Popeyes & Private Equity

Chicken Sandwiches and Zero-Based Budgeting

Ranjan here, talking about fried chicken and 3G.

I have long been obsessed with fried chicken. For any of our readers that have ventured onto our About page, my co-host Can managed to sneak this in this fact. I think it really took hold while going to college in Atlanta (RIP Gladys Knight’s Chicken & Waffles), and when I moved to NYC in 2002, fried chicken hadn't quite become the hipster sensation that it would be. Popeyes was by far the best accessible chicken. I kind of believe fried chicken can save the world.

Popeyes has long been a guilty, frequent pleasure of mine. I try to limit it to 1x a month, and I certainly dabble in upmarket chicken (Momofuku had an incredible reservation-only fried chicken dinner back in the day). But for the fast stuff, Church's is good, Bojangles is very good, KFC is garbage, and Popeyes is the best.

Popeyes has forever been considered, let's say, downmarket, by most people I know. So it was a bit jarring to see my Twitter feed lit up with Popeye's chatter this week.

There is a certain part of me that has that "I liked that band before they got big" hostility towards all this Popeyes talk, but I just had to write about this. The story has everything. The costs and benefits of private equity to society. Viral, conflict-based social media marketing. And of course, chicken.

Private Equity & Chicken

Let's first talk a little about the recent corporate history of Popeyes. Its parent company, called America's Favorite Chicken (AFC), went public in 2001. At some point they changed their ticker to PLKI. I remember looking at the stock chart in the early 2010s.

One cardinal rule of investing is to never regret the money you didn't make, but I still regret not buying PLKI, because I might've gotten rich off of chicken. Just imagine the dinner party conversations. The stock steadily climbed through the past decade, and then a company called Restaurant Brands International (RBI) bought them out in 2017.


RBI is a really interesting company. It began with a famous Brazilian private equity firm called 3G Capital. 3G is kind of what you picture with a PE firm. Tall guys, good hair, nice suits. The founder played at Wimbledon and Bloomberg called him "the world's most interesting billionaire". They also embody the controversial stuff. They're most famous for intense cost-cutting efforts, debt-fueled dealmaking, mass layoffs, and a practice called zero-based budgeting. Again, it's pretty much exactly what you would picture with Private Equity.

Image result for 3g capital board

Their first really famous deal was a $52 billion hostile takeover of Anheuser-Busch in 2008. This 2010 CNBC piece captures a lot of that drama. As far as PE takeovers go, this one seems to have generally worked out. All the good things you might hear about PE seemed to kick in. Trimming a bloated organization, sharing knowledge across multiple companies, growing top-line revenue and increasing profit margins. Synergies!

Their next big thing was taking over Burger King for $4 billion in 2010. Furthering the notion of private equity stereotypes, a 32-year old 3G guy was named CEO of Burger King in 2013. He checked all the boxes: Cornell grad, Wall Street, "tall and lanky", hard-working, etc. And again, with this one, 3G did incredibly well. Even McDonald's seemed to copy a number of their strategies over the past few years. BK worked so well, that they spun it out as a new, publicly-traded company called Restaurant Brands International. They bought Tim Horton's in 2014, and then, Popeyes, in 2017.


Then there is Kraft-Heinz. This is an incredible story. In 2013, 3G, alongside Warren Buffett, bought Heinz. In 2015, they merged it with Kraft Foods to create a consumer goods giant where they could apply all those classic PE principles. Right away, they laid off 5% of the workforce. There are some funny anecdotal things like cutting of free string cheese sticks and making sure everyone prints only in double-sided black ink.

This WSJ writeup (also this Pitchbook writeup) does a good job summarizing the debacle, and it was bad. After laying off thousands, the combined company is worth less than when they began. It looks obvious in hindsight. Getting a bunch of boxed macaroni with powdered cheese, hot dogs, and Jello brands that had been around for 50 years might've seemed like a tremendous asset, but in this era, they were a liability. You could not cost-cut your way to new consumer brands. The 3G founder even called himself "a terrified dinosaur" because of how rapidly the consumer goods landscape was changing.

Also, complicating 3G's path to PE greatness with Kraft-Heinz was a failed takeover bid of Unilever. Once again, the playbook was similar. Use their $50 billion consumer goods company and debt to facilitate a takeover of a much larger, older, "lazy", conglomerate. The story of how Unilever CEO Paul Polman fought off the takeover is the stuff of business legend. This FT piece gave the Succession-esque play-by-play and there was even an HBS case study on it called The Battle for the Soul of Capitalism.

But most important for our readers to note, Paul Polman was talking about fighting shareholder short-termism with community and customer-oriented longer-termism, all the way back in 2017.

“Do you want short-term forces – that work for a few people, and make a few more billionaires – to be the dominant force? Or do you want the system to work for the billions that need to be served? It’s a fundamental choice.”

In light of this week's big Business Roundtable announcement, where 181 CEOs announced they will shift from a shareholder-first to a stakeholder capitalism doctrine, I would love to see someone like Paul Polman leading these efforts.


Okay, back to chicken. Why did I spend so much valuable newsletter real-estate on the 3G? Well, it's a great business story you should dig into, but more relevant, we have to remember Popeyes is owned by RBI which is basically 3G. Popeyes is PE.

The infamous Popeyes chicken sandwich, called their “biggest product launch in 30 years” only became available on August 12th. But as my feed became increasingly dominated by chicken sandwich talk, I couldn't shake the feeling that I had already tried the sandwich before.

I went through my credit card statement and found it. July 9th, a charge for $4.34, which was $3.99 + NY tax, the price of the sandwich.

I remembered it. I was teaching a summer course at the CUNY Journalism School, and there is a Popeyes across the street. I’ve tweeted about the dangerous proximity of CUNY and a Popeyes as far back as January 2013 (and yes, I ate there twice that week).

