Live on Substack #3: Unmasking the Strategy Success Trap

And I do believe that we're live here on Substack. Folks, if you're looking for the strategy Success Trap, you're in the right place. It's not the link that we had originally created, but here we are. So how should your company react to an amazing success? In 2021, companies like Peloton and Fiverr were soaring. You probably remember that. And they believed that they they had finally hit the, I guess, the goal that they were searching for and that this surge in demand would become the new normal. And what we know is that it didn't. Peloton originally abandoned its content model for capital-intensive manufacturing. Fiverr abandoned profitability and instead decided to grow at all costs. I think they multiplied their debt by some tenfold, up to 370 million. So in this conversation, we're going to discuss how these strategic shifts, chasing tactical success or tactical demand, guarantees a crash and sometimes mass layoffs that follow.

It may ask you— I'm going to say right now, I disagree with that premise. So I don't think that's what went wrong.

Great. So it might lead you to ask if your company's prepared for a strategy that works beyond its wildest dreams. So here to join me in what could be a contentious conversation is Amie Devoro. Welcome, Amie.

Uh, hi. If I seem crooked, it's because I cannot get my phone to stay correct. So I apologize in advance if I'm periodically askew.

Um, it looks, it looks perfect right now.

Yeah, but it's like creeping down on this like—

It's drifting. Yeah.

And it's in a wonky position, so I can't look at my screen and anyway.

Okay, well, we'll forgive you. Thank you. Someone will send you one of those nice handy-dandy, I guess a tripod that will hold your Yeah, I don't know what you're supposed to use to put a—

I don't do selfies or I'm not an Instagram influencer, so I don't get the whole phone thing. I don't know why Substack can't let us do this on a computer. I really don't get it.

It can, but it's more steps. And next time we'll probably shift over because anyway, for people listening. So folks, as I said, you probably know the story. That during COVID So we'll spend some time establishing the background, then we'll do some diagnosis, and then we'll talk about solutions. That's usually our cadence. But the challenge was that they both went through boom times, you know, unexpected, in a way unearned booms during COVID And during COVID they had a huge surge in demand. Fiverr, as you may know, is an outsourcing company. They bring people on and then, or bring on providers and then outsource your services to folks who want small-term contracts. Used to be that you get stuff for $5, hence the name Fiverr. And they were profitable before COVID Peloton was a company that was a subscription-only company that catered mostly to wealthy clients. And it was doing fairly well before—

Wait, correction. It was not a subscription-only company ever. It was a hardware company with a subscription model. So the hardware had to be purchased in advance for thousands of dollars. And then the interactive aspect of it was only usable with the subscription. However, you could always buy the hardware and not get the subscription and And regardless, you had to buy the hardware. So that was a very, very specific model. So I just, yeah, so it's not, it was not subscription only.

Point taken, point taken. Cause you had to have the hardware in order to do it.

Yeah.

It's not like others where you could use your own bike and not like Zwift, which I use. Right. So they, they were going pretty well before the pandemic and then pandemic came and all of a sudden there was a surge in demand. So we have two cases of where all of a sudden something unintended, unexpected, unplanned for, uh, changed the entire demand structure of the industry. And these are two companies that, among others, that benefited. But let's talk about how they benefited and maybe we can bring in some other examples.

Amin. Yeah. And I think, uh, I actually know very little about the Fiverr situation and I don't really I don't have a good analysis for that because I don't understand both why they prospered in the pandemic and why it would've changed after. But most of the companies, if you look at the companies that had outsized change in their results during the pandemic, there were, there were several of them and they all had different results. Not all, most of them, their results changed as a result of the change in conditions during the pandemic. In other words, Peloton went from being an incrementally growing at-home workout concept. And then when the pandemic hit, its demand surged because people could not go to the gym. And at the same, with the same, same story with Zoom. Zoom had had incremental growth. They were a small very slowly growing startup and the pandemic began and then their product had massive demand immediately. I will say Zoom is the, is a counterexample to this story, as is Amazon and several others. The thing that, that pushed their, that pushed the demand was entirely situational. That's why I don't quite understand Fiverr. Like, why would they have more demand during the pandemic than they had before? Because people lost jobs, maybe? They had more providers? That I don't really understand.

