Ted Audio Collective HBR presents Hello everyone, you're listening to After Hours I'm Felix I'm Rowie I'm Rebecca Hey guys, I have a question for you You saw that the oversight board of Facebook decided that the decision to ban former President Trump was justified at that point in time How devastated
would you be if you were banned from social media?
You know Felix, I think I might be delighted Really?
I have a Twitter account, but I've never tweeted anything And it's super stressful to imagine like what's the first tweet And I'm not on Facebook So I don't know, I think you would relieve me of some pressure Would you miss any?
No, I wouldn't miss a thing, although I'm not trying to run for president And so maybe my needs are different than President Trump How about you Rebecca?
All social media? All social media, yeah So I asked, because I actually really enjoy being on LinkedIn Oh, the LinkedIn, is that social media?
I didn't know that counted Yeah, yeah You didn't tell me that Oh, now we're talking I mean, it feels to me slower paced You don't have to put your heart into 128 characters Yeah And it feels kind of more real Nothing bad happens to anybody on LinkedIn as far as I know Yes Like basically, people say,
I like the thing that you did And then you say, thanks Yeah, exactly It's sort of the most civilized of conversations Well, I mean, I tried being on aggressively on Twitter I was doing three or four a day I was kind of trying to be in the swim It is exhausting It's a lot of work Yeah Speaking of work,
we're towards the end of Q1 earnings And we thought we would do an earnings round Companies that we follow, organizations that have done amazing Or maybe not so amazing things Great idea, Felix Let's do it All right, earnings Ravi, you brought a few companies I did I'd like to start with Crocs Oh, huh?
Like, you know, the rubber shoes You're going to start with rubber shoes, Robert?
I'm going to start with rubber shoes Okay And so Crocs, fascinating company in lots of ways Crocs have been called the It shoe of the pandemic And their earnings per share were $1 .49 versus unexpected $0 .89 Wow Whoa Okay, now I understand the focus on rubber shoes Exactly This is a thing Their sales
are going through the roof They're getting ready to launch in a big way In the rest of the world, especially in Asia So why?
Do you have a sense, like what they do?
Is it just laziness?
I mean, is this the same thing that's driving us all into yoga pants?
Yes I think basically, yes, Rebecca It's yoga pants for feet Is that what it is?
Evidently, the people who wear them find them incredibly comfortable So is this a thing that's going to persist?
Are we all going to be wearing rubber shoes around after the pandemic as well?
Or is this a thing that's very specific to this moment?
So is this related to the changing fashion and trousers?
I mean, skinny jeans are no longer in The jeans in the magazines are all a bit more relaxed I think you're right I think that's the question Having gotten to a point in our lives during this very difficult However many months it's been It's either been like 100 months or 15 or something We want our
feet to be comfortable So this is how we feel comfortable That's such an interesting question Whether this push towards more casual appearances That felt exactly appropriate as long as he were at home Whether that's going to persist Or whether we will look back and say, oh remember, we were slobs For like
just an unbelievable period of time And you know, not time to rejoin civilization And actually dress up when you leave your house So I predict, no, it's not going to last I don't want to buy stock in Crocs And I'm reminded of a time that I was in a library Looking at books on how to decorate your house
And they had books from the 30s, the 40s, the 50s, the 60s, 70s, 80s And what was weird is that you'd look at the books And they were all kind of similar, you know, chairs, sofas A little bit of difference in style and color Except for the 70s The books about home decorating in the 70s looked as though
aliens had come to Earth And left behind like orange throw pillows That people were lying around on the floor And green velour drapes I mean, it was extraordinary And I think this moment is going to be like that I just was thinking about how we could test that And I was thinking about a different company,
which is Ralph Lauren If we could imagine what's going to happen to Ralph Lauren Versus what's going to happen to Crocs, it would tell us this answer We'll get a good test of these hypotheses About whether we're really just going to be in comfy clothes And rubber shoes Or whether we're going to be in suits
or ties or whatever Yeah, fascinating Rebecca, what did you bring for us?