I was able to confirm that the sandwich was around long before the official launch with a simple Twitter search. People had been tweeting about the sandwich for months. I started seeing mentions of the spicy chicken sandwich in mid-October 2018.

Which made me think more about just how brilliant this entire campaign has been. It was a quiet release over many months. They kept tweaking the product. A lot of those early tweets were about how it’s better than Chick-fil-a's sandwich, so you can start to see a marketing campaign forming.

But what I really want to know is how did they get everyone talking about it?

They certainly nailed the conflict-based social media marketing aspect of it. They went right after Chick-fil-A and Wendy's.

Nothing travels better and faster on algorithmic media than shade, conflict and competition. But was that it? Did they get lucky, or was this a genius, year-in-the-making, 3G special? Was the fried chicken brand beef accompanied by massive social ad spends? Did they hook in food influencers?

You have to remember, this is the same organization with the marketing geniuses that launched the Burger King - Andy Warhol Superbowl ad. They're also the ones that made the first major move into the vegan meat craze with the Impossible Whopper. They know how to make good noise.

I think I'm so intrigued by this because it could be an example of private equity at its best. Did 3G / RBI manage to bring this 50-year old brand, with an incredible product but probably not very well managed, to the national stage? Did they leverage a marketing knowledge base that has been built over a decade across two other massive brands (BK and Tim Hortons)?

Has my beloved Popeyes been given a new life thanks to private equity and that specific breed of hyper-capitalism?

I mean, the previous Popeyes management are the ones that came up with this concept of Rip'n Chikn - where it was an invention where you could "rip off" individual tenders, but ended up looking more like a weird, fried hand. Maybe, thanks to the synergistic magic of a fast-food conglomerate, we may never see something like this again.

Further Chicken Reading (mostly from my Instapaper):

  • Important note from Wikipedia: Alvin C. Copeland claimed he named the stores after the fictional detective Jimmy "Popeye" Doyle in the movie The French Connection and not the comic strip and cartoon character Popeye the Sailor. Also, there is no apostrophe in Popeyes.

  • Apparently, Popeyes is a guilty pleasure for both Anthony Bourdain and Danny Meyer

  • I love Fried Chicken and Geopolitics reading, and still remember this 2013 Guardian piece, The KFC smugglers of Gaza.

  • I had mentioned the story of KFC in China. This 2011 HBR piece outlines their strategy well (and this was long before the spinoff). And a weird connection to last week's piece, WeWork's global head of business and financial operations announced he was leaving this week, and his position prior to that was CFO of Yum Brands China.

  • Buzzfeed in 2015 on the real-life history of Colonel Sanders.

  • From me on Medium in 2013, trying to recreate the Popeyes recipe.

  • Not chicken-reading, but writing this post made me seriously business-crush on Paul Polman. Here is him talking about fending off the 3G takeover bid.

Welcome back, San Francisco

This should have been a Medium post

Hi. Can here. This one is personal.

Hello, San Francisco

I was young and restless. I didn’t even realize the start date on my offer was the day after I graduated when I signed it. Luckily, the good folks at Digg were understanding and pushed it a couple of weeks. I still flew from Pittsburgh to San Francisco the day after the ceremony, but at least there was some slack.

I didn’t have a place to stay when I landed, so I went to this warehouse my friend used to stay. It was exactly that, a giant warehouse turned into a living space. There was a giant hammock, and the first person I saw sleep on it was a guy who kept talking about his apartment sharing app, or site as we called things then. I remember asking him name over and over again. It just sounded a bunch of vowels to my Turkish ears, instead of an actual word. Air-something-something?

In a week or so, I found a place to stay with my roommate, who I met from my internship at Yahoo! the year before. We had two huge rooms, a sprawling living room and a view of the Bay from our balcony. Even with our entry-level jobs, we could afford a pretty luxurious place because we worked in capital-t Tech. Of course, we bought a giant TV, coupled with not one but two gaming consoles. Our complex had a pool and two saunas with views of the downtown San Francisco, so people came around often. Life was good.

Work was good too. In less than a week’s time, I was checking in code to one of the biggest websites at the time. Push, wait, boom. Live. Celebrity CEOs were in the office because I also worked for one. I was young, fresh-faced, wide-eyed and those things mattered to me. My close friend at the time, who worked for an oil company on the east coast didn’t believe we had a fridge full of beer in the office. Blasphemy! She couldn’t even wear open-toed shoes and we had an intern who refused to wear shoes. Gross. Could he have at least worn some Vibrams?

Digg was a special company, at a special time. We threw parties, and fancy people showed up. We were a technology company, apparently, so we did what technology companies do and over-engineered things. Things didn’t work at our scale, apparently, and we bet the company on an untested, unproven infrastructure. Things overall didn’t work out too well. Lots of ink would then be spilled on what happened. I, too, spilled some.

My short but sweet tenure at Digg was an accelerated course to life in Silicon Valley, or at least Silicon Valley’s Layer 7 that is San Francisco. The idea seemed nice enough on paper; democratize the news. A bunch of people built a website quickly and it got popular. They raised a ton of money and built some fancy offices. We came up with unique ways to track you all over the web, before doing so would get you a congressional hearing. Then we killed them, somewhat performatively. There were some technical innovations along the way. Voting brigades with questionable politics frequently took over the site before they were collectively called alt-right. Whatever you see happening online now, has happened to Digg in some form or fashion.

Digg doesn’t exist anymore, at least in any way comparable to its past form.

Silicon Valley and the San Francisco it was born into, however, is here and it’s all turned to 11.

Goodbye, San Francisco

After a few years working in tech, things started to take a dark turn for me too.

