We take a break from our regular programming to remind everybody to go vote. This election is important, y’all know that. Just vote if you haven’t already. I don’t care who you vote for, just vote.
Another question that I have been pondering is – We know the stock market is up and to the right, but it’s not the real economy. How is the real economy doing? How bad is it – Is there another shoe to drop? As I dug into some indicators, color me pleasantly surprised.
Part two of the deep dive into the Buy now pay later (BNPL) market. In part one we dug deeper into the core product and its history. In this post, I dig deeper into the value proposition of the product.
A common misconception about this market is that it exists only to serve only the needs of the consumer. It exists only to make consumption easy. This is wrong. This a two-sided platform product. This product exists to help both sides of the transaction – merchants, who sell items and the consumers who purchase them. The fundamental axiom in use here is that extending credit greases consumption. Consumption for consumers is revenue for merchants. By offering various credit constructs and financing options to your customers you are enabling them to buy more of your products. This increases your revenues as a merchant. There is immense value in this product as a conversion tool.
Affirm filed for an IPO last week. I’ve wanted to do a deep dive into the BNPL segment and Affirm’s filing is the inspiration that I’ve been waiting for!
Let us start at the very beginning. Once humans came together in groups, the concept of lending aka credit has been willed into existence. The very earliest example of lending dates back to over 4,000 years ago in Mesopotamia, 2,000 BCE, where farmers bought seeds on credit and repaid the debt after the harvest. Pre-industrial revolution most economies were rural. Lending was like having a tab at your corner store. All underwriting was social and very few folks wanted to risk being cut off from the local economy by defaulting on their debt. All credit was local.
“I’ve never seen a monument erected to a pessimist.” – Paul Harvey
We live in interesting times, the world around us seems to be constantly on fire – physically and metaphorically. It’s gloom and doom all around. Morgan Housel touches on this extensively in his latest book,The psychology of money. He makes a convincing argument on why pessimism appeals to our emotions more than optimism. We tend to be more fearful than optimistic as losses hurt more than happiness from gains.
This is the first attempt at what could become a monthly feature on this blog. I’m always experimenting with new things to write about and books are my latest source of inspiration 🙂 It fits with the theme of this blog – I want to write about things as a mechanism to learn and retain! What better way to retain knowledge than to write down what you learned from books!
The thesis expressed today is that financial services are no longer a separate vertical component in consumers’ life. Consumers are going to be better served where they already hang out. So the natural extension for business with a large number of customers is to start offering financial services to their user base. In this model, financial services transition from a vertical component to a horizontal capability that all businesses will offer to their users. Hence the popularity of the term embedded finance.
Is this thesis valid? I’ve been thinking about this for a few years and this post is an attempt to work out a mental model and answer this question.
Short answer – this thesis is wrong. Long answer- it’s nuanced.
An antipattern that I see in startups constantly is Senioritis. This normally happens when the startup finds some success and wants to upgrade its product and engineering teams. Typically at this stage, new leaders are hired and there is a we need to grow up vibe. These new leaders typically are hired from established companies/startups and bring with them their approaches. Continue reading “Premature optimization is the root of all evil”→
Accountability is one of those topics that sounds super easy but is the hardest to get right in practice. A recurring pattern in organizations is
The top of the totem pole (exec team, org VP’s) get together and decide the strategy for the year
It gets broken down into priorities and goals for the year
Its gets documented and passed downwards via some process
The entire organization references the document and should have visibility into priorities and be completely aligned
Starting from the top every node in the hierarchy points to the document and downward and says I hold you accountable to this. This process continues until you reach the individual contributor at the bottom of the tree.
The organization achieves 30% of what’s on the priority list
The accountability stack unwinds upwards with the feedback that either
The goals were not clear
Stuff changed midstream
Reasons why the goal was missed
Go back to Step 1
This loop repeats like clockwork. Welcome to accountability theatre.
My current obsession is the topic of signaling. Julie Zhou posted an interesting newsletter last week about team dynamics and feedback. The central theme in her post was about creating a document called the user guide to you and how it helped her level set with her team.
Something about that post didn’t sit right with me. It made it to hacker-news and the comment section gave me a few clues on why I had such an allergic reaction to the post. I have had to a few times in my career, write a user guide like Julie described. I’ve always found it uncomfortable, but never dug deeper. I wrote the document and carried on, treating it as a piece of paperwork that I have to get out of the way.
Tell me if this sounds familiar. It always begins with a workshop. We all gather in a room and talk about the mission of the company. We talk about who we want to be when we grow up as a company. We discuss how we want our customers to feel when they interact with us, we talk about how we want to feel. There are brainstorming exercises, discussions with word-clouds, and visceral debates on logo design. What is our brand identity? what is our company identity? – deep deep discussions. This culminates with a big fat book with detailed instructions on how the logo should look, what type of font you should use, what type of words to use, and the approved color palette.