No, no, no, no, no. They had more demand. They had lots of people asking for, you know, temporary help. So what? Whereas before, you had a full-time— No?

I don't understand.

Why would—

I don't— why would you not have your same staff during the pandemic. I don't understand that. I mean, I've used Fiverr. They do like things in your house.

Oh, well, let me, let me, let me check. I believe it's because you didn't have the resources available to you because you were letting go of people. So there were some layoffs during the, during the pandemic. You didn't have the same staff. So then you needed temporary staff and it was cheaper to use them.

That's not really what Fiverr sells. I mean, I don't, I don't quite understand the Fiverr model, like what changed for them that they got more successful.

Let me dig into my notes here. But anyway, go ahead with Peloton. I'll see exactly what to say.

Okay. With Peloton is a very interesting case. Um, as it would be with Zoom if Zoom had not identified their error earlier than Peloton. So Peloton made a really stupid assumption and it's hard for me to understand why they made it. They made the assumption that when things changed during the pandemic and people started working out at home, that they would keep doing that when the pandemic ended, which was a nonsensical assumption. And I don't know anybody who assumed that was true, that nobody would go back to the gym because psychologically it makes no sense to work out in your home. If you have access to a gym, most human beings need the social interaction and the motivation and the, all these other things. This is not true for everybody. I realize there are exceptions to this rule, but I'm one. Yeah. Understood. But for most people, and this is borne out by the data and has been for over 50 years that we have data on gyms, people do not sustain their habits if they work out at home. It is a rare person who does that. And so the very thing that brought Peloton its success was this highly contextual situational model that they assumed would stick. Like they'd never read a psychology book ever, or met a human being ever. And so they seemed completely caught, you know, off guard when gyms reopened and everybody went back to the gym. Those people were desperate for interaction and other human beings and more machines than they could fit in their garage. And so of course they left their Peloton and it became a hanger for their dirty laundry. Of course. That should not have been surprising.

So here are my notes from Fiverr, 'cause it's a similar question. Businesses had to go digital, and the digital skills that they wanted to use were available remotely but not in the office. So e-commerce websites, online marketing, and graphic design— the demand for that went up all of a sudden. Um, there was the increased supply that you said, which therefore meant that there were lots of people looking for work on Fiverr. But there, this source also says that there was a lot of risk aversion, that people were— companies were strapped for cash. And it was cheaper to outsource to someone who you could pay $5 for, supposedly. Um, so you didn't need to hire someone full-time. You didn't want to hire someone full-time because the pandemic was like, well, okay, let me try this type of person who I've never hired before, before I actually hire this kind of person, you know.

And I think the biggest point is, I mean, there are clearly two things that drove their success in the pandemic. Then one is the first thing you said, which is Lots of businesses were forced to go virtual. Restaurants had to think about how they're going to have an app so people can order and so on and so forth. And so that surge was again, situational. I don't know. I just don't know very much about the Fiverr model. I mean, I know about the Fiverr model. I'm actually a customer, but I mean, I've used Fiverr. I don't know. How they made the mistake of thinking that their demand would remain the same after the pandemic. Because although it's not quite as obvious as Peloton, it should be relatively obvious that all these businesses that added virtual services, that first of all, that flow of new business would not continue. And the ones that you already had, it's kind of a, this is the same problem Peloton has is Peloton's model depends on people buying a $2,000 bike. And right. So, and it's a one-time purchase because you don't have to do the subscription. So it's a non-renewable product. Once you buy the bike, you don't need to spend $2,000 with Peloton again. Now you can, if you want the subscription model, but the bike works fine without it. You might be like me. I do all my reading on a bike. So like, I don't, I don't do anything interactive on a bike. Um, and so that's a bad business model unless you're Apple, right? It's hard to sell equipment because you have to keep acquiring new customers, which is very difficult to do when you have a high-ticket item. The subscription model, I think they thought would save them because obviously you get ARR, but in the absence of a need to work out at home, that became less attractive and people started cutting their subscriptions because they weren't using their Peloton. They were going to the gym. Now, if we take Fiverr, you have a similar assumption, right? Which is that businesses that went virtual would keep using those services, but they don't because once they implemented their online menu or their online ordering apparatus, or they, whatever they did, It's done. There's nothing to renew. Like, I don't use my webmaster anymore because I have a website. It's already made. It's there. Everything I need to do, I can do. And so, and then the, the ongoing demand would of course stop because brick and mortar businesses were not going to become virtual businesses once the pandemic ended. And human beings were not going to continue to do 100% of everything in their homes. So again, this model that conditions changed and they would be like that in perpetuity is just a, it's a very naive assumption and very difficult for me to understand how he's made it.