I was bothered by how expensive the city has gotten. I went from being able to afford a nice place with my junior level salary to having to have multiple roommates to save some money. I felt unsafe, as a man, walking down the street. The human suffering I saw on the sidewalks took the joy out of doing anything for myself. I could see smoke rising from a fire at a homeless encampment from my window.

Tech people seemed to be everywhere, but no one seemed to like us. My girlfriend at the time used to take The Google Bus, and the protests scared her. Posters plastered on my walk home casually hinted at violence towards my brethren. I used to have an album of “techie scum” stickers on my phone. We even accidentally broke democracy?

So I left, first my job, and then San Francisco.

I flew to New York, where I thought about what I wanted to do. I wrote a bunch of things to get things out of my head and on paper. That seemed to help, but it didn’t seem like what I wanted to do. I lived partially on my savings, while also doing freelancing.

In the meantime, in somewhat of a contrarian move, I decided to go to business school. I specifically applied to school outside of California. Through a very convoluted yet intentional turn of events, I got into INSEAD and ended up spending a year split between glitzy Singapore and sleepy France.

And then, in a move that surprised no one but myself, I came back.

Hello, America

As an immigrant, one of the first things you notice in America is how people smile all the time. As a skeptical and a deeply cynical Turkish person, your first instinct is to suspect foul play. You assume that people who smile all the time are either idiots or that they are out to get you. Your friends, for example, cheerily ask you “What’s up?” as they see, but since they don’t wait to listen to your existential droning, you deduce that they are idiots. Similarly, you deep down want to punish the waitress at the cafe for donning a fake grin, as you despise being treated like a human ATM for tips.

A more subtle thing, however, you realize about Americans is how they foolishly optimistic they are about the projects they want to embark on. Back in the motherland, we do not teach kids that they too can be presidents they grow up. The main goal, like in most other parts of the world, is merely to not mess things up too much.

I know this can sound somewhat tone-deaf in 2019, with Trump and climate change and wars, and a myriad of things that make it look like the sky is falling at all times. Yet, even today, the difference between America, and especially Silicon Valley, and the rest of the world is very striking.

In America, people think about the future in a way that’s hard to comprehend for many outsiders. In Turkey, even your best-laid plans do not survive the first contact with your friend, let alone the enemy. Here, people look at obstacles and consider them milestones to clear, not hurdles to be stuck at. In many parts of the world, the natural reaction to any idea, no matter how good it is, is to poke as many holes in it as possible. Here, and I say this with a straight face, people paper over your stupidest ideas because that is just what friends do.

And I wish more people living in America, and especially in Silicon Valley understood how rare, and diminishing, of a commodity that is. It is the obliviousness to the challenges and the foolish naiveté that makes this place work.

Koan Capital

I joke a lot, maybe too much, about the obnoxiousness of tech people who want to make the world a better place. The navel-gazing venture capitalists that seem to quip koans all day, every day are annoying. Yet, underneath all that dorm room philosophy, still lies this very rare belief that tomorrow might be a better day than today.

My co-host Ranjan looks at the world through the lens of finance. And maybe, as he says, we are living in a world so flush with capital that we are simply getting high on our supply. That thought has a certain appeal. I don’t think even on 4/20 in Hippie Hill, you could ingest enough drugs to type the words “we want to elevate our consciousness” with a straight face on an IPO prospectus.

But I would like to believe there’s more to it than that. I am genuinely convinced it’s the naiveté.


Last week, I was talking to a friend whose acquittances started an autonomous driving company a few years ago. The founders, who I remotely knew, were generic software engineers that didn’t seem to have any background in what would be required to start building any of the required software or the hardware. I asked my friend, how they started it. There had to be a catch.

He shrugged and said they thought they would figure it out as they went along. Look, I know that this sounds like a cop out-answer. But bear with me for a second.

There’s a way to look at a problem like and worry about all the things you possibly cannot do, and all the things that can go wrong. Most of the outcomes end up in a bad place, ranging from not being able to get this out and running, to actually killing people.

Yet, it’s also possible to simply start somewhere and see where things go.

It turns out, it possible to find a ton of websites that tell you how to hook up a computer to a relatively cheap car, and start controlling it with your keyboard. It’s possible, turns out, that you can find a sample project written by a grad student that allows you to use your laptop’s camera to read the road markings and signs. And it’s possible, turns out, to find empty parking lots where you can test all this stuff out without risking hurting someone. And at some point along the way, it’s possible to end up with something that works, barely, to get someone who might help you out to get to the next place.

A Plea

I recognize my industry of choice is not perfect. The bro culture runs deep in many places. Casual sexism and racism are still par for the course. Entire parts of the industry either run on preying on people’s psychological vulnerabilities, or regulatory vacuums that put people’s data at risk. I try to voice my opinion on those issues I care about, sometimes at a considerable professional (and social) expense. Because, I think, otherwise I too am complicit.

Similarly, as I decide to call this place home, I want to be involved in solving its problems. The housing crisis is the undeniable existential risk here. And while much of the problem lies at the state level, I’ll be donating my time, money, and platform to get more housing built in this city. I want it not just for myself, but so that there’s a vibrant community of people here.

And lastly but maybe most importantly, I’ve made it a point to stop the digital rubbernecking equivalent of sharing and commenting on everything that’s bad happening in San Francisco and technology industry. This isn’t to say I am isolating myself from the problems, but rather, I am actively acknowledging the gravity of the problems instead of doing the least productive thing of complaining about them.

I encourage you to do the same on all three.

Parting Thoughts

I’ve come to realize, in the time I was away from the city I’ve lived longest in my adult life and the only industry I’ve worked that I miss them both dearly.

