Ted Audio Collective.
Hello, everyone. This is After Hours.
I'm Felix. I'm Mihir, and we are delighted to have Stephanie Metzler as our guest today.
It's great to have you, Stephanie.
Stephanie is the CEO and Chief Content Officer of Mansueto Ventures, and Acting Editor -in -Chief of Fast Company Magazine.
Yeah, wonderful. Thanks, Mihir.
Thanks, Felix. I think a lot of people probably have not heard of Mansueto Ventures.
It's actually the parent company of Fast Company and Inc.
Magazine, which is a magazine and website that focuses on entrepreneurship.
So, it's great to be here and excited to join the podcast.
It's really great to have you.
By the way, breaking news, apparently Elon Musk has bought 9 % of After Hours.
What an amazing investment.
He has such good taste.
I know. Unbelievable.
Is he going to add an edit button?
I just wonder, is he going to change the show?
What do you think? I think he's going to ask for a board seat.
Well, we'll have to have a board then.
Yeah. We'll create one for him.
Excellent. All right.
What did you guys bring today?
Well, I wanted to talk about this phenomenon that we've been seeing that one of my coworkers at Fast Company dubbed the vibe economy, which is this notion of fairly mature companies going public with no profits and no sign of profits in sight.
In fact, many of these companies have only increased their losses since going public.
And it's not really clear to me what levers they have at their disposal in order to hit profitability.
These are companies that are in some cases 14, 15 years old.
So what are they waiting for?
That's great. Vibe or not vibe, I guess is the question.
Yeah. I think they need a vibe shift.
Yeah. And Felix, what did you bring?
Amazon has now contracted with three different companies for 83 launches to essentially have enough transportation capacity to launch 3 ,236 satellites.
And I'm curious to know, what do you think about it?
Is this the beginning of a real space war?
Fantastic. Straight to the final frontier.
So, Stephanie, unprofitable companies in the vibe economy.
What did you see that's different and important?
Well, I think there's a few things that are interesting about this current crop of companies that are pretty mature, and a lot of them are supposed to be tech companies, but a lot of them are really food companies or consumer -packaged good companies.
And what's interesting to me is these are all companies I happen to really love for a lot of reasons.
They're companies like Chobani and Oatly and Sweetgreen.
These are all companies that are really purpose -driven companies and are very innovative in their own ways.
But it's hard for me to see where a Sweetgreen can pull levers in order to get to profitability.
This is a company that already charges $13 for a kale salad.
So it's not like they're going to be able to take price up a ton.
And it's not like they have a lot of control about the ways that they make their salads.
I know they've introduced some robotics and they've done some really interesting things with packaging, but at the end of the day, this is still a pretty labor -intensive business, and their costs are going up.
So we saw their losses widen last year from the year before, and I think my question is, will shareholders start to clamor for profits from companies like Sweetgreen and Chobani and Oatly?
Yeah, this is such an interesting question, Stephanie.
It's often in conversations sometimes in the classroom and sometimes with investors.
When I ask people, imagine any company, let's take Sweetgreen as an example, and imagine for a moment that the company is going to be twice as big as it is today.
It's really growing substantially.
What changes about the unit economics?
And I always find it fascinating how there's almost this built -in assumption that something about the unit economics will be very different.
And, of course, we know from many experiences last year, so many companies that went public, where you think, yeah, they're growing and because there's big growth expectations, this seems to be a sign of hope for the company that it will be more profitable.
But as you point out, it's often just not clear.
What is the lever? Are you spreading fixed costs?
Are there network effects?
All the kinds of things that we normally associate with much higher profitability sometime in the distant future, you don't really see it with these companies and yet they have at least behaved in the past as if they were technology stocks where we sort of know what's driving the financial implications
of growth and that this makes companies much more profitable.
Yeah, I think this is the fundamental confusion in a way, right?
Which is at a time when everything associated with technology gets valued in a certain way, it's tempting to attribute those same characteristics to non -technology companies and somehow make them dress up in that way.