Well, I guess this is why we're doing the call because we want to know What it is about success that disrupts strategy.

See, but I, that's the premise I disagree with because there are lots of counterexamples that did well during the pandemic and sustained their growth.

I mean, let me give you the example. Hold that thought. Hold that thought. We'll get to it because there's another good exa— couple of other good examples here. So Clorox and Lysol had booms. All of a sudden you needed cleaning equipment that you For a while, for a while, but only for a while.

It was very short-lived because once everybody knew that you couldn't catch COVID by touch, that stopped.

Right, right. There was also a surge in Hertz experienced a huge surge as people were, I guess, wanting to get out and they needed to rent a car. They had a huge spike and then that busted. Bed Bath Beyond, had a huge surge in home goods because people were locked down and they wanted to, I guess, clean or at least remodel.

No, they needed furniture. They needed home office.

Oh, that's right. They needed home offices, right? So they needed to buy a desk and buy—

Right.

And then there's a list of others. It's really interesting because it—

But these companies didn't all fail after their surge. I mean, Yes, they had a surge and then the surge went away, but they hadn't staked their entire strategy on that surge. Bed Bath Beyond was already going out of business before the pandemic began. And the makers of Lysol and Clorox are just fine, thank you. I mean, like, those companies are fine.

But there is a— what I did is I did a search for companies that had a boom and then a bust. And so they all coped because these are different companies in different industries. They, they coped in different ways from, you know, from the bust, from the bust that they experienced. They all, they're also, they all survived. None of them is out of business, I don't think. They're all in business in a form, but there was this period you failed.

But the ones that were dismal failures do not include all of the ones you just mentioned. The ones that I mean, I think you have to, I think you have to establish some causality here. There was a spike in demand for Clorox and Lysol, but Clorox and Lysol had very substantial business models outside of that. Bed Bath Beyond was already going bankrupt. I mean, if they got a little bit of a bump from the pandemic, okay, but they sell towels and sheets and stuff. So, and they were already failing and they were in bankruptcy and so forth. There are companies that uniformly failed after the pandemic. Some edtech companies, um, actually I can tell you, so I have a sustainer and a non-sustainer. So the non-sustainers are, let's see, I have Robinhood here. Robinhood. So that's a good one. So the ones that were really bad. All right. So I know some of these, um, the non-sustainers are Robinhood, Clubhouse. You could include Kivi in that.

Uh-huh.

And some of those you can really tell how they came to be in the pandemic. So Kivi is not, it's sort of pandemic-y. It's a little bit before that actually, but Clubhouse surged during the pandemic because people needed more ways to engage. And because they were socially distanced, Clubhouse was essentially a social network for for audio. So you could go on, you could start a show, kind of like we're starting a show, and people could call in. It's like you have your own radio show, and you could interact in groups. And it was exactly like social media but audio. And it failed because, honestly, I think people realized that there was a lot of other ways to do that. You know, there was just— it had much more competition, and it was just a novelty. It was kind of a flash in the pan. But some of the companies that failed in exactly the same way as Peloton made the same mistake, which was assuming that this very idiosyncratic condition, which we all knew was to be short-lived, right? We all knew that at some point, either half the population would die and the pandemic would end, or half the population would not die. And the pandemic would end. But either way, the pandemic would end. And so if you know the pandemic will—

Be sure, because there are, I'm sure there are C-suites among the ones that we're talking about who were convinced that this might not go away, that there was some percentage chance that this could be a 10-year pandemic. And during the 10 years, they could make as much money as they possibly could, and they would ride it all the way to, and work from home would be permanent and we would never go back to the office. There was that, there was somewhat extreme kind of thought.