I didn’t miss the smell of piss in Soma but missed the views of Golden Gate from Hawk Hill. I did not miss the transactional view of romance that permeates the dating scene, but I missed the people who get excited about the most inane stuff that I found enticing too. I did not miss talking about technology 24/7, but maybe that’s more on me. I didn’t miss the people who talk about their latest funding at a dive bar, but I missed having friends who I can drop by without having to call ahead.

People here, for whatever reason, still carry on that haze of optimism. The idea that you too can give it a try. There are obstacles, but they are just there to jump over, not get stumped by. If you fail, it’s not good, but it’s also not over. You might think people take it a a bit too far. However, I think that is the right side to err on.

We’ll see if I am right, but this time I am optimistic.

What I’m Reading

A Walk in Hong Kong: I think about my time in Singapore daily. It’s hard to describe the highs and lows you get being in a city, or a state, that is so well run yet so…rule-based after living in United States. It comes at a cost, and it’s hard to tell if the idea scales over time, but it does make you question your most strongly held assumptions about how an advanced society could be run. Maciej of @pinboard fame sends his dispatch from Hong Kong, where he’s there during the protests. It’s worth a read, as most things Maciej writes are. His fascination with Hong Kong hits close to home.

All that prelude is to say, coming in to the Hong Kong protests from a less developed country like the United States is disorienting. If you have never visited one of the Zeroth World cities of Asia, like Taipei or Singapore, it can be hard to convey their mix of high density, mazelike design, utterly reliable public services, and high social cohesion, any more than it was possible for me or my parents to imagine a real American city, no matter how many movies we saw. And then to have to write about protests on top of it! 

AI’s new workforce: There are two ways how so much of what counts as AI is actually powered by humans. On one hand, you have humans that pretend to be robots to impress you. On the other hand, many of the “real” artificial intelligence tools require millions of pieces of data, carefully tagged by humans so the robots could learn. It’s less artificial than is farmed. Obviously, now there’s a huge cottage industry that spans across the human task supply chain. The input is us; output: AI.

AI supply chain companies insist that their work no longer involves mindless, rote labelling of basic objects such as cats, dogs and houses but has evolved into a far more specialised set of tasks.

For instance, iMerit employees might analyse in-car footage of drivers, including facial expressions and eye blinks to determine driver fatigue; they have trained voice clips for Amazon’s Echo speaker to understand language and analysed satellite imagery of individual buildings and construction sites, to train risk assessment algorithms for insurance companies, Ms Basu said.

WeWork and the 2010s

Fruit Water and Financial Arbitrage

Ranjan here, talking about how WeWork represents this business cycle better than any other company.

Shortly after diving into startupland in early 2013, my cofounder and I decided we couldn't do the coffee shop thing anymore, just as the coworking concept started taking off. We went to a couple of different places, and all of them had these almost comical "interviews" where they wanted to make sure you were "good for the community". The nicest place, by far, was a place called WeWork at 175 Varick St and we moved into that location.

image via Fast Company

I've long prided myself on making pretty good bets on businesses, especially technology companies. I’ve rarely angel invested (public market tech is so much cleaner!) but I love debating the financial possibilities of early-stage tech startups. I got WeWork completely wrong. Sitting at one of their first locations, I never imagined it would turn into the global behemoth it has become.


We started out in a space called WeWorkLabs. As a perfect time capsule for the go-go Twenty-Teens, it was one of those ill-defined "incubator" spaces. Certainly not an equity-based accelerator, but there were "benefits" like VC's coming in for office hours, and law firms and banks pitching their new startup services. Having come from a trading floor, and then a newsroom, I’ve only worked in open-plan offices, so I liked the space.

That’s Ted Kramer of Six4Three fame. He was our community manager!

It was a good group of people. My cofounder and I were on the older side, and there were moments where I certainly felt like Dan Lyons, but people definitely socialized. In fact, socializing was core to the experience, and the first time I encountered Adam Neumann was when he came in to pitch us on (I think the 2nd) WeWork Summer Camp.

Regarding Adam Neumann, the guy had charisma. He told a small group of us that he was going to turn this simple summer weekend getaway into the next Woodstock. And like any great entrepreneur, he did manage to turn these insane dreams into some semblance of a reality.


One thing I'll never forget was the Fruit Water.

Adam would regularly walk around the floor with some older investor-types in suits. He’d show off the crowd of young people clanking away at keyboards as a revolution in the way people will work, and then guide the Suits to this tank of water that had fruit cut up into it every day. They would stand in a circle, drinking fruit water, as he regaled them with visions of a work culture revolution. This whole ‘elevating consciousness’ stuff didn’t come out of nowhere.

The fruit water thing evidently became a core part of the entire WeWork culture.

The earliest tweet I found in 2013:

In 2019, they have internal Slack channels dedicated to showcasing the fruit water (some impressive images in the thread):

When WeWork opened a much larger location at 222 Broadway, we moved there along and stayed almost 2 years. The frequency of old-guys-in-thick-pinstripe-suit visits dramatically intensified, and there was one time I remember, sitting on some weird ball-like seat, looking up and Eliot Spitzer just kind of staring at our row with a big smile.

The world of working was changing, and WeWork was where it was happening. People wanted to buy in.


Part of why we write The Margins is to force ourselves to put long-itching thoughts to paper. Looking back, I probably ascribe a bitterness from the failure of our startup to my time at WeWork. The weirdest part of the entire experience was that the locations were so nice, they provided you an unfounded sense of accomplishment and legitimacy. Your startup could be floundering, but when potential clients, investors, or even your parents, came to visit, everyone assumed "you must be doing something right" and you carried on. For this faux-fulfillment, the price of admission was relatively cheap (~$350 a desk at the time).