And so it is going to be really challenging for companies like this.
And I think you're right, Stephanie, to point out that appetites for continued growth without profits are going to be really limited for companies like this once the wheat is separated from the chaff.
I think the interesting thing for me is, you know, how did this happen?
Part of it is, of course, is just this remarkable two -year period that we've been living through in the IPO and the reverse merger or SPAC market, which has just enabled a lot of folks to come public at a time when they wouldn't have been able to come public otherwise.
We had a conversation in class this weekend about Peloton and I put up a stock price chart, which showed it going from 25 to 160 down to 25.
And the conversation was, I thought, really interesting because one of the things I was struck by is, in a way, is Peloton worse off for having had this remarkable period in the middle where its stock went through the moon.
And I think that is similarly true for a lot of these companies who the financial markets have been too generous to.
Actually, it ends up distorting their path and in that way leads what are otherwise really interesting good companies, like Sweetgreen, whose products I too love, Stephanie.
It makes me wonder if this meteoric rise and this financial embrace of them actually hurts them in some way as they continue to grow.
The other note of caution I would want to sound is that technology isn't always the answer for some of these companies.
So to keep on Sweetgreen, I use the app to order my salads.
I can time it in such a way that I arrive at the store at just about the time the salad is getting on the shelf and it still tastes fresh and it's wonderful.
But I've also had less than great experiences using delivery and the app.
Fast Company just ran a story about Starbucks and the challenges that that organization has faced.
And the writer's thesis was that the app had actually hurt Starbucks in some ways.
That the push to get more people to use the app had in some ways diminished the famous third place that Howard Schultz and his successors had tried to create this notion of a relationship between the barista and the customer, the coffee lover and the person preparing the drinks.
It had created anonymity in the stores, which was hurting that experience for coffee lovers.
And it was also creating pressure on the workers.
So it's interesting that some of these companies are valued as a technology companies.
They think that technology may ultimately help them with their margin.
But I think there's a cautionary tale there, too, where the technology may start to take away from the caliber of the experience.
The reason you go to a Sweetgreen for the freshness of the salad to see it being made goes away when we become overly reliant on technology.
I'm just struck by how the markets don't really know how to think about these companies.
So Sweetgreen, if you just look at their performance this year, early March, they're down 30 % from the beginning of the year.
And then they post a much bigger increase in revenue than the market expected, but also wider losses than the next thing over the next two weeks.
Now they're up 20 % this year.
So there's these huge swings in valuation somehow influenced by, yes, they're growing a little faster.
But at least I have a hard time seeing how faster growth will ultimately lead to a much more profitable company.
Well, some investors are pushing back.
And an example of that is the short seller Spruce Point Capital.
They have been very aggressive in criticizing Oatly, which is another very mature company, 28 years old, growing rapidly, but perhaps at the expense of profits.
And Spruce Point has been very, very blunt in their assessment.
And they've said that basically the emphasis on growth over profit is I think the report said a decoy to provide insiders time to cash out.
That's harsh. Well, although we know that insider selling has never been higher than it's been in the last 12 months, more generally, but particularly with IPOs.
And so without going into the details of that particular example, I think this is part of what we have to kind of come to terms with, which is there's a lot of redistribution going on in these financial markets with insiders selling at the peak and without early lockups and retail investors, especially
with these brands, Stephanie.
The other part of this story is these are companies where you can walk by Sweetgreen and you can say, wow, I like their products and they seem to be busy, so I should buy the stock.
And that is kind of a little bit of what's happening.
And so with retail investors coming in, it's hard not to take that point seriously, which is, wow, there's a lot of redistribution going on here.
And the other piece, of course, is these companies have also wrapped themselves in this idea of purpose, which also I think has given them latitude to grow without profits, which is good in some sense, which is they are in some ways making the world a better place in all kinds of ways.
But that has given them latitude to say, we're doing more than generating profits.
We're changing the world.
And so that takes more time and that takes more patience and profits are less important as well.
It is remarkable if you look at the companies that tank, with the stock price tanks after IPO, the vast majority of them are VC funded.