But you, but you just said two different things. So do I think there were CEOs who thought it would go on for 10 years? No. I'd, I'd like to see documentation on that. No, not, not anyone we're talking about. I mean, not serious people. With some idiot crank, not some idiot crank somewhere. Yeah, maybe, but these were Fortune 50 CEOs and CEOs of companies funded by major VC firms. They did not think the pandemic was going to go on for 10 years. However, now, did they think certain societal changes in the pandemic would be permanent, like work from home? That's a different question. And I do think that, and in fact, you know, this has been unrolling now for what, 3 or 4 years, that it's been quite shocking to a lot of people how many businesses have said no. You have to come back to the office. And it wasn't shocking to me at all. And I wrote about it at length, so I can claim the prognostication banner here that I said, and I think there were others like me who said, no, work from home is a great option. Hybrid is a great model. You must have people together in order to have all of the benefits of human beings in in shared proximity, which is casual collisions, osmotic learning, you know, how people be. I mean, I wouldn't have had any friends in my 20s and 30s if I hadn't met them at work, you know? Like, there's a lot of life that happens just by being in the same place as people.

But that doesn't say, that doesn't explain why, so like the lifestyle example. They built in all this extra capacity to, to, to extra manufacturing capacity. So they spent presumably millions of dollars to add new factories, believing that they were on the beginning of a trend that was going to be sustained, if not by a pandemic, by a, by a something, you know, whatever they, they, they believe the originator of the new demand for Lysol and cleaning products was. They, and so did Peloton, you know, Peloton bought factories and No, they invested millions in dollars in this new capacity that they believed was now going to be permanent. And in the light of day, you know, we can look back and say, yeah, but I have a little bit of sympathy for them or empathy for them because a C-suite that gathers around an office and creates a strategy, an original strategy, and then seems willing to abandon that strategy once they start to feel as if they're becoming very, very rich, very, very fast, and that their dearest dreams are coming true. That's the crux of the, I think, the matter is what, what is it that causes someone or a group of people to lose their way with respect to their original commitment versus the results that are now happening that change that commitment, probably without a whole lot of discussion. I probably not have a lot of reasoned discussion. You know, a lot of, you know, a lot of— Like a lot of— I don't know the word for reasoned discussion. Kind of having the luxury to look back with some modicum of distance, emotional distance, and say, you know, is this really going to last? That question probably didn't last very long. In some of these C-suites, it probably came up and it was like, whoosh, whoosh, whoosh, and they moved on.

I actually, Francis, let me interrupt you because I think that, um, again, there are, there are a couple things that are all stuck together here that we need to parse apart. So I think it is entirely reasonable for Lysol and/or Peloton to have increased manufacturing capacity, even if they knew it wouldn't last. All right. Why? Because they had demand and it would be insane not to meet the expectation of the demand. The bigger question is, if you are going to increase manufacturing capacity, do you have a way to pull it back? Right? Do you have a plan B for whether you think this is going to last for 6 months or 6 years or 6 decades? Do you have a way to Is your demand elastic, right? Is your response to that demand elastic? Now, my guess is that the Lysol makers, who are they? P&G? They're, um, who are, who's Lysol?

Who's the parent company?

It's a huge company. I mean, I think they just, they just did a buy for patient.

Lysol and Clorox.

Yeah. They're, are they Procter Gamble?

Keep going.

I think it's P&G, but anyway, but those were companies that are sufficiently diversified that even if they invested in a bunch of additional manufacturing, they could redeploy it to a different product line. They could give it to a subsidiary. They've got a way to deal with the elastic demand, right? With the possible demand diminishment. And I also think it's reasonable for a brand like Lysol or Clorox to assume that some of that demand would stay. Stick just because they have new customers, right? If you have, if you converted somebody from natural soap to Lysol or somebody who never, you know, worried about disinfecting anything to Lysol, they buy it once, odds are they're going to keep buying it. Why? Because they're in the habit of using it.

Maybe.

I don't know. I can understand.

The source I'm reading says it was because of pandemic.

