I was reminded of this 2020 post by a recent Stratechery article and realized I should give some context to why we stopped linking to Stratechery and why we might reverse that decision.
Stratechery made two horrendous calls on big trends. The first one was scooters, maybe excusable, anyone can get caught up in the hype and for a while there was a lot of hype around scooters.
The second was WeWork. Long time readers may remember our first few posts on the company currently known as We:
January 14, 2019
...Programming Note: Climateer Investing Is Dropping Coverage of the Company Formerly Known as WeWork
It was fun back in 2014 when headlines like WeWork Worth $5Bil., Weally were fresh and new.
And in 2015 it offered an intellectual exercise: How To Convince Investors Your Startup Is Worth $10 Billion: "There has got to be a way to short this". And $16 Billion Valuation WeWork Cut Forecasts as CEO Asked Employees to Change ‘Spending Culture’:
"It has been a long cherished dream to figure out a way to bet against this one, links below....
Climateer Investing even took "WeWork: 'Our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.'" at face value:
Roger that, energy and spirituality. Over....
In contrast Stratechery was writing:
....Given this vision, WeWork’s massive losses are, at least in theory, justifiable. The implication of creating a company that absorbs all of the fixed costs in order to offer a variable cost service to other companies is massive amounts of up-front investment. Just as Amazon needed to first build out data centers and buy servers before it could sell storage and compute, WeWork needs to build out offices spaces before it can sell desktops or conference rooms....
Even after the very much downsized public flotation (via SPAC rather than the earlier IPO which had to be CXL'd), there was still downside:
BigCharts
Anyhoo, despite all that, a recent post may make up for two misses on big trends. I have to digest it, cogitate, ruminate and see if we can make a bucko or two out of it.
But first, here's how Mr. Thompson created a very nice little business, first posted December 8, 2020:
I stopped reading the very popular newsletter a few years ago when I began noting that Thompson's worldview was not comporting with my learned/lived experience and that he seemed to be selling the standard Silicon Valley weltanschauung.
The last time we linked was in October 2018.
On the other hand, one of the Founders Fund guys says:
Columbia Law School's Tim Wu has a deeper and more insightful critique mentioned in this piece, see after the jump.
From Business Insider Australia, December 4:
- Founded in 2013, Ben Thompson’s $US120-a-year Stratechery newsletter is beloved by tech executives and venture capitalists in Silicon Valley and reaches subscribers in more than 80 countries.
- By one estimate, Thompson’s solo-media enterprise is expected to generate more than $US3 million in revenue this year.
- Yet as a raft of big-name writes leave their jobs to start their own newsletters via the “pivot to Substack” trend, Thompson’s success will be difficult – if not impossible – to replicate.
- Visit Business Insider’s homepage for more stories.
Primarily working out of Taipei, Taiwan, Ben Thompson sits some six thousand miles away from his adoring fanbase of techies in California.
His Stratechery newsletter reaches subscribers in more than 80 countries, but his most rabid readership is in Silicon Valley where has built a large following of tech executives and venture capitalists including Upfront Ventures’ Mark Suster and Facebook top brass Andrew Bosworth. The co-founders of newsletter platform Substack even cite Thompson as the inspiration for starting their business.
Thompson’s prolific daily analysis covers the intersection of technology, business and society and digs into companies ranging from Apple to Zendesk. Often accompanied by hand-drawn doodles, Thompson’s missives are focused around catchy concepts like “aggregation theory“ and “disruption theory.”
Thompson has said one of his favourite published pieces was a 2013 take on what his “intellectual hero” Clayton Christensen, the late academic who came up with the business theory of “disruptive innovation,” got wrong.
For $US120 a year, or $US12 a month, subscribers get access to the daily update and its archive of articles. Fans can also pay $US5 a month or $US50 a year to subscribe to the “Dithering” podcast, which he co-hosts with John Gruber, author of the popular tech blog Daring Fireball. Thompson also pumps out one free article a week to lure in potential new members. By one unofficial estimate, Thompson’s newsletter is on track to rake in over $US3 million this year.
