Sign up for Morning Brew Here:
It took the average s&p 500 company 20 years it took google eight years, facebook six years it would appear that there are two basic approaches to growing a company. the second – more innovative – approach it up as much as possible and then eventually – i’m not sure if that last step is always necessary though. the first model is of course boring, and the valley
Business model over the last twenty “blitzscaling,” by reid hoffman – the founder of linkedin. every type of business, but mainly to network-effects a network effect business is one where the when the number of people who use that product or service increases. effects, and then once you are the dominant up prices, and the unprofitable fast-growing one way to think
About blitzscaling is as the financial benefits of entrenching your so significant that spending even billions especially in an environment where interest at minimal cost, you can spend an awful lot takes a really long time to eventually flip rates, those distant, and hopefully huge profits in the future) as they would be if they were these future profits at a zero – or
Close to zero interest rate. these are not necessarily businesses that cash flow negative, and there is not a really obvious path to profitability, but their valuations we have similarly seen companies dump rental of big cities, with the idea of dominating that form of transportation. the way reid hoffmann explained the term blitzscaling took the name from the world war two
German military tactic blitzkreig. beyond their supply lines, which limited their speed. could move very, very fast, surprise your enemies, and win. once you made the decision to move forward, you were all in. than a company going through the normal process of scaling up. from an offensive perspective, your business linkedin is a good example; it would never marketplaces
Like ebay equally must have both payment businesses like paypal and e-commerce from a defensive perspective, hoffmann argues than your competitors because the first to additionally, hoffmann argues that in a global of who your competition really is, as they as most of you know, i’m a big consumer amazing way to get up to speed on what is going on first thing every morning.
It’s a totally free daily newsletter, delivered seven days a week. and economists appear to disagree on the likelihood maybe one of the funds we think most of when we think of blitzscaling. the popular stereotype of what they do is softbank can step in and fund one of them with a huge amount of capital. it can expand domestically and internationally overnight, while its
Competitors grow slowly environment where one well-funded competitor the chosen company can out-compete everyone with unlimited money to spend they can eliminate the rapid growth will come at the expense care, as they are playing the long game, and category surely, they can eventually find a way to make it profitable. they were not the first company to come up a lot more on
Growing the business, they kept to photograph every apartment that was listed when airbnb filed for an ipo in 2020 they on the day the company went public it hit another example is uber, whose move fast and set up in a new city, skirt regulations, and customers were given a $5 ride credit for had they taken a more cautious approach, consulting and trying to grow organically,
They might not have grown at all? now, in theory, uber should be a cheap business to run. arranging deals between buyers and sellers for a fee. since the start of the pandemic it shed its aircraft units, offloaded bikes and scooters while the company is valued at $47 billion, it still loses money. they are locked in a fight with a variety too high and passengers move
On, too low and drivers will find other work. whatsapp is another company who spent a lot it’s not obvious what the path to profitability is for an app like that. silicon valley wrote the playbook for spending remains a hotbed of fast-growing yet unprofitable companies. spotify, the popular music streaming service there are all sorts of delivery and shopping rental
Companies, short term office rental hugely over the years, building out their side efforts like amazon web services and amazon prime video. today amazon is the fifth most valuable company in the world. moviepass is possibly the other side of the coin from amazon. moviepass members could pay $9.95 for a monthly many movies as they wanted to in movie theaters per month.
Just two movies per month resulted in a good they had that special sort of blitzscaling and the more they used the service, the greater the losses would be. the company claimed that it could eventually with theater chains, or by charging movie studios to advertise inside its app. if you have a working piece of computer software, the software won’t necessarily sell on its
Manufacturing, it’s an entirely different business. 47 billion dollars in 2019, had very different leases on office buildings, redecorating them, to this day, i’m not really sure what is supposed to be innovative about wework. to disrupt industries like laundry, parking promotional deals, only to run out of capital before customers latched on. there is a social cost
To the blitzscaling in 2014, new york city taxi medallions (the yellow cab) were worth over a million dollars, mom and pop bookstores have almost entirely there are all sorts of amusing stories in funded three different ride hailing companies, blowing through softbanks money competing maybe softbank should have picked just one uber is possibly the company most associated
That they are trying to switch to the first model of doing business. he said, “we have to make sure our unit economics work before we go big.” than adjusted earnings before interest, taxes, depreciation, and amortization. there is nothing actually surprising about to make money and that if they are doing things i should note that an economy mostly made at a profit,
Which distorts economic growth customers of these companies, can do well find themselves facing sudden price hikes, for those willing to do their research, this where you can reap the benefits of artificially the current crop of money-losing companies someone is willing to keep funding blitzscaling, one question we could ask is whether blitzscaling is countercyclical?
As the economy slows, these firms are pushed that they push up prices exactly at the point we might see inflation just because companies once this business model has made it through made money, or if blitzscaled business models models from the dot com bubble twenty three years ago? a lot of the leading lights of silicon valley where a regular fixed payment is given to
Universal basic income might actually be the logical conclusion of blitzscaling. would be phenomenal, there wouldn’t be all and then, once other competitors stopped handing if you found this interesting, you should don’t forget to sign up for morning brew totally free so there’s no reason not to try it out.
Transcribed from video
The Rise And Fall Of Blitzscaling! By Patrick BoyleliveBroadcastDetails{isLiveNowfalsestartTimestamp2022-06-07T180015+0000endTimestamp2022-06-07T182131+0000}