No, I'm not saying it's true. I'm saying I can understand the assumption, right? It's not Peloton, it's cleaning your house. So I will say I use more, more Clorox and stuff than I did before the pandemic. Not because I'm germ crazy, I'm not. And I never was. I kind of like the effects, right? So I use it more. So I keep buying it. Um, but Peloton was a little bit crazier, right? Because Peloton only made one thing. You know, like P&G or whoever makes Clorox and Lysol.

Oh, it's, it's a company called Reckitt, which is a British multinational consumer goods company.

Right. But nonetheless, multinational consumer goods company, they probably make a million things they could turn those factories to making if Lysol is not necessary. Peloton makes one thing and there was only one use case. That's it.

You could use it for, for to hang your laundry on. That's what you're saying.

Right. That's it. Nobody's buying it as a hanger. So there it's a little bit more mysterious why they didn't at least build in a method, like they could have rented factories. They could have done a lot of different things other than invest millions in buying factories. Right. They could have subcontracted the manufacturing. There's a lot of different ways to skin that cat. They chose not to. They went all in with their new capital and put themselves in a precarious position, which no matter how big a boom you're having, you do have to ask the question, why would you be so incredibly impulsive is what it feels like. It feels like impulse.

I, I think you're right about the impulse. I agree with— I, I think, but this is like impulse at scale, you know. Personal impulses— I, I drink, I drink a beer instead of drinking water, and that's a personal impulse. But maybe there's something called a, a strategic impulse or, or a C-suite impulse where over a period of time— I'm sure in retrospect all of them look back, all these companies look back and said, what the hell happened? We're Smart people, we make reasonable decisions usually. And as things changed and as the numbers started to go in the right direction and our founder's dream started to come true, we came into some impulse, some strategic impulse that didn't exist before, that was foreign to us, and led us to make these decisions.

And yet, with Peloton, because I have followed the Peloton saga, all right, from Like throughout the last year, as they changed CEOs and they're trying to change their strategy and they're doing this and they're doing that, nowhere in that time has anyone actually said what you just said. They have acted as though what they did was perfectly logical and entirely reasonable, and that it's a complete, like, left turn that people went back to gyms and started hanging dirty clothing on the Peloton. To this day, nobody in that company has said to the shareholders, you know what? We had our heads up our ass and we should not have done it that way. We should have hedged our bets. We should have rented manufacturing plants or subcontracted it. We didn't. We need to change our strategy now. And to this day, they have not come up with— they made a cheaper bike, But it's still not cheap. It's $1,500 instead of $2,000 or $1,200 instead of $1,800 or whatever. It's still a lot of money. They still have not done what would be strategic, which is come up with 100 different virtual workouts you can do anywhere, right? Because they have a platform to do that. They should be able to take all the Peloton riders, who are now in the gym and give them something to do in the gym for which they could continue to pay a subscription, right?

Right.

That's the obvious pivot.

Right. Like the gym could become an extension of your Peloton experience.

Exactly. I mean, that's the obvious pivot, not to dig into this idiotic hardware model, you know, and then they made a treadmill, which nobody wanted because cyclists don't want to run and people who can run don't want to run on a treadmill during a pandemic. They want to go outside.

So like, this strategic impulse of which we speak, I think, is— so it's not— we now see that it's durable. It doesn't go away because demand drops off. No, this, this somehow works its way into the culture of a company. By the way, so this is not for you because you know this, but folks, as you're listening, there were other companies that experienced surges And they did not respond in the same way as the ones that we're talking about.

And we should mention some of those.

Yeah. Did you have a list of them? I had a list of them.

I do have a list, but I actually, I want to speak to one in particular, which is Uber.

Uber?

Okay. So Uber, I have the numbers and all of that, but I don't know that they're all that interesting. So Uber.

That's kind of boring, right?

