Unit Economics

The Lyft IPO filing reminded us why we love the car sharing services.  The price is a bargain - for consumers - not so much for the company which has negative unit economics.  Negative unit economics can’t last forever.  Our favorite podcasts and blogs remind us of this reality.  It is 2019 but some of the IPOs are starting to remind us of the Dotcom euphoria.  Freemium is seductive but someday we must pay.  Those advertisements sandwiched into the podcasts with their tracking systems are essential.  The irony is many of these advertisers have negative unit economics too.

Invest Like The Best

One of my favorite podcasts remains Invest Like The Best.  The podcast delivers the two essential elements of a good podcast.  A knowledgable host who asks great questions and is able to attract guests we want to hear.  Two great episodes that deserve your time are episodes with Peter Zeihan and Michael Kitces.  Who knew that geopolitics and wealth advisory could be so interesting?  Listen and see if you agree.

Steven Pressfield

Writers and entrepreneurs love the books of Steven Pressfield.  For those of us who can’t get enough of his wisdom I recommend his blog. We love Pressfield because he tells it like it is, pulling no punches.  That no nonsense approach is unique and helps me every time I read his thoughts.  His blog reminds me and confirms that he would not support any business that has negative unit economics. His "tough love" works.

Recruiting Checks

Wall Street was an early adopter of negative unit economics.  Their huge recruiting checks only worked if the highly paid recruits continued to grow and cross sold new products and services.  Unfortunately the recruiting money was spent on a second home and cosmetic surgery.  Recently recinding the  Protocol has reduced the number of recruiting checks and provided the managers with an excuse to not write any new checks and further their negative unit economics  The people who abolished the Protocol must read Steven Pressfied. 

Negative unit economics are seductive and believe the fallacy that further growth will offset any losses.  My cynical opinion is why I never worked in the Venture Capital industry but I do love the low prices at Lyft.


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