What I never understood at the time was, that was the product. That was the entire pitch. While we all snicker at the language in WeWork's S-1, they, in fact, delivered on filling a very human need.

You'd be in a large room with a number of meandering startups, and WeWork would throw a big party at HQ for major new expansion of their own. We'd all celebrate it as though it was our success. The Summer Camp turned into the massive event Neumann promised (captured in the thread below), and provided thousands of WeWork tenants an experience they couldn't find anywhere else.


When the story is written, the We Company will be THE company that captured everything about this decade's business cycle.

They were selling lifestyle and self-betterment as a product before the Equinoxes and Soulcycles started down that path. Before our gyms, and lunches, and clothes, and beds, and everything we bought became more about fulfilling a need for identity, rather than the product itself, WeWork was selling us desks by telling us to "Do What You Love". They extend the definition of tech company more aggressively than most.

WeWork also perfectly captures the zeitgeist for how they've managed to do this, almost inventing the art of millennial double-speak. They perfected the delivery of high-minded, burning man-esque self-actualization language while operating with a cold-blooded ruthlessness that would make Henry Ford blush.

So many of their questionable business practices echo the afflictions of the 2010s. There are the contractor, not employee, issues. There are the founder control corporate governance issues. There's the self-dealing. There are the questionable acquisitions. There are so many issues I hope you spend time devouring every WeWork S-1 analysis you can find.

But I want to stick to the core business model.


I mentioned that the price of admission for superficial legitimacy was very reasonable. I was always intrigued as to how they managed to deliver a very high-quality product at such a low cost, until I read this Nitasha Tiku 2015 piece in Buzzfeed. The article was a revelation. I know it’s bizarre to ascribe a strong emotional value to a 4600 word financial pitch deck breakdown, but you have to remember, in 2015, startup skepticism was a lonely endeavor. You were kind of an asshole if you questioned anything startup. Meanwhile, I was sitting at WeWork, dumbfounded about their skyrocketing valuation, with nary a receptive ear.

I know regular readers might be getting annoyed at me ascribing everything from the past decade as some example of financial arbitrage, but this is one of the best examples.

Instead of owning real estate, WeWork signed inordinately long-term leases with landlords. As part of those deals, they would receive huge concessions up front, like free rent for the first year, or the landlord investing into property upgrades. By drastically lowering their short-term expenses, it allowed them to significantly discount memberships to boost sales.

Matching long-term liabilities against short-term revenue generation is pretty much the definition of financial engineering. In a way, it’s what every pension fund does. The difference is, it’s their core business. WeWork’s core is purportedly selling desks (or elevating consciousness). Scott Galloway perfectly described this art of duration matching.

But the weird thing about the arbitrage is, usually these things end up incredibly profitable. That is not at all what happened here. First, from the 2015 Buzzfeed piece:

WeWork expected operating profit of $4.2 million from revenue of $74.6 million by the end of 2014. By 2018, the company predicted operating profit of $941.6 million on revenue of $2.86 billion:

With the passage of time, we have the privilege of seeing WeWork’s arbitrage only ended up in increasing losses:

We generated $1.54 billion in revenue in the first six months of 2019 and posted a net loss of $689.7 million

It's so perfect. Wrap a large-scale, real-estate arbitrage play up into an identity-driven "tech company". Convince the world that you are revolutionizing the way "we" work and live, while performing a routine of Simone Biles-level financial gymnastics. Cash in. Sell out. Bro down.


Perhaps, their greatest achievement to date has been managing to maintain their cool-kid vibes, while levering up the final laps in their race to an IPO with SoftBank money.

The entire $11.5 billion in funding has certainly seen its share of drama, but after the killing of Jamal Khashoggi, there was a brief minute where we all questioned the ethics of companies that take Vision Fund money due to its heavy Saudi connections. Yet, WeWork managed to triple down on Softbank money while continuing to sell self-improvement.

That collective cognitive dissonance towards capital is what captures this era better than anything else. We might cancel our Equinox memberships because of a Hamptons fundraiser, but it’s not out of bounds to sell hippie dreams while taking dictator cash. You can equal WeWork’s propensity for financial gymnastics with your own mental gymnastics, dreaming of a Free & Easy life where you Do What You Love, all the while propping up an illiberal regime. It doesn’t get more 2019 than that.

You could time-travel Travis Kalanick back to the 1920s and he'd still make sense. Ruthless business practices are time immemorial, but adding in a layer of Tony Robbins-esque self-betterment is something unique to our time.

Adam Neumann could only be of the 2010s.


This April 2019 interview with Masayoshi Son is something you should watch from start to finish. But there is one part, beginning at 21:30, I could never get out of my head.

When asked about WeWork just being a real estate, company Masa Son says the following, and mind you, he invested nearly $12 billion into this company, and this is the story he’s telling:

And-- with the power of AI-- can recommend, "Hey, by the way, you have-- if you're looking for design of the package, there's another member in the WeWork office next building. And you may want to have a meeting-- at the next beer party on Friday night." So that kind of recommendation can be done. Like-- Amazon is giving you recommendation, next product to do as shopping, with your shopping history-- and with your interest-- it gives the recommendation with the power of AI. So if the recommendation of the product can be done with the power of AI, the recommendation of meeting the other people within the-- WeWork membership can be done. So it will be much more productive, much more enjoyable. So even the beer party become more productive and fun.