Let me just, let me just show you what this, I don't know if I can show you what this chart looks like because I'd have to move the phone. So I can't. But on this chart, Uber more than, it looks like 5x their revenue from pre-pandemic to post-pandemic. Now, obviously people were not riding Ubers very much in the pandemic. Travel stopped. It was a social distancing problem. As you said, people bought cars, they moved to the country. What did Uber do though? Uber took all their drivers and had them work for DoorDash or not DoorDash, but Uber Eats delivering food. And then they acquired another company that was a DoorDash, a Uber Eats equivalent. Was it Postmates or— they made an acquisition though that was strategic. And Uber managed, even to this day, the lion's share of their revenue comes from Uber Eats and not from Uber Rides, because they're still struggling with trying to get Uber Ride pricing to where it's profitable, because it's not cheap anymore, but it's still cheaper than it should be. But they made a pivot that was both responsive to the pandemic and would maximize their advantage. Even when the pandemic ended. Now, that's an example of being really smart. And Zoom also experienced a huge surge in demand through no fault of their own. They had to invest to meet the demand because their servers crashed on like the second day of the pandemic, which they did. But even though they experienced a drop after the pandemic, they did what Peloton didn't do. They said, we need a strategy for a non-pandemic. We're not the only game in town anymore. Google jumped on it. Microsoft jumped on it. Everybody has an instant video access now. What can we do? And so they immediately started strategizing to, again, sustain their advantage by essentially creating more and different ways of serving their customers. That we're not all the same pony, right? All the same.

Who could have done that? Fiverr could have done that. Lysol could have done that. They could all have backed the heck up from the demand and said, you know what? Step away from the demand and let's look at the bigger long-term picture and let's see what this really means. Even if it's sustainable, if it's not sustainable or if it's sustainable in ways that would actually endanger our company, because you can also fail because you grow too fast. Exactly. But the tendency is not to do these things. The strategic tendency is to give into that, especially when you see those— I mean, you see those numbers coming in and you start to imagine and play out in your mind how you're going to spend the extra money. There's something very human here that is happening, that in the heat of the moment, you, you and your colleagues, you convince yourselves that this too shall last and this shall be my swan song and this will be where I retire to the beach in Jamaica because this is what's going to take me to the golden land where all promises are being fulfilled. So what is it that causes a group to— I've never been around this kind of phenomenon before, so I'm really curious. If I were to see it happening, how would I, as a consultant, how would I What would I say in that moment to put the brakes on something that is, you know, very human?

Well, I don't give them— I actually don't believe that's what happened. I don't think it was they were like counting their money and imagining their island getaways. I think it was actually more nearsighted than that. It was really, finally, our company's growing. We need to scale so we can meet the demand. I mean, really, like, I think it was really tactical. You know, let's figure out— Only tactical. Right. Super tactical. So we're going to solve— our current problem is we can't deliver enough bikes. Right? That's our current problem. And so we need to solve that problem. Mm-hmm. Right. There's all these customers waiting to buy. We need to get them bikes. Mm-hmm. And we have cash coming in, so we have the money to do this. So it really was just like, we're thinking on our feet. I don't think they were counting money. I think they were thinking on their feet about how to, you know, how to sustain delivery, how to get these new customers, how to make sure the customers got the virtual thing, you know, the subscription. And then nobody had the thought, will this last? Like, I think they just didn't think, will this last? I think if anybody had actually had the thought, will this last, they all would have said, hmm, maybe not. Maybe we need to diversify our offerings. Maybe we need to focus a little less on bikes and a little more on virtual offerings. You know, maybe people get—

I disagree because I think Even if someone had the thought, I don't think it would have been anywhere near enough to turn around the momentum of a team. So I can't believe that so many smart people in so many companies, that there weren't people who raised their hands and said, yeah, but what if? And I'm sure their colleagues just turned on them and said either a version of what you said, which is we to solve the short-term problems, so don't even worry about that. We'll care about the long-term when we have time to care about the long term. So they shut the person down or they just overrode them because they were, back to my emotional response, they were filled with the joy of their own success. And they were finally realizing that, oh, I'm the master of the universe because here are the numbers that show me that my business model is finally working. So I'm brilliant and yada, yada, yada. Either, either reason, the person didn't get much traction.

I think I would agree if in fact I agreed that there were so many, but I don't think there are so many. I think there are a handful of companies that had massive surges during the pandemic. I mean, I can't even with all my searching, even with asking ChatGPT and Anthropic, I haven't come up with more than 10. And most of them were timing issues, not causal issues by the pandemic. Peloton definitely was due to the pandemic. I'm now convinced that Fiverr was as well. Bed Bath Beyond, I am not convinced had anything to do with the pandemic. Um, so—

You mean their failure, their ultimate failure?

