments can work quite well for businesses that are aiming to be unicorns, but what alternatives are out there for profitable and growing companies? Quite a few, actually. Over the course of 2018, our client Village Capital interviewed more than 200 investors and asset managers to gauge their interest in various alternative capital strategies, but the one option that received the most interest from investors — with 63.1% willing to explore or co-create such a structure — was revenue-based financing. A revenue-share deal typically involves a capital investment that is later repaid from a share from the revenue of a growing business. It has historically been used to invest in businesses with potentially predictable cash flow and high profit margins, from Hollywood movies to high-margin service businesses. After backdating a hypothetical revenue-share investment in 30 companies, they found that, on average, it would take around 4.4 years to realize a 3x return on the initial investment amount, which ranged from $20,000 to $100,000… faster than an equity investment. Novel GP has a $12 million fund focused on revenue-share investments in software-as-a-service companies. Indie.vc recently raised their second $30 million fund that invests through a “profit-sharing” structure by which the fund receives disbursements based on net revenue or net income, depending on which is greater. Candide Group, Adobe Capital and affiliated fund VilCap Investments are a few more examples. TechCrunch (7 minutes)

Techno-maximalism

Techno-maximalism is the basic idea that technological innovations can bring value and convenience into your life. We assess new technological tools with respect to what value or convenience it can bring into our lives. And if you can find one, then the conclusion is, “If I can afford it, I should probably have this.” We tend to just look at the positives. More things that bring you benefits must mean more total benefits. What is so pernicious about that type of thinking is that there’s a cost to these additions. What we don’t factor in is the cost of the attention required to have this device/ app in our lives. Facebook might have some particular thing that’s valuable, but then you have the average U.S. user spending something like 50 minutes a day on Facebook products. That’s actually a pretty big amount of life that you’re now trading in order to get whatever the potential small benefit is. Maximalism ignores the opportunity cost. And as Thoreau pointed out hundreds of years ago, it’s actually in the opportunity cost that all the interesting math happens. GQ (11 minutes)

Skeptical Kids

How do you raise a kid that’s sharp, but not an anxious mess? Focus on skepticism and critical thinking. Kids who are able to engage in critical thinking often think through the consequences of their actions before they do anything drastic. They’re also more willing to consider if the things they encounter might be unsafe or the things that they hear could even be incorrect, leading them to be independent thinkers who want to figure out the truth for themselves. To instill critical thinking 1) When making decisions in front of kids, ask lots of questions. 2) Explain decisions made to kids. 3) Interrogate kids about their decisions. Fatherly (7 minutes)

In a Nutshell

In a Nutshell is a mesmerizing stop motion animation, directed by Fabio Friedli, attempts to sum up the entire world in just five minutes, “from a seed to war, from meat to love, from indifference to apocalypse”. Vimeo (5 minutes)

Weekend Wisdom

Like anything worth doing in life, happiness takes time and patience and consistency.Mark Manson

About the Weekend Briefing

A Saturday morning briefing on innovation & society by Kyle Westaway – Managing Partner of Westaway and author of Profit & Purpose.

Photo by Adam Gong.