Another great podcast from Patrick O'Shaughnessy. This time around, he interviews Michael Mauboussin, adjunct professor of business at Columbia Business School. Throughout the podcast, the two discuss a white paper Mauboussin recently published, available here. Two topics that I found most interesting were: 1) how to account for investments in growth/ how R&D expenses might not be terribly accurate and 2) (something that Mauboussin touches on at the very end) the idea of exploit vs. explore (meaning how much time a company spends on exploiting what it does well vs. exploring something new). This podcast and Mauboussin's white paper also cover public vs. private markets and how these have evolved through time, something that is important to understand as we reflect on the large pipeline of upcoming IPOs and very large private companies.

Intrinsic Investing recently published this piece that juxtaposes the familiar notion of "shareholder value" to an interesting term called "stakeholder value." In short, the authors highlight that given the (increasing) interconnectedness of the world, it makes sense that companies evolve to not only serve shareholders, but also the broader group of stakeholders that includes groups of people like customers, employees, and even regulators. "The future success of a company is dependent on the organization creating value across its entire stakeholder ecosystem," the article says. "Just as shareholders benefit from supporting value creation across the company's other stakeholders, so do those other stakeholders benefit from supporting economic value creation for shareholders." Intrinsic's definition of stakeholder value echoes the ideas of authors such as NZS Capital and W. Brian Arthur, which may indicate a growing awareness of, and interest, in this "ESG-Plus" approach to investing in companies that exhibit win-win outcomes for all the communities they serve.

How do platforms differ from other businesses and how are they evolving? First and foremost among six key observations in this Medium article is that platforms are becoming increasingly important as aggregators of small businesses. However, the author sees the "value capture" moving away from the platforms toward the actual businesses they support. "The value capture still asymmetrically rests with the platform itself, but value has started to shift towards the commercial actors on the platforms," the article says. "This will continue to happen as (i) the platforms compete with each other for talent and (ii) the new small businesses take audiences initially captured via a platform, use the audience to build a brand, and start generating organic traffic." This alludes to a degree of disintermediation, or at least a change in platform industry structure. To continue to capture value, platforms will likely pursue win-win strategies so that creators do not leave when they reach sufficient scale. As an example: "Does the platform monetize on behalf of the small business? In the case of YouTube, yes — because the programmatic ads create revenue for the YouTuber who only needs to entertain an audience. In the case of Instagram, 'not yet,' since programmatic ads with creator revenue share have not been rolled out at scale to Instagrammers." Platforms that have strong network effects and set up win-win situations seem more likely to scale than those that are extractive.

With varying degrees of COVID-19 containment, companies are experimenting with some workers returning to work in person at offices. There will likely be a hybrid office/ work from home (WFH) approach going forward, according to this Economist article that ponders the long-term impact of the extended WFH experiment. "This era holds promise but also brings threats, not least to companies' cultures. Instead of resisting change, governments need to update antiquated employment laws and begin reimagining city centres." There is clear demand from workers for more flexible schedules, and over the last six+ months the "bureaucratic hurdles to remote work have been blasted out of the way." In figuring out the right way to work in the future, there are many competing interests: corporate culture, healthy work/ life balances, the theoretical existential threat to commercial real estate, city economies, etc. Those businesses that manage this transition best will likely build competitive advantages around employment (is this the right or wrong approach?).

One executive who isn't a fan of WFH is Netflix co-CEO Reed Hastings, who is on a bit of a media tour to promote his book, No Rules Rules: Netflix and the Culture of Reinvention. "I don't see any positives" in WFH, Hastings says in this WSJ interview. "Not being able to get together in person, particularly internationally, is a pure negative." Hastings does see some evolution of the workplace, though: "If I had to guess, the five-day workweek will become four days in the office while one day is virtual from home. I'd bet that's where a lot of companies end up," he says, though only time will tell whether the prediction turns out to be true. For more on Hastings' thoughts on WFH and corporate culture (which he sees as opposed), see this NYT article and this Economist article.

Anybody working from home can immediately tell you about its pros and cons. As time away from offices drags on, the downsides of WFH are becoming more clear. Specifically, the physical workplace served as a cultural engine for a firm and a social place for workers. With these gone, both companies and workers are left scratching their heads as to how to move forward. This article from The Atlantic looks at some of the negatives associated with WFH, comparing issues new graduates face to ones encountered by those entering the workforce around the 2008 recession. "Those who were just starting out during the financial cataclysm of 2008 and the recession that followed have had their fortunes stunted by it, and many will never recover," it says. "For recent graduates beginning work via Zoom in the twin chaos of a pandemic and a financial crisis, the impact could be even more profound. The negatives are not only a result of limited opportunity in terms of employment, but also the crucial social element: "Workplaces are complex social ecosystems just like all other places humans inhabit, and decentralizing them can obliterate the things that make them satisfying." This could be why Hastings sees employees returning to work 80% of the time – while perhaps not true for all employees, the allure of the office is real.

Disclaimer: To the extent that Beach Reads discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. The companies and or securities referenced and discussed do not constitute an offer nor recommendation to buy, sell or hold such security, and the information may not be current. The companies identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the companies identified was or will be profitable. Beach Reads does not constitute a recommendation or a statement of opinion, or a report of either of those things and does not, and is not intended, to take into account the particular investment objectives, financial conditions, or needs of individual clients.