And about a quarter of them have now much shorter lockup periods than they traditionally used to have.
And in fact, you see secondary sales are not uncommon now, even pre IPO.
And so there's this old tension here.
Are you really building a company for the longer term or are you building a company for peak evaluation at the time of the IPO?
In part, I feel it's hard to say because the pressures from the labor market are, of course, real.
So as long as incentives for workers in startups are so much tied to the valuations of the companies, then to say, yes, we've gone public, but now you have to wait for quite some time again until you can cash in.
In the current labor market situation, that's a really hard thing to do.
And so I feel it's this confluence of SPACs and VC capital desperate for investment opportunities and a really hot labor market.
And as we come together and they put a lot of pressure on companies and maybe the bigger, more general question, how much confidence can we have in people building companies that are really going to be long term valuable given the funding model that we have?
Maybe we're too pessimistic looking at the most recent experience that we've had.
That's a great point, Felix.
And, you know, again, to come back to one of the founder led companies we've already talked about, which is Starbucks, that is a built to last company and was purpose driven and I think will continue to be.
And certainly has paid off for investors and was, as Meir pointed out, people could walk by Starbucks, enjoy the product and think, I want to be an investor in this company.
And as much as the company is facing some headwinds right now, the labor challenges, the experience in stores is not what it used to be.
I wouldn't count that company out.
Right. And again, this takes us back, I think, to where Felix began us and I think is really worth emphasizing, which is underneath it all in these businesses.
You have to think about the unit economics and I think at Starbucks, they're still pretty darn great and they will be.
And that's where you really want to start looking at these really core economic questions because then when the core economics are great, lots of things are possible.
But when they're not, it gets really, really hard, I think.
And it's really mixed, right?
Well, they have built something that is going to last and for some of them, it's just really hard to tell.
The ones I think that rely on these network externality stories where every market is a winner take all market, I tend to be very skeptical.
I think that's just not true all that often.
And the ones that have terrible unit economics, I think we should all be very skeptical.
Yeah. I mean, it's such an interesting topic, Stephanie, in part because one of the important things to distinguish between in the world are companies and stocks.
And Sweetgreen can be an amazing company and can be a great product and I can enjoy it.
It's quite a different thing to talk about it as a stock.
And I think that's one of the lessons out of all this, which is there are companies who can be doing interesting things in the world, but there's a separate question about the way they're valued.
And there's a separate question about whether they are creating value for investors.
And that I think is the question that financial markets are supposed to decide.
But we'll come back and see all of these, I'm sure, and revisit it in the future.
Fabulous. I feel like I think it's time for us to get into space.
Yes, I agree. So we had exciting news.
Project Kuiper. So this is the Amazon low orbit satellite project.
They made headlines by now securing 83 launches.
So this is capacity to transport the satellites into orbit.
And I would have expected the vast majority of the contracts go to Blue Origin, Jeff Bezos' venture.
And actually they spread it across three companies.
So it's both Ariane Space Blue Origin and then United Launch Alliance.
But it now seems all of a sudden much more real.
It seems they're really going to do this.
They have contracted the launch capacity.
Interestingly, the size of the satellite constellation is going to be much smaller than Starlink, which always has to do with what's the distance between Earth and the satellites that they're flying.
The further away you fly, the smaller the number of satellites that you need.
But of course, at the same time, the trade -off is with latency.
If in fact the big goal of all of these satellite constellations is to provide Internet service in areas, two locations that don't have it today.
So we now have these two big players, the Kuiper project.
And then of course we have Elon Musk's Starlink.
I'm curious what your take is on this.
Is this a real business where the main purpose is to provide Internet service?
Or is it ultimately a first step to perhaps a very different vision of what you can do in space?
Well, I do think it has the potential to be a real business.
And it's fascinating to me to see just how much activity has been taking place, not just with Project Kuiper and SpaceX, but the entire space ecosystem.
It's amazing to see not only the amount of investment that's happening among these big companies, but I think something like $17 billion in venture investment was poured into space startups just last year alone.