To give some historical perspective, I went through my Instapaper archive to find some of the good stuff over the years:

Inside The Phenomenal Rise Of WeWork - 11/5/14

A very early, flattering Forbes piece

The Workers Behind WeWork - 7/2/15

The Awl (RIP) on the labor issues

Adam Neumann’s $16 Billion Neo-Utopian Play To Turn WeWork Into WeWorld - 3/14/16

Fast Company with a flattering profile that gave us this legendary image

Lord & Taylor, WeWork and the Death of Leisure - 10/27/17

The NYTimes on the Lord & Taylor building acquisition, along with a look at how working culture has genuinely changed

Sriracha Is for Closers - 1/16/18

A great Esquire piece profiling some absurd characters working out of WeWorks

WeWork Accounts for Consciousness - 4/27/18

Matt Levine doing what he does best - he also covers the now legendary Community-Adjusted EBITDA

WeWork owes $18 Billion in Leases? - 4/28/18

Someone on Medium digging into the WeWork financials

Crying in the WeWork Bathroom - 5/24/18

A dark, funny look at being new to NYC and working out of a WeWork

WeWork’s CEO Makes Millions as Landlord to WeWork - 1/16/19

The WSJ breaking a genuinely shocking corporate governance issue

WeWork’s $47 Billion Dream: The Lavishly Funded Startup That Could Disrupt Commercial Real Estate - 1/31/19

CB Insights doing what they do best

Surfing, Schools and Jets: WeWork’s Bets Follow CEO Adam Neumann’s Passions - 3/5/19

The WSJ on the acquisitions. The acquisitions are positively bonkers.

How did WeWork’s Adam Neumann turn office space with “community” into a $47 billion company? Not by sharing. - 6/10/19

NY Mag with a very long piece on their entire history

Everything is a tech company now.

Are you?

Can here. Let’s talk tech.

Blockchain on Ice

I am not sure where we are with The Blockchain on the hype cycle, but it’s fair to say the worst is over. It was good while it lasted, and I don’t mean just financially. Whenever there is money, there’s fraud and whenever there is some irrational exuberance, there’s someone to take advantage of that.

Thus, I followed the Long Island Iced Tea Blockchain drama with deep, sustained interest. And boy did it deliver!

Matt Levine has been on it since day one. At some level, there’s not much to the story other than “people are attracted to shiny things”; turns out you can simply suckle on that sweet cryptocurrency nectar by simple adding “Blockchain” to your name. People (or computers, who knows anymore) will think it’s going to make them money, and buy the stock based on the name.

Really, that’s it. I feel dumb typing these words, so I am sorry if you didn’t know about this and feel dumber reading them. But I have a point.

Look, there are run off the mill ICO scams, but they actually require work. You need to create a swanky website, hire someone off of Upwork to create a white paper full of indecipherable jargon, create an illusion of activity on various subreddits and Telegram channels. It’s probably less work than actually doing productive work that benefits you and the society for a similar gain, but still, it’s tedious.

But you can, you know, just pretend. And it works, I guess, until it doesn’t. You have to appreciate the brazenness, if nothing else. None of this is legal advice, obviously.

Laziness as a Service

This entire thing works because, fundamentally, people are lazy. There are only so many hours in the day and understanding stuff takes energy. A better way is to something you already know a lot about and bank on (leverage?) that knowledge. Associations are powerful, because they are cheaper than learning. You don’t need to tell me that your store will be filled with identical looking but oddly soothing, well-proportioned furniture; you can just call “Scandinavian Design” and I’ll probably pay more than I’d have had it been called “Furniture”.

You might think finance folks would be less prone to this, but apparently not. Even in an industry known with its obsession with reducing every complex phenomenon to its measurable bits, and comparing them to other phenomenon with similar bits, you can rely on people being lazy to make some money. There’s a fine line between lying to people and preying on their laziness, but that’s a philosophical question.

I think what this means to be a “tech company” often. Benedict Evans recently wrote about Netflix, and how it not really a tech company. Evans says Netflix is a media company that uses technology “as a crowbar” to enter. He writes that the main drivers of the business Netflix is in content. While the technical aspects are impressive, they are quickly getting commoditized, lowering Netflix’s competitive advantage.

I wholeheartedly agree.

In fact, I am somewhat relieved that relatively influential (if not a bit controversial) figures like Evans can comfortable call a company like Netflix “a media company that uses” versus a “tech company”. This seems like a new development. Netflix is located right in Silicon Valley in Los Gatos. It has tons of engineers. It’s the N of the FAANG.

This does not mean that the technologists over at the company are not doing innovative, technically challenging work. But it means whatever work they do, the company will live and die mainly by its ability to create as much original content a possible. The rest, as they as, are on the margins.

Tech of Tech

If you spend all your time in code, it can get easy to ignore the forest for the trees. Yet, today, many of the new companies operate mainly through a network of emails and changing data on some spreadsheets. Sometimes, a company’s needs are so unique that they hire a bunch of people to help them send less emails, and make that spreadsheet more usable. This takes a certain amount of technical talent, surely. If you need to do a lot of work, you might need to take apart some of those systems and rebuild them to scale, but even that is becoming less of a problem.

So, what is a tech company then? Is there a way to group tech companies into a group, so that, say, we can compare them? There are many ways to do.

Take public companies for example. There are companies that use various methodologies to divvy up those companies into neat lists, called indexes. There’s a ton of financial literature why indexes are useful. We wrote about how they are both useful to invest in, but also scarily powerful.

Indexes, however, are not really useful many reasons. First of all, they generally exist only for public companies. This makes them pointless when looking at startups. There are some exceptions, as more companies spend their private time rubbing elbows with public company people, but still. They can be a good way to see if the markets think a company does business in the “technology” business, but they don’t add much to analysis.

Let’s Check the Books

If you want to go deeper, you can follow the same playbook analysts use. How a company spends its dollars can give you some idea. For example, you could look at the R&D spend as a percentage of its sales, and the more a company spends on it, the more tech-y it’d be. But even that would a bit misleading. Capital expenditures which are typical of really large tech companies are hard to tease out from financial statements. Similarly, acquisitions muddy the water, as they can come in various forms, like buying technology or simply marketshare. And maybe more fundamentally, your dollar gets a lot more R&D mileage in some companies then others.