So I bought a couple of companies that I'm deeply interested in One is Danone Where the CEO was fired in March of this year And people said, whoa, that firing is like proof That stakeholder capitalism doesn't work Because he'd been a super champion of stakeholder capitalism Danone makes essentially
yogurt, bottled water Evian is their brand, and baby food And about five years ago, the CEO announced Mission 2020 We're going to transform Danone We're going to make it healthy living He went totally doubling down on so -called stakeholder capitalism And Danone was going to serve healthy snacks and healthy products
He was the first company in France to become an Entre Prix de Mission And everyone said, whoa, you know, the first big essentially benefit corporation Which, you know, meant he was really committed to sustainability And then investors started making a fuss And they said, wait, wait, wait, wait, wait
What happened to growth?
What happened to earnings?
What happened to returns to investors?
And in March, as I said, they fired him And you know what's really amazing?
The board fired him without having a successor lined up Wow So the investors must have thought something was really, really wrong So I went to this quarter's earnings You know, it's the first quarter without the CEO What are they going to say about the company?
Where are they going?
And they've kept the stress on health And the transformation of the business And they lost Sales fell about 9 % in the first quarter And that's a year on year comparison So you can say, well, you know, the quarter one in 2020 People were still drinking bottled water Which they mostly drink when they're
out And now they're not out But I was really struck To me, this was not a story about investors repudiating stakeholder capitalism So much of the rhetoric is around Are you stakeholder oriented or are you shareholder oriented?
And the firing of Danone's CEO Shows that the market is rejecting stakeholder capitalism But I don't think that's what's happening at all I think it's we like good managers Who make their numbers and keep up with the competition Unilever has way outperformed them And so for me, this is a story about Yeah,
you can be stakeholder oriented But you still have to know what you're doing How to manage Generally speaking, it's hard to imagine How you would be immediately rewarded by consumers If you are more socially responsible And food, I always thought, is sort of the most immediate response To these kinds
of efforts Because when the company says, you know, it's better produced And we understand the supply chain And we make sure there's no toxic element in your food That seems like a value proposition That probably many of us will say Yeah, I actually pay a price premium And then the further you go away from an immediate
impact on consumers You can see companies who do the right thing But it can't be this expectation That then magically you get this enormous price premium Simply because you're now a company That thinks about the rest of the planet as well Now Rebecca, are you worried we're going to learn the wrong lesson from this?
Oh, Ravi, that's exactly why I wanted to go back and look at the financials And read what the investors said Because people have coded it as, look at Emmanuel Faber, who was the CEO at Danone He got fired That means you should not take these risks You shouldn't move in this direction I think that's
exactly the wrong lesson It looks as though it's a management failure Not a kind of fundamental strategic stakeholder capitalism doesn't work sort of story Felix, what do you got?
I brought in a set of companies I guess we can call them payment gateways The granddaddy is PayPal But then companies like Square and Stripe And we've spoken a lot about the winners of the pandemic And it's obviously all the e -commerce companies that have brought in really good results But very similar
and not surprising These companies are on fire as well There are two dynamics that I find quite fascinating The first one, and I think you see it best in PayPal's number Is the shift away from credit to debit cards In part, it has to do with people being more careful, being more conscious In particular,
in uncertain times And then interestingly, the stimulus checks hit your bank account And that frees up some capacity to now use debit cards more often And just because of how payment works When people use their debit cards, that is so much cheaper for PayPal You see it in their operating margins that now
expanded by multiple points to almost 30 % So Felix, if I shift my PayPal account to a debit card, will PayPal give me a rebate?
I'm afraid. This is what ends up on their P &L Not so much in your pocket The second part that I find fascinating in this sector is The companies start in very different places PayPal, in particular, once it's owned by eBay And before it gets spun off It's basically in the business of making sure that eBay's
merchants Have an easy way to make people pay for the products that they buy from eBay Square is really, you might remember, it's like for smaller merchants who use their iPhone To process their product And they have this dongle that they can stick in That's what I thought it was And I think that's
still a big part of their business But that's where they start And when you think about the pandemic effects And how many small businesses had to completely close down That was a much more problematic sector of the economy to be in Because many of her customers just couldn't be open And then Stripe,
again, e -commerce oriented But e -commerce 2 .0 is actually two brothers who started it They were just really annoyed how difficult it was to do credit card processing for their own businesses And it's now the most valuable, privately held startup in Silicon Valley It's probably worth about a hundred
billion dollars They added about half a million new customers as a result of the pandemic Simply because so many people had to move online But now what happens is that the competitive overlap between these companies grows almost day by day They start in different corners of the payments world In the beginning
you think, yeah, they're doing really different things And then before you know it, PayPal buys Venmo Which is in the peer -to -peer processing space Which was a big part of what Square did when they started an app called Cash App Cash App was peer -to -peer transactions And so they're overlapping there
Square buys Weebly, the company that helps you set up a website And that now competes with Stripe And so you're seeing sort of an increasing overlap And it's almost like competitive advantages shift away from what you have to do to be a player in the first place Two are sort of the secondary advantages
I saw one really interesting example Stripe now uses machine learning to predict when credit card payments or debit card payments wouldn't go through And one of the most common reasons is that you got a new credit card in the mail And of course you didn't bother to tell the 1800 merchants that you have a new
credit card So they started automatically updating credit card information that they got their hands on So enabling many more transactions which is worth millions of dollars for individual merchants So we have this really vibrant space with a number of players who you look across the spectrum And you
end up saying, aren't they all doing exactly the same thing?