So clearly the market feels like there's a business here.
I think Project Kuiper is a real project and a real business.
And I'm fascinated by the broader space ecosystem.
We focus a lot on these two big players.
We focus a lot on billionaires going to space.
But there's a really interesting and robust conversation about everything that's happening around these two companies.
To your point, Felix, I think this is a real business.
I think it has to be thought of as a real business.
Amazon is putting in something like $10 billion.
And the key tradeoff here is with these higher, older satellite networks, you had fewer of them, but the speeds were slower.
Well, as launch costs come down, which is what the real revolution I think underneath all this is, you can launch a lot of satellites.
And that's, of course, what Starlink has done particularly well, and now Kuiper will try to get.
And then with these low Earth orbit satellites, data speeds are conceivably considerably faster.
I think the interesting question is, is this what it's touted to be, which is a retail business for those people who can't get internet connectivity today, which is conceivable.
And there are chunks of the population, which certainly in the U .S., but all around the world, which are not able to access high speed internet.
And this could be about them.
And that's kind of the way it's touted, frankly.
Or it could be about more commercial applications, and in particular, AWS.
And I wonder if part of what is happening here is these kinds of constellations have historically failed.
There's a lot of dead bodies in satellite land because the economics are so hard.
Are difficult. They're really, really difficult and they continue to be difficult, right?
So we just had one of them come out of bankruptcy.
But I think what the story is here is, you're almost guaranteed the revenue with AWS purchases.
And in a way, I think of this as kind of a backward integration play for AWS more than it is this retail play.
So I don't know if that makes sense, but my instincts are, there is a retail play.
We want to make sure everyone can access the high speed internet.
But something about that doesn't ring entirely true to me.
I completely agree with you, Mihir.
You see it a little bit in the conditions for Starlink.
So it's about $110 a month.
The satellite dish that you need is sold at $500, $600, but we think it's probably costs more like $2 ,000.
Apparently Amazon has managed to make the antenna much smaller, which I think will give you more favorable economics.
But these are not the places where it was worth laying ground cables.
I think that tells you a lot about how big these opportunities are.
And of course the technology makes a big difference.
But it's not as though you get any benefits of density or anything similar.
And in the end, it's still true.
They contract with Verizon, right?
So Verizon will ultimately provide the internet access.
And it's still true that you need cell towers and you need all the rest of it to make this really work.
To me, what's really fascinating is we often think of Amazon as sort of a consumer -oriented company.
It's a little bit the way they describe themselves.
However, we're always in the customer's corner.
But in the end, I think it's actually more interesting to think about them as a logistics company.
They create infrastructure.
Amazon Marketplace is essentially infrastructure for all the businesses that now are able to sell online.
AWS is ultimately infrastructure for all the businesses that need computing capacity and don't want to build their own data center.
And I think along every step of their development, everything they've ever done is a complement to what they built in the first place.
And so this is why I find the AWS angle so interesting, that they will have an advantage that many other cloud providers will not have because they will not have the ground terminals.
They will not have the links to the satellites that then allow you to beam data everywhere where data can conceivably be valuable.
I wonder, and I don't know enough about antitrust law to speculate knowledgeably about this, but this is just another land grab by Amazon.
Lena Khan's antenna is already up, and I do wonder if this kind of link up, even if they are distributing the launch partners, if this kind of close connection between AWS and Project Kuiper is going to be something that will certainly raise the antenna of regulators and lawmakers.
Right. The other angle on that, which I think in a way cuts in the other direction, Stephanie, is that Kuiper was notable in not using Falcon and SpaceX launches.
And so it also feels like an effort to create folks who can actually compete against SpaceX and the Falcon.
So it almost feels also like that the exclusion of SpaceX in the Project Kuiper orders was a little bit deliberate as to say, we need more competition in who's putting things into space, and we need competition for Starlink.
So I take your point completely that there's a super interesting competitive aspect about AWS, but there is a nice part of this story, which is Bezos and Amazon saying, Musk and SpaceX don't get to own this.