Or you could go the other way and see how a company earns its dollars as opposed to spending it. Companies that sell software online, for example, would be more similar to other companies selling software online than those that sell toothbrushes online. They would have similar cost structures, similar earnings per share, and such. Maybe, and I can’t stress this enough, comparable margins.

You could call the software folks “tech”, and the rest “online retail”. This sounds more accurate to me them lumping the toothbrush people with the tech people.

Show me your Enemy

I generally view the world of business through lens of competition, so I am partial to this approach. Your identity as a company is defined by who you compete against. Of course, this is a bit of a circular approach. Who gets to be the initial tech company to be compared to? I don’t have a good answer here.

And, selling goods and services is not the only place where companies compete. Talent, for example, is an increasingly scarce resource in Silicon Valley and you see companies compete for it often. The recent resurgence of distributed work evangelism has more to do with dearth of people to hire in a tiny earthquake prone region, then, say, an enlightened view of what work should look like.

There’s probably a simpler answer here that “whoever has the last word runs the company”. This rings true to my experience. You could, for example, be the highest paid person in the room but that doesn’t mean that you have the last say. If you are, say, in the business of providing transportation as reliable as running water for everyone, and you are running out of drivers, it’s more likely that you are an “operations” company than a tech one.

Working in technology is fun. There are few purer joys than being able to type something on a computer, and see its effects in real life. Sometimes, that comes in the form of moving people around, and sometimes helping a business run more efficiently. However, it is misleading to conflate the how a business runs to how it makes money. People, with both malicious and benign intent, will always go extra lengths to present themselves in the best light. Where that care for style and flourish crosses the line into maliciousness is in the eye of the beholder. Thoughtfulness is the best I can hope for. Maybe we’ll get there one day.

Congrats on the IPO, WeWork.

What I’m Reading

This Land Is the Only Land There Is: Climate change is real, and it coming in fast. There are no two ways about it and we are nowhere near ready. Robinson Meyer at The Atlantic goes over UN’s latest report on climate change and wonders if we literally have the resources to fight it. The idea that we need to not just change our habits, but actually transform the earth to undo the damage we inflicted is fascinating intellectually, and dreadful realistically.

But that’s not my point. To address climate change, we will need to reduce our use of fossil fuels, and replace energy generated in the past (by long-dead plants) with energy generated today (by wind turbines, solar panels, and uranium atoms). But, this report adds: We must do all that in a house of only 52 million rooms, the majority of which already serve as someone’s bedroom, bathroom, or kitchen. And those 52 million rooms must stage not only the unending drama of the human family, but also—as far as we know—every other living thing in the universe.

The Lonely Work of Moderating Hacker News: I’ve long stopped reading the comments but checking Hacker News daily has been part of my routine since its inception. One of my favorite writers in tech, Anna Wiener (whose book I’m really excited about), talks to the two moderators of that orange website that sets the zeitgeist in tech. She uncovers the human side of moderation while not mincing her words. This paragraph is stuck in my head forever:

The site’s now characteristic tone of performative erudition—hyperrational, dispassionate, contrarian, authoritative—often masks a deeper recklessness. Ill-advised citations proliferate; thought experiments abound; humane arguments are dismissed as emotional or irrational. Logic, applied narrowly, is used to justify broad moral positions. The most admired arguments are made with data, but the origins, veracity, and malleability of those data tend to be ancillary concerns. The message-board intellectualism that might once have impressed V.C. observers like Graham has developed into an intellectual style all its own. Hacker News readers who visit the site to learn how engineers and entrepreneurs talk, and what they talk about, can find themselves immersed in conversations that resemble the output of duelling Markov bots trained on libertarian economics blogs, “The Tim Ferriss Show,” and the work of Yuval Noah Harari.

3 Thoughts on Cars

Autonomous rides. Car dealerships. Uber losses.

Ranjan here, and this week I'm going to talk about cars.

Let's start with the fact that I know almost nothing about cars. The only car I ever bought was during college in 2001. It was a Maroon 1992 Corolla and I think it cost $1,200. One of my favorite parts living in NYC is not having to own or think about cars, save for those obscenely expensive occasional rentals.

However, a few recent developments have me thinking about cars a lot. This, being The Margins, made me want to overanalyze them in the contexts of technology and business. I also realized that each development represents a very different outlook on the impact of technology on society.


I rode in an autonomous vehicle! I've been working at a client's office at the Brooklyn Navy Yard, though it's a bit misleading to call it an office, as it's a really cool warehouse-y, industrial, tech-y space called the RLab. The Navy Yard just happens to be the first place in NYC where a startup called Optimus Ride just launched six autonomous shuttles.

Riding in the autonomous shuttle was incredible.

photo via OptimusRide

I know I might come off as a bit cynical when it comes to technology, but let me explain. For all of my life, I unquestioningly LOVED all things tech and considered every new product or feature as unadulterated progress. I’ve now, perhaps, swung too far on the cynical pendulum because I sometimes feel like a jilted lover, who loved and lost, rather than never loved at all. But riding in this goofy little shuttle felt like young love. Or maybe the first iPhone. Clunky and awkward, fuzzy and warm, innocent and full of possibility.

I have never experienced the self-driving capabilities of a Tesla. Friends in San Francisco, who all work at big tech firms, all, naturally, have Teslas. They love to talk about how far along the autonomous driving features are, but I've never seen it, so watching a steering wheel turn with no human hands was insane to watch.