And now it really matters how well you do it That's super interesting It's really interesting Will they start to compete with Visa and Mastercard?
The core Square service is really much more of a compliment than a substitute for the credit card In fact, many small merchants who couldn't accept credit cards to begin with, they now can But there's definitely more competition among these companies in that they expand in similar ways And then the latest
craze for all of these, Bitcoin Everybody now accepts Bitcoin and that's a billion dollar revenue stream for most of these services So everything is moving and everything is moving in really interesting ways Fascinating Alright, we'll take a break So Ravi, you have another one?
I do have another one I've been thinking of companies that are metaphors for where we're headed after the pandemic How about HelloFresh?
Oh, okay So HelloFresh is a German -owned meal kit delivery company And there are a bunch of these, Blue Apron and so on But boy, have they been killing it Yeah During the past year, their customer base is up 74 % And so the question is, now that we've gotten used to cooking at home And now that many
many people have gotten used to cooking at home with kits that get sent in the mail With all of the ingredients right there, just to make it super super simple Is that something that's going to persist or are we going to just go back to what we were doing before?
I have to say I'm a little skeptical And mostly because when Blue Apron and all these other meal kit companies first appeared We thought, oh my God, this is going to change everything We were so optimistic that this would be a really valuable, amazing business And then it was just so hard to get to
profitability And I can completely see how the pandemic would help, would give you a big boost But I don't know if this is sustainable Let me take the other side So I've actually used the meal kits Oh And I've really liked them for two reasons The first is you don't have to think about what you're going
to cook tonight You know, I don't know about you, but I have like seven recipes I can do without thinking about it And when I stumble downstairs to cook dinner, I'm going to make one of those seven, you know And so it's great You get these kind of exotic things that show up And there's just the right
amount of ingredients and you make it And it actually tastes quite good But I stopped doing them It comes with a ton of packaging And you think, well, that's okay a few times But day after day after day, I started to feel like a waste -generating machine And then after a while, you kind of get a sense
of what their 15 recipes are Well, I think one of the questions will be for multi -person households bigger than two persons Will this be an efficient, cost -effective way to eat more healthily that will persist compared to the alternatives?
And I haven't done the math to see whether like this is actually less or more expensive than buying your own ingredients But that seems to me like one of the big questions Which is, if these multi -person households are going to eat in more often because they've gotten used to cooking Is this part of the answer?
Even if you like cooking, if you get satisfaction from the fact that at least a part you did well I think chopping is just no one's favorite part of cooking So it might give you a little bit of an advantage in that you still get to cook You feel good about the fact that you cooked And interestingly,
when you see, say, in whole food stores Every now and then you will encounter a vegetable that has not been dealt with But much more common now, that you find everything chopped, right?
I think it's the same realization that the price premium, the efficiencies that come with mass chopping Are just really hard to compete with as an individual household I don't know if that's good enough to keep the business alive But it's definitely value in my book But I think Felix, if you think about chopping
in a different way What if chopping is your opportunity to have the first glass of wine?
I don't need an excuse for that First glass of wine I love it Let's keep going So what else do you have?
Do you remember the game Farmville?
No No? No Alright, so there was a game Farmville There is a game Farmville actually And it was the rage at one point They build massive audiences And the game involves growing virtual vegetables Oh, my son got obsessed with it Yes, yeah He would play with his friends It was the thing, absolutely It
was the thing Where was I?