Or their success.

I'm surprised. But you don't think that people needed to buy their products and so on?

That's Bed Bath Beyond. Bed Bath and Beyond didn't sell furniture. They sold towels and sheets and bathroom ornaments. And it just doesn't, it doesn't, it doesn't make sense to me unless it was Airbnb. I mean, how many people could be outfitting their Airbnbs?

You know, it says there was a demand for home goods. I think home goods broadly, because you're at home, you want to make your home.

I know people, people, people were buying DIY. They did.

I mean, DIY. Right?

They don't have paint there though. They had towels and sheets and bathroom ornaments and toilet paper holders and, you know, homey stuff.

People wanted to feel comfortable at home, whereas it was, you know, especially for someone who was working a 9 to 5, and if you're busy on weekends, then a home is just somewhere that you come, you know, during it, you know, to sleep at night for the most part. You're not there during the day, but if you're there And if they're, if they're $168 a week, then, but even if you put Bed Bath and Beyond in the mix, you're still, say there's 10, there's not so many.

There's, there are a few that have this outlying success. I mean, Bed Bath and Beyond had been successful in the past and, you know, they were a huge deal. And the only thing that killed Bed Bath and Beyond was Amazon. That's what killed them. It was not— had nothing to do with pandemics or anything else. It had to do with people buying the same stuff on Amazon. Interestingly, the other company that benefited tremendously from the pandemic is Amazon. And Amazon also took their pandemic success and maximized their advantage and used it to create additional ways of serving customers. That could outlast the condition change. And so like they used that extra money to build out their logistics service so they could stop using UPS and use their own trucks and have their own, you know, their own cargo and their own airplanes and their own everything. So that was a really smart investment. The demand drove it, but even when the demand, you know, went down, all of that still benefited the company.

Yeah, but check this, check this out. So this is, this was a thought I had in setting this show up, that a success is no different than any other perturbation, any other unexpected events. It could be a technology, it could be a tariff, it could be, uh, inflation, it could be whatever, whatever the thing might be. It could be a hurricane, it could be positive or negative. It's just that this one happened to be super positive for certain companies. But the same thing happens in, in, for negative and positive thing, which is again, this impulse strategy by impulse kicks in. It takes over an executive team and somebody raises their hand and says, yeah, but what if? And that voice gets dismissed and this tactical frame of mind becomes the new religion, like this, we can only get through this thing that's in front of us, including, you know, we need to build new factories, that the dynamic of the two are actually, they're the opposite, but they're the same. What do you think of that?

No, I fully agree. They are two sides of the same hand, which is not thinking, not first of all, two things. One is not expanding your scope beyond not just temporal scope, but scope in general, right? So, you know, there's all kinds of first, second, and third order effects of investing a tremendous amount of money in manufacturing plant. Now you have this asset and you have to maintain this asset and you have to employ people for this asset and you have to pay taxes on the asset. You have to depreciate the asset. Like assets have a lot of economic impact outside of just the money you spend on them, right? They have these long tail effects of additional money on and on and on and on and on, right? So you buy that asset. It's, this is the same thing I think that happens to football players who make a tremendous amount of money. They buy penthouses, you know, they buy, they buy a zillion houses and airplanes and they treat their friends to everything, forgetting that a football career is not a lifelong career. And if you don't think really carefully about how you're going to husband your resources and think about what happens after your career, money doesn't naturally accrue and grow. You have to create the conditions for it to accrue and grow. And that's true in an organization too. Value doesn't accrue and grow unless you create the conditions consciously to have it do so. So if you assume those conditions will last forever, even though they're anomalous, even though they're perturbations, as you said, then you are going to be sorely disappointed and in really bad shape when they change, have— if you haven't thought about it. If you are a professional football player and you're making, you know, you have a contract for $130 million for the next 4 years and you blow out your knee, And you can't complete your contract and you spend all your money on mansions and women or men or friends or whatever you spend it on, you have a problem.