We're going to create a serious competitor to him.
Our colleague, Matt Weintzierl, has this nice distinction, I think, that I find very helpful.
He says there's one type of business that is sort of space to Earth.
We're doing things in space in order to somehow make life on Earth better.
And then there's the space to space business, which is, of course, everything has to do with Earth, but it's much more we're developing capabilities that are really built around making life in space possible and getting around some of the economics that are really terrible.
So one practical example is the satellites that we designed today.
Of course, they have to withstand the launch, and they have to withstand all the pressures that happen in orbit.
And imagine if we could somehow shoot up parts and then assemble in space.
Then, of course, we would get satellites that look entirely different.
And I sort of agree with Matt that many of the businesses that are really space to space businesses, that's like the stuff that's really exciting.
So, for instance, Made in Space, they 3D print industrial products in space.
Like OXIUM space, the idea is of a private space station where maybe you'll have tourism, maybe you'll have manufacturing.
So those kinds of ideas, they're further out there, and maybe all the Starlink and the Kuiper kind of enthusiasm pales in comparison, I think, with the opportunities that those other companies might have.
One company I started looking into that I think is really interesting is a Japanese company called Astroscale.
And they are really focused on the space debris, because the other problem that's happening as space becomes not even the next frontier.
It is the frontier.
I think there's 7 ,000 satellites in orbit right now, and only half of them are actually active.
And so Astroscale's business model is, in some cases, extend the life of those satellites.
So, as you say, these sort of space to space business models where they might go in and repair or extend the life of a satellite so that it can get a little bit more usage.
But they also have, as part of their business model, trying to remove that space junk.
And if we are going to have a vibrant and sustainable, and we're not going to destroy our own planet with our space junk, there's going to need to be garbage men.
And Astroscale is one company that's trying to do that.
That's amazing. I love that.
This, of course, will just betray my own prejudices, which is on that dichotomy that Matt outlined, Felix.
In a way, I'm like a space to earth guy.
Yeah. You can't imagine moving your family to space.
Yeah, I just think that is what captivates, I think, some people's imagination.
But I think the real businesses and the real opportunities in the next several decades, that feels like chaff relative to the wheat of, like, wow, latencies and speeds that can be a real competitive advantage.
But that's, I think, a limitation on my imagination, maybe more than anything else.
Much of the not -so -favorable economics always has to do with it's so difficult to get things into space and then it's difficult to bring things back to earth.
There's real limits there to what you can do.
And if you move some of the activity into space to begin with, I think what you will see is that both building out space capacity, space stations, and so on and so on, imagine you actually don't have to go to earth.
The infrastructure for your next space station is made essentially in space.
Then, of course, all of this looks very different, the kinds of opportunities that you have, the materials that you might be able to use look different.
But perhaps most importantly, price points might come down where even my good friend here might say, well, guess what?
My family and I, next spring break, will be somewhere, I don't know, maybe for you it's more low orbit than I'll say low orbit before I say moon, but I think that might be a real possibility.
This is where I really feel limitations of my imagination, because I confess right away, I think to myself, I think I'd rather be in Tuscany.
Tell me again why I would want to do that.
I think there's a little bit of evidence that you know how the one astronaut that was in space for a very long time is called Kelly.
And interestingly, he has a twin brother who also happens to be an astronaut, but he wasn't in space.
And so it was almost like this perfect experiment where you could see what will happen to a human body if you're in space for a long time.
And I think the short version of the story is many things change, but also many things revert back to what you were like when you were back on earth.
But one of the things that the research showed, I think, is that your brain really loves space.
The rest of your body, not so much, like stuffy nose, you can't really see all that well.
So clearly our human bodies are not created for microgravity, but something about looking at earth and something about the brain and space.
I think that could be an amazing experience.
I totally buy that, by the way, just to be clear.
I mean, I can imagine the thrill of that.
But is it about novelty or is it about something deeper about doing things in space in a longer runway?