What was I doing during this time?
What, we sport at a different time, no idea You must have been hiding pretty far away So the company is Zynga They had, not surprisingly, a pretty good time during the pandemic Revenue grew very quickly And is up about 70 % compared to last year But they're losing money So it's not a big success story
What was interesting about that earnings announcement Is that they bought a company called Chartboost And Chartboost is essentially an in -app Programmatic advertising and monetization platform So the way this works is if you develop a game You can implement Chartboost And then the company will observe
what your users do And they will collect that information And they will make it available to other people who develop online games And it solves one of these issues that is really quite significant Because there are so many new games all the time When you think about your experience on the App Store
If you're looking for a new game It's really not great It's search, which already presupposes that you know what to type into the search box The descriptions of what you actually will experience If you download any one of these games Are not super, super helpful And so new companies, new games Really
have a hard time finding an audience And Chartboost is fantastic for that Because they allow game companies to show in -game advertising That is now directed at people who love to play online games And we know what they play And so it's just almost like a match made in heaven It observes about 700 million users And
it's in tens of thousands of games So it's a really big deal The part that I found most interesting is Why at this moment in time And why do you buy a company that provides a good service But you might as well just have a contractual relationship with them Like why do you need to own that?
And the background is of course Apple's privacy rules The moment Apple makes it difficult for apps to share data across apps Because they will ask you You fire up some online game and will ask you Oh, do you want that game to have access to all your other data?
We don't know because it's so recent But at least a reasonable assumption is that many people will say No, I don't And so this is now the attempt to bring personalization To bring data inside the big companies And Zynga is actually not the only one App -loving is a competitor to Zynga They just bought
this ad tech company Adjust Same idea They're essentially trying to build walled gardens That have their own programmatic advertising platform inside the walled garden Because you can no longer share data across applications as easily as you used to So Felix, I'm still stuck at a sentence that you just
eerily pronounced Which was tens of thousands of games How do they reach the customer?
It's the usual media industry kind of problem That you have an incredible long tail There are lots of clones Obviously, versions of a popular game Where someone else tries to offer some mini variation on what's already available But I'm sure there are also really good ideas, good games That just never
make it because they can't get anyone's attention So we can target the advertising It's sort of a closed ecosystem to begin with And now that you bring it inside Zynga, that is super powerful And I think the only really, really interesting question Zynga was asked in the earnings conference What's the response
of everyone else? So are you still going to share your data with Chartboost The moment you know that Chartboost is owned by Zynga And Zynga in most instances will probably be a competitor So it could be that this actually is the future of programmatic advertising We're essentially using first party
data And then we have integrated ad platforms That allow us to collect data elsewhere Because those platforms are integrated elsewhere on the web And it's this combination that really makes targeted advertising super helpful Or are these investments where we try to bring ad platforms inside companies
Only then to discover that the competitive response will be Oh, now that Chartboost belongs to one of my competitors I'm actually not going to share data And I think it's a little too early to say Thanks Felix, that's a really, really good one Rebecca, you have another one, right?
I do I have one more and it's sort of like my first one But I think really interestingly different So I want to talk about BP The new CEO of BP, a man called Bernard Looney Announced in February of 2020 That BP was going to go to net zero carbon emissions by 2050 And they're an oil and gas company Now
when you look under the hood What that meant is that their operations were going to go to net zero And then they were going to try and reduce the carbon intensity of what they produced by 50 % But still, I mean, this is a massive commitment if you're an oil and gas company It's essentially saying you're
going to change the entire structure of your core business You're going to sell half of the oil and gas you did And somehow you're going to make it up in wind or solar or hydrogen or something Initially the investors hated it His stock price dropped 4 % the day he made this announcement And then I went
to look at the other oil companies And Rawi, maybe you already know this But when you actually start reading Exxon, Chevron, Shell They're all talking about switching away from carbon They're all investing in billion dollar projects in hydrogen and wind The investors are all talking about the carbon transition I
had not appreciated how deeply this has begun to sink into the everyday conversation About what's going to happen to these energy companies Is there some element of this that is just moving the carbon emissions upstream and downstream And not in the core operations of the business We're not doing the carbon intensive
stuff But the firms from which we buy are And the people who buy our products are And so we're getting toward neutral It's just not we're doing it ourselves For sure this is a big issue But it's relatively easy to get a feel for it So the trick is to look at what a firm is promising on so -called scope
1 and scope 2 emissions That's the carbon they're generating to make their own operations go And then there's scope 3 emissions Which is what's happening in the supply chain or downstream What's the role of BP's history here, Rebecca?