More importantly, Optimus Ride did this right. They understood the current moment and adapted accordingly. There are two people up front the entire time. One has a big laptop open that shows you a constant stream of everything the car's LIDAR is "seeing". The other is behind the wheel as a safety precaution. They talk to you about safety and walk you through what's happening, like tour guides. Some people used the multiple “drivers” as an occasion to snark that we’re still far away from autonomous, but that is the point. We’re still on the way. It’s worth doing this slowly, and not promising fully driverless cars as soon as this year.

The company also chose the perfect place to try this; the Navy Yard is huge space, but it's all enclosed with little thru or pedestrian traffic. It's a very controlled environment, with just the right amount of bikes crossing your path or cars passing by where the shuttle is lightly challenged.

And it was just plain, nerdy fun. The two people up front were genuinely giddy to talk about the cars, and the "cars" looked like gutted, futuristic PT Cruisers. For context, the walk from the ferry stop to the main entrance of the Brooklyn Navy Yard, the route these vehicles travel, is 0.8 miles. yet, most people were just walking by the cars ignoring this was a transport option. One person yelled "just get on a bus!"

This all made it feel like good old-fashioned early adopter fun! Cool technology, trying to solve a defined problem. People ridiculing and/or ignoring it. The founder is an MIT PhD and longtime MIT Media Lab researcher, and the entire experience seemed to reflect this.


I'll admit it. I've been looking at buying a car. I feel ashamed to write this, as I strongly believe in the importance of both public transit (shared spaces!) and making cities better for bicycles. But now, with two kids, I've been looking at something reasonable to get out of the city more, and have been shopping for a Honda Fit. For those unfamiliar, they kind of feel like the modern, urban cousin of a 1990s minivan.

(Side note: The ultimate endpoint to a formerly free-wheeling bachelor life is when you google “honda fit trunk space uppababy vista double stroller”.)

I honestly thought tech had "solved" car-buying. As I avoided the process for nearly two decades, I assumed there were heavily disruptive forces that would allow me to simply define my requirements, be shown a few prices, tap a button on my phone and a shiny, new car would show up with all insurance and ownership requirements fulfilled.

It's not that, at all. There is certainly more information with which to arm oneself. But, almost every sleek aggregator site ends up leading you to a local franchise where your interactions are, well, what I always imagined car-buying to be. Given I work a lot with email, I have very strong thoughts on emails like this:

The most surprising part of this was how aggressively every dealership pushed for getting your email and phone number. To simply view prices, most of them force you to enter both, but it makes sense. The cost of the information capture is far lower than the high-value sale. You do whatever you can to get that phone number, and then spam the buyer incessantly.

The process made me think about my co-host Can's writing on Data-as-a-Liability. Imagine how this equation will change if (hopefully when) the dealer assumes some cost in accumulating and storing tens of thousands of email addresses and phone numbers. How will that change site UX and overall buying process?

This entire experience has been a reminder that in many industries, for all the talk of technological disruption, many things have not changed.

(Note: Carvana was the closest thing to delivering the digital-first experience I wanted, but only deals in used cars. Given I'm looking for a fairly inexpensive car, I was looking for something new.)


Last winter, I was debating the impact of Uber and Lyft on public transit infrastructure with a self-declared neoliberal friend. The New York City subway has certainly been seeing its increasing share of issues (this 2017 NYT piece is the best explanation I’ve seen on why), and my friend’s argument was that you can only see "profitable" innovation, or operational and cost structures that aren't wasteful, from companies in the private sector.

After the conversation, I sent her Michael Lewis's The Fifth Risk.

Yesterday, we learned in Uber’s earnings that the company again lost over $1 billion in a quarter (the stock-based compensation charge, something Can has written about, is what pushed it to a ludicrous sounding $5 billion). They’ve lost over $16 billion in their lifetime. And to clarify, that ~$16 billion is not what they’ve spent. It’s what they’ve lost!

Is Uber really a Koch Brothers-ian wet dream, or is it just a public infrastructure cost structure with a private market compensation structure? The common Heritage Foundation / right-wing perspective is that public infrastructure is wasteful and a vibrant private sector is where you find innovative and profitable organizations. But is Uber destined to eternally lose money on a per-unit basis?

Their go-to market strategy has certainly worked. Thanks to cheap capital, they were able to build consumer habit off of artificially deflated prices. If my Uberpool costs less than a subway ride, there is no question I’ll take it. But when they raise prices to break-even levels, do we all go back to taking the subway (this is admittedly a very NYC-centric view of the issue)?

The only paths to profitability for Uber have always felt like:

  • Uber eliminates the cost of drivers with self-driving cars

  • Uber builds a strong enough monopoly where they can simply raise prices and users have no choice but to stay with them.

Neither of these sound like a case study in private market efficiencies, but instead, forms of financial arbitrage (#EverythingIsArbitrage). Even more worrisome, on this road to a moonshot break-even, could they have already obliterated public transit systems?

This felt especially relevant after reading a NY Times piece from this week which informed me Uber will begin selling public transit tickets within its app in some cities. There are already a number of cities where the local government heavily subsidizes Uber rides in low-transit option areas. This seems laudable - but isn’t a per-unit, money-losing service that is heavily subsidized by government, in this case both local and foreign (via Saudi PIF/Vision Fund) just…..public transit.

The question of whether Uber can ever be profitable is important if they are to become an increasingly integrated part of public infrastructure. We need to better frame debates around public vs. private market innovation to account for the possibility that some private companies were never meant to be private.


These are admittedly three disparate ramblings, and this has probably been the most I’ve thought about cars in my lifetime. My love/fear relationship with technology remains something I continue to feel the need to work through via writing newsletters. In the meantime, I’m going to go test drive a positively gangster Lunar Silver Honda Fit.

A Video

This is one of the darkest and funniest short clips I’ve ever seen. If Black Mirror and Saturday Night Live had a baby, this would be it.

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