I don't know. What do you think, Stephanie?
Well, I'm with you, Mahir.
My imagination is somewhat limited as well.
But in some regards, the human imagination that romanticizes Tuscany is in part a function of the media and the historical information and everything that we've been fed and the vision in our mind's eye around it.
And so I could see 30, 40, 70 years from now where there's a whole space tourism publication industry, where there's travel and leisure for space, where there are blogs around travel and space, where we could also see a similar publicity machine that makes space travel seem more appealing to people
like me without the imagination to currently see the possibilities.
We could do like an after hours recording session in space.
I'd be up for that.
Especially now that Elon Musk owns 9 % of you.
That could be the trade.
Okay, you took 9 % of after hours, but we want to go up on the next rocket.
I love it. All right, recommendations.
Stephanie, what do you have for us?
My recommendation is a television show that's streaming on HBO Max called Julia.
And it's about Julia Child.
And it sort of picks up where the Nora Efron movie of a couple of years ago, Julie and Julia left off.
I love that movie. Yeah, that was great.
Every time I catch it on cable, I'll stop and watch a few minutes of it.
It's like a warm hug.
And this television show is similarly very comforting.
It takes place in Boston after Julia and Paul Child move to Boston after their time in France.
And Julia is trying to get her television show off the ground.
And I find it incredibly comforting because I remember being a kid watching her show on public television.
And this is the origin story of that show.
Fantastic. Can't wait to see it.
Felix, what do you got?
I would like to recommend an app.
It's called Picture This.
And it's perfect for the season.
It's an app that specializes on visual recognition of plants.
So now spring flowers come out.
To me, at least, it's such a magical season when you see nature awaken.
And Picture This is amazing because the accuracy is just truly astounding.
But then what's even better is each of the plants that are recognized.
You learn a ton. You learn a little bit about the history.
If it's a plant you want to take care of, if you happen to have a garden, you learn about how to take care of it.
And it shows how other sort of more general purpose visual recognition apps just in the end don't really have the depth of information and the care that goes into creating something like Picture This.
So if you're a nature person, if you're going on walks now since it's spring, almost spring here in Massachusetts, I should say, it's not totally clear yet.
We always have to wait a little longer than everybody else.
Picture This is your perfect companion.
That sounds fantastic.
What did you bring me here?
I wanted to recommend an article in the Washington Post by a reporter whose name is Jessica Contreras.
And it is the story of a hyperpolyglot.
She's written this remarkable story about a carpet cleaner, Von Smith, who knows 25 to 40 languages.
Oh, my God. And has basically learned them in this remarkably kind of informal way over the last 30 years.
But it's a story not just about Von Smith, this carpet cleaner who happens to speak 40 languages, but it's about his education, how he was frustrated, his emotional development.
And then now about the brain science of people who can learn so many languages.
And as somebody who always struggled, frankly, to learn languages, I just think it's the most amazing capacity.
And he gets a great deal of emotional satisfaction from talking to people.
And it becomes this really wonderful, life -affirming story just based on what language is.
And I think it's just a fantastic story.
That sounds so interesting.
Isn't there something about switching from one language to another is actually not easy, right?
It's somehow the task is a hard task.
It's a hard task, but he does it almost effortlessly.
He's actually kind of an emotionally uncomfortable person.
But then when he starts to switch languages, he becomes like a new person.
Do we know why he can do it?
And it's generally very difficult for us.
We don't. Part of the story is about a set of MRI studies that he goes to Boston to do.
And actually this reporter and him kind of go on this journey together.
So the story becomes a much larger story as well.
So it's really touching.
This is probably an article that Hollywood is going to option for a movie, the sort of funny story between the reporter and the polyglot.
But trying to make it into a movie with all the language changes might actually end up being a bigger challenge than I thought.
No, I think it's coming to Netflix soon.
For sure. Yes. Like every story these days.
Except Julia, that's on HBO.
We're out of time. This is it.
Thank you for listening.
This was After Hours from the TED Audio Collective.
Thanks for watching.