Remember beyond petroleum was their motto And then I think deep water, the oil spill, what was it, 2010 maybe somewhere around there Completely ended this right?
You should read the investors They are so jumpy about this because they think they've seen this movie before So do I And it really didn't go very well And so I actually have enormous respect for Mr.
Looney Because he's a BP insider He came up through the operations He lived through Deepwater Horizon He knows that everyone is skeptical as heck That is very interesting to me that sometimes Doing something that seems difficult Doing something that seems challenging In particular given the history
of the company Somehow it gives it more credibility I think that feels exactly right to me Standing up and give fluffy speeches when the whole industry is, you know Oh, we're all going healthy In some ways it doesn't carry the credibility of the CEO standing up and saying I know you've heard this before
I know we fell flat on our face I'm going to try again Yeah, it's an interesting paradox That's super interesting And we have Pics, of course Ravi, what do you have for us?
I have something about which I feel very passionate actually Oh, nice So there is a contemporary composer His name is Max Richter Ooh You like Max Richter too I love Max Richter Max Richter is awesome So he is what is known as a neoclassical composer So he's postmodern, minimalist But uses classical
instruments and classical themes and structures And I'm not a music person, but I'm just totally fascinated by what he's done So anybody who's watched any movie in the past ten years has heard some Max Richter Yeah Just gorgeous, gorgeous stuff A lot of violin, a lot of piano So I will recommend Max
Richter generally But specifically, there's a piece that was released I don't remember exactly when But it's called Vivaldi Recomposed Oh, okay And it is Vivaldi's Four Seasons Literally recomposed by Max Richter And so Max Richter took the composition that is Four Seasons And made it into something
that is very Max Richter And my understanding is that he discarded about 75 % of the original Four Seasons composition Kept 25 % And the parts that he really liked, he looped and phased in a new way And so it's very identifiably Vivaldi's Four Seasons Like as soon as you hear Oh, you can tell when you
listen to it Yes, he recognizes it As soon as you hear it, you're like, this is Vivaldi's Four Seasons Except it's not I don't really know what's missing I definitely know it is Four Seasons And it's just gorgeous Interesting And I love, love listening to it Fantastic Rebecca, what do you have for us?
So I'm going for a cookbook It's called Supernatural Simple A Whole Foods Vegetarian Recipes for Real Life By a great cookbook writer called Heidi Swanson And it meets my criteria for cookbooks I can make the recipe in 30 minutes I don't have to get any exotic ingredients And the food tastes great That's
my criteria And a little bit different You know, a little bit unusual So I bought the cookbook, came home first recipe Mushroom salad You're thinking mushroom salad?
Really? That's what I'm thinking, exactly Exactly, I can see you thinking it But no, this is spring onions And lime juice And paprika And sauteed mushrooms And can we have this again soon, Rebecca?
Really? I think that sounds great, Rebecca And the last cookbook you recommended Yeah Was so good Oh So I went out and bought it It was like the Four Seasons of The Four Seasons of Pasta The Four Seasons of Pasta?
Yeah, really great The food is really good It's a little bit different It's not that hard to make Kinda try it That's what this cookbook is too So take a look It's funny, I have a culinary recommendation also Do you two have ponzu sauce in your fridge?
Who do you think I am?
Of course I have ponzu sauce in my fridge And I'm not joking, yes I do No, no, how do you spell it?
P -O -N -Z -U I do not have ponzu sauce in my fridge It's citrus juices with soya sauce, samiran It's tart, tangy, sweet, all at the same time And I recently made this dish that paired scallops with ponzu sauce And it was just the most amazing combination Again, it's something that you can make Well, if you
leave the scallops raw You make it in 30 seconds or so If you cook them it's four minutes But there's something I don't know when you stumble across combinations Of ingredients that are just so right for one another It was really like this amazing revelation That sounds easier than a cookbook I'm going
for the ponzu sauce You can dip dumplings in ponzu sauce You can dip an old shoe in ponzu sauce And it'd be pretty good So thank you for listening This was after hours from the HBR podcast network I'm on my way to the next part
