This Wired article elevates the importance of communication by studying the role played by Margit Wennmachers, a partner at Andreessen Horowitz and co-founder of the OutCast Agency, in improving the messaging and image of Silicon Valley. The author focuses on how managing communications develops not only an image and identity but also helps to effectively run a business. From the article: "Andreessen Horowitz can advance its own editorial ideas through blog posts, podcasts, social media, and a newly launched YouTube channel independent of the media, connecting directly with people starting or building their own companies … 'the running joke of the firm is that we're a media company that monetizes through venture capital,' Andreessen says." This theme, that internally produced communications shared publicly can help attract like-minded, talented individuals, is reminiscent of the idea put forth in Alex Danco's Craft is Culture piece in the last edition of Beach Reads. Beyond this function, I found it fascinating to learn how messages are conceived, crafted, and disseminated; how narratives are controlled; and how meaning is created by a select few people. Powerful positions, no doubt.

I've featured the work of Toby Shorin in the past and think this recent post adds to the theme of increased online content creation. The owner of strategy and research firm Other Internet focuses on how online presences and content can create real, niche communities that serve needs that are not met by large social media companies. These communities can be supported via subscription instead of advertising. From Shorin: "Paid communities are a still-nascent category, but the business model is familiar: free content with a subscription paywall for more (the standard model of content + social). Paid communities develop this formula further: they take the subject matter of a content producer or brand lifestyle, and pair it with a paywalled digital social space for ongoing user interaction. Here the community is not a passive audience, but one that generates its own discussion, and for users comprises much of the value in and of itself. This community often comes to re-shape the brand or content development process." In a way, this sounds like the digital manifestation of existing physical social groups, such as country clubs. Perhaps unlike physical groups, these online communities will likely be used by brands as some sort of sales or marketing channel, which Shorin believes will be difficult to balance: "Different users of the 'community' word have different motivations, and these motivations will be the origin of conflict — conflict not only about the word's meaning, but about how this type of business should be operated. But these debates, no matter how uncomfortable, should be had. Because in a very real way, the financial and social sustainability of paid communities will depend on the degree to which the communities are recognized not as a monetizable resource but as a body of people with social needs, emotional lives, and practical concerns of livelihood." There are a lot of ideas to pursue here: the infrastructure needed for these communities, the right way to monetize them, how much external or "branded" content should exist within them, etc. Perhaps a good first take at branded content for paid communities is through mimetic advertising.

The process of unbundling and rebundling is a common theme on Beach Reads (see this Shishir Mehrotra podcast). In the context of COVID, however, a new (un)bundling phenomenon has been brought to my attention by this substack article: unbundling and rebundling employment. In the piece, the author examines how new tech platforms and high unemployment have increasingly led people to make money through more entrepreneurial or creative means, rather than by pursuing a traditional job. The industry that caters to these individuals is largely fragmented and the author posits that both people and platforms will eventually rebundle: "As individuals professionalize and seek to take their businesses to the next level, I anticipate more re-bundling—whether it's short term collaborations with other micro-entrepreneurs, or building out teams that work together for longer-term projects. There's a massive opportunity for digital platforms that lower the barriers to micro-entrepreneurship to support the growth of these workers, in whichever directions they seek." It'll be interesting to see if the multiple revenue streams that individuals currently make will be aggregated onto a single platform with other workers, effectively re-making a "traditional" employer. If this is the case, the future structure of work may be less interesting than the fact that switching costs will be lower than ever and employees may be better able to pursue positions that they find most fulfilling.

The value vs. growth debate rages on. But, this time, the article above takes a different tack by looking at systematic forces that create dramatic, sustainable divergences from fundamentals rather than comparing returns or looking at style drift. While every active investor must fundamentally believe that the efficient market hypothesis (EMH) is incorrect, a commonly held principle is that more or better information is the edge that should be pursued to generate alpha. This article suggests that understanding asset class structures and incentives can reveal a lot about price performance and represent a source of market outperformance. Describing the number of intermediaries between the ultimate equity owner and the individual making the buy/sell decision, the author highlights that competing time horizons and incentives have "significant consequences for the way assets are priced, and at a system level, can result in truly massive levels of market inefficiency, and this inefficiency can also be highly persistent, because the arbitrage forces that are supposed to correct mispricings are not only relatively ineffective in the short term, but frequently overwhelmed by structural flows-based feedback loops that have a tendency to amplify rather than moderate these inefficiencies." The idea introduced here is that "liquidity flywheels" can divorce prices from fundamentals -- effectively confirming that most humans/investors are crowd followers. "Industries or countries enjoying and/or expected to enjoy rapid growth, which are perceived as offering significant opportunities, are the frequent locus of inward liquidity flywheels, as people crowd into a theme to get 'exposure' to growth opportunities, and the price increases such flows engender have a tendency to be seen as validating the narrative, which acts to trigger yet more inflows." The reflexive nature of these inefficiencies is described in more detail in the work of W. Brian Arthur of the Santa Fe Institute, and I believe that recognizing and acknowledging that institutional inefficiencies exist is an important unraveling of the EMH that goes beyond information (dis)advantages.

This is a lengthy blog post from a partner at VC firm "Compound" that examines the nature of inflection points in business and technology. In detailing different kinds of inflection points, the author elucidates some fascinating points, for example, that massive companies with trillion dollar valuations come from the maturation of multiple inflection points: "It wasn't just that the best companies benefited from desktop internet penetration globally, but instead they also understood how the internet would proliferate into mobile, and how high speed networks would expand the use-cases, moats, and horizontal expansion of their businesses. In a historical context, the sophistication, malleability, and ambition of scope is what often separates single inflection point companies from maturation wave companies, and thus billion dollar companies versus trillion dollar companies." This analysis highlights, in my opinion, a key attribute of many successful companies: adaptability and an institutional desire to change and improve. The author also touches on a topic covered in previous Beach Reads: the growing divide between the large and the small, and writes that the increased speed of change has resulted in faster disruption times. "As we move down the stack of the world's most valuable companies even outside of those with market caps of $500B+, a macro shift has occurred due to the increasing pace of technology proliferation as well as the depth of private capital markets and scale of incumbents creating faster disruption than ever before. This has led to investors and acquirers demonstrating a strong willingness to pay up materially for potential expansion and the perceived moats that this can create/replenish." I'm curious to hear if others think it is truly a novel phenomenon that people pay up for quality, if moats are more fleeting than previously as a result of faster disruption periods and, if so, how we should think about innovation as a moat source?