But it's hard to convince the— I think the lesson from this is that it's hard to convince the football player right after he signed that $10, $15, $20 million contract that, listen, you know, you raise your hand and you say, You're some uncle who says, yeah, but you know, this could all go away, you know, are you sure you want to? And the football chair looks at him like, you've got to be kidding me. Because there is, and I doubt that companies that are doing really well as a result of any reason hire consultants like us to come and tell them, hey, you know, are you sure you should be looking at the, because There is that sort of, I have figured it out. I know better. You've not read, you've not, you're not being paid $10 million, Ms. Consultant, and you're not experiencing a surge in your business like we are. So, who are you to tell us? So, I'm still backed up. What do I tell a company if I happen to be consulting with one? I don't think they would even call me in.

Well, I've been called into those companies because I worked with startups that just got huge funding. And, you know, even while they feel like they're swimming in cash, they also know that, you know, at least with VC money, it's not free money, right? It comes with expectations. And, you know, you may not need to generate profit for the next 5 years, but you better show how you're going to generate it one day, how you're going to do an IPO, how this new demand that you've found found is going to show that it has legs. And so I don't think it's our job as consultants to come in and tamp down the enthusiasm. It's more a question of how you frame what you're saying, right? Because what we're really saying is not, whoa, whoa, Nelly, stop. Don't get so happy.

It might not—

it's not quite that. It's more like, oh, this is amazing. Now, how can we leverage this so it lasts the next 40 years?

For real.

Because that's really the question, isn't it? It's not, it's not, oh, don't get so enthusiastic. This won't last. No, it's how can we leverage it? How can we compound this? How can we enhance the strategy so that what may be anomalous right now becomes a lasting sustainable advantage, no matter what happens in the environment? And that's not a naysaying downer message. That's a, hey, you're doing great. Let's make sure that if you blow out your knee, your shoulder, and your head, you're still a zillionaire.

You know? In a corporate setting.

Right.

How can we make you ridiculously profitable and you use—

And Teflon.

And Teflon. Teflon-ish. Yeah. How can we make you that even as you like DoorDash did and Amazon did, even as you invest the gains of a windfall. You know, it's kind of like a sovereign fund for companies that— countries that are oil dependent. You build this kind of long-term fund so that you can assure your success later down the road. So it's more about that kind of conversation.

Well, it's interesting because you see that now with like Saudi, right? Because they see the writing on the wall that oil is going the way of the dinosaurs. Like, it's meeting the dinosaurs where it came from, because the reality is, is that sustainable energy now makes up over 40% of energy production in Europe and in the US. And so if you're an oil-based company, you have a Saudi Sovereign Fund, that fund is about investing in potential revenue generators for the country when the oil is no longer in demand. It's smart. You know, I don't think we thought 10 years ago or 20 years ago we would see, you know, the Arab countries making that kind of strategic decision, even as the US does the exact opposite.

And on that note, that'd be another call altogether. But it does lead to another call. Why do some countries get in and others not? So, Ami, I want to thank you for joining me here at the Jumping Deep podcast and on this Substack. Any parting words?

No. Are we going to do this again in a couple of weeks?

A couple of weeks isn't good for me, but sometimes we'll sort it out.

So for those of you listening, you may have noticed this is now on somewhat of a regular cadence. And our decision is that we swap hosting. So if you want to make sure you know about it, whoever's hosting, make sure you, if you're a listener or a reader of mine, that you subscribe to Jump Leap. And if you're a reader of Francis's, make sure that you subscribe to Beyond Better. And, um, we always love to chat and argue with each other. So it's all we can do not to foist these on you every day.

Right. By the way, we did get a comment from John, 3 comments from John Savatt, friend of ours from a long, long, long time ago, 2 decades maybe. Lord have mercy. Yes, more than 2 decades. Sorry, I didn't get to get to the question on the comment.

Well, John, the answer is neither. It was the organizational strategy. All of the above.

Marketing and sales. John asked, was the failure based on marketing strategy or sales strategy? And, and misandrous both. All right, folks, thanks for joining us. Sorry about the snafu and the change in links, but this is a platform that we've not quite figured out yet. But see you next time. Take care. All the best. Bye-bye.