Thompson is perhaps an unlikely leader of the solo newsletter pack. By contrast to the recent raft of writers leaving salaried journalism jobs to create their own individual media empires — Casey Newton from the Verge, Matt Taibbi from Rolling Stone, Emily Atkin from The New Republic, to name a few — Thompson has never been on the masthead of a newspaper or magazine.
The “ethics statement” on his site says he hasn’t taken “consulting or speaking arrangements” with the companies he covers since 2016. And unlike many big-name tech thinkers, he rarely schmoozes on the conference circuit.
“He’s found this perfect spot in between [sectors] where he has a refreshing outside perspective,” said media analyst and Stratechery subscriber Thomas Baekdal.
Thompson rarely grants interviews, and declined to participate in this article.
“I have been fascinated by the technology industry from a young age, and feel very fortunate that the same forces I am interested in writing about have also made my business possible,” Thompson emailed. “While I am honoured that you are interested in writing about Stratechery, my focus continues to be on the arguments and analysis, not publicity for myself.”
Thompson may well be one of the most lucrative one-man newsletter outfits, but as other writers flee their salaried jobs to start their own, they will find his success hard — if not impossible — to replicate.
From humble beginnings to a newsletter nobleman
Born in Michigan and raised in what he has described as a blue-collar upbringingin Wisconsin, Thompson graduated with a BS in political science from the University of Wisconsin-Madison, where he contributed to The Badger Herald student newspaper....
....MUCH MORE
And from Professor Wu at Medium: [note: Tim Wu still has his professorship at Columbia but since this was first posted is additionally in charge of Technology and Competition policy in the Biden White House]
....MUCH MOREBen Thompson is the author of Stratechery, a popular newsletter that “provides analysis of the strategy and business side of technology and media.” Thompson, who has an MBA, is a former tech industry worker who has spent time at various tech firms, including Apple and Microsoft. He is a smart and thoughtful guy who has interesting and insightful things to say about tech strategy, which is an endlessly interesting topic. I appreciate his work and admire his effort to set up his own shop and do his own thing.
[Part 2 of this series is here, and Thompson responds here]
However, Thompson has more recently begun to pronounce and analyze in the field of tech antitrust, and here he is on less solid ground. I appreciate that deep industry expertise is important in his area, especially, say, when designing remedies that make sense. Nonetheless, I’d say Thompson’s readers are at risk of being misled if they rely too much on what he has to say about tech antitrust. For, as we shall see, his analysis relies too much on an idiosyncratic “digital markets are fundamentally different” thesis that really doesn’t hold up too well. Stated simply, I’d say he’s inducing his readers to drink too much of his “aggregation theory” Kool-Aid, as opposed to encouraging them to think more broadly or read more deeply to understand a slightly messier reality than he presents.
Take Thompson’s recent analysis of the United States v. Google case. According to Thompson, the Google case needs be understood primarily through what he calls aggregation theory, which is something of a specialized version of what economists call a two-sided markets theory. His theory asserts that 1) the quality of the user experience, rather than control over distribution, is what determines the winners in digital markets; and 2) a lead based on quality is self-reenforcing, because either more suppliers are attracted or the winner, with more customers, gets more feedback on what makes for a better product. (For those with a background in economics, Thompson’s aggregation theory resembles a mixture of a two-sided market theory with some positive feedback loop stuff thrown in.) Thompson says that “aggregators” (or more technically, “level-3 aggregators” which are platform in economic if not technological parlance) are in this manner different than traditional monopolists, for they “win by building ever better products for consumers.”
Viewed more carefully, aggregation theory is — at least in part — a model of what idealized competition might look like online, in some markets. Competition driven by quality reflects what antitrust and net neutrality advocates want competition to look like — that is, the better product wins, instead of whoever owns the pipes (or the channels). But that doesn’t mean it is what competition actually does look like, even on the internet. And this jump from the normative to the descriptive is the major pitfall of Thompson’s analysis.
The problem is that his aggregation theory isn’t aspirational. Instead, it is presented as a description of how the internet has “fundamentally changed the plane of competition” in a world where “on the internet everything is just zero marginal bits.” It also takes as its assumptions: “Zero distribution costs. Zero marginal costs. Zero transactions.” In that, in some ways, it is like the older economic models from the 1960s, except that they were at least billed as models, not depictions of reality.....
