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The invisible hand of business models (E)

The invisible hand of business models (E)

Released Wednesday, 4th December 2024
Good episode? Give it some love!
The invisible hand of business models (E)

The invisible hand of business models (E)

The invisible hand of business models (E)

The invisible hand of business models (E)

Wednesday, 4th December 2024
Good episode? Give it some love!
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Episode Transcript

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0:00

30 years ago, if you were

0:02

growing up in Roundup, Montana. you

0:05

probably worked in a coal

0:07

mine. And if you were

0:09

working in a coal mine, you

0:11

knew exactly what your job was.

0:14

to dig coal out of the ground. Bring

0:17

it up to the surface so that

0:19

the boss could sell it to someone. Hey,

0:22

this is Emily in the Bronx,

0:24

and you're listening to a special episode

0:27

of A Kimbo. Today,

0:30

if you work in Roundup, Montana, you are

0:32

almost certainly not mining coal. Today, if

0:34

you work in Roundup Montana,

0:36

you are almost certainly not

0:38

mining coal, what you might

0:40

very well be doing. is

0:43

buying huge cases,

0:45

wholesale lots of and

0:47

ends from Target and

0:50

other big retailers. And then

0:52

taking those boxes apart. putting

0:55

them into smaller boxes and waiting

0:57

for a UPS truck to come pick

0:59

them up. up because they were sold. on

1:01

Amazon. the

1:03

business model has

1:05

changed. And understanding where you

1:08

fit in the system. and

1:10

what model you are working under is

1:12

essential if you're gonna figure out if

1:15

you're doing a good job. It's

1:17

important to understand. before

1:20

you enter the industry. It's

1:22

a really good way to figure out if

1:24

you want to be a customer. or

1:27

an investor. business

1:29

models, and how they fit into the

1:31

systems of our lives. determine

1:35

what's gonna get done. and why.

1:38

original business models were super simple.

1:41

Either made a thing and sold

1:43

it. it, or you bought a

1:45

thing and sold it. it, Or maybe

1:47

you traded something. Every

1:50

once in a a while, there might

1:52

be a business model, like I run

1:54

the marketplace so that lots of vendors

1:56

can come together. So if that's the

1:58

business model, if you're running smorgas - which is

2:00

a giant food fair

2:02

in Brooklyn, New York. you

2:05

know how to do a better job.

2:07

Do a better job by getting

2:09

better vendors. Better vendors will

2:11

get you more customers. More customers

2:13

will help the vendors justify

2:15

paying more to be at your

2:18

food fair. You the

2:20

business model, you can do

2:22

the business model better. But

2:25

business models are getting more complicated,

2:27

not just for the people who

2:29

run them. but for the

2:31

people that they serve. Consider

2:34

Depot. Home Depot

2:36

when it began just 50 years

2:38

ago. there was no no

2:41

hardware shortage in the United

2:43

States. If you needed to buy

2:45

some hardware to fix up

2:47

your house, you could do it.

2:50

Home showed up with a different

2:52

model. and their model had a a

2:54

bunch of elements to it. One element

2:56

is they're gonna be out of town, not in the

2:58

center of town. Another part,

3:00

they're going to have a very, very

3:03

big store, which means they

3:05

can have more selection. They're

3:07

going to count on having lots

3:09

and lots of stores which is

3:11

going to give them buying

3:13

power. which means they can't

3:15

buy goods that are sold by

3:17

small companies because they need a ton

3:20

of whatever they're going to buy. Literally

3:22

a ton. There's more

3:25

than Home ,000 Home Depot

3:27

stores now, more than

3:29

400 ,000 employees. But

3:31

this systemic change to the

3:33

hardware business forced thousands

3:36

of hardware stores out of business

3:39

because what Depot

3:41

offered the consumer the

3:43

contractor, the person fixing up their

3:45

house. was simple. If

3:48

you are willing to get in your

3:50

car and drive 10 extra minutes, you

3:52

can have more selection at a much

3:54

cheaper price. There isn't

3:56

anyone who's know your name. No one's gonna

3:58

help you very much. when you go there. but

4:01

they were making a bet. that at

4:03

scale, that wasn't going to matter. which

4:06

means if you work

4:08

at Home Depot in the buying department, you

4:11

understand you're not not gonna win

4:13

any prizes for buying something

4:15

obscure in small quantities, which

4:18

means that if you're the manager of

4:20

a local Home Depot, your goal

4:22

is to avoid controversy, not

4:25

to deliver extraordinary service, because

4:27

that's not the business that

4:29

you're in. King was

4:31

one of the pioneers of the

4:34

razor business model, and the method

4:36

there is pretty easy to

4:38

remember. you can get

4:40

a Gillette razor for not

4:42

a lot of money. but the

4:44

blades, the you're to have to buy over

4:46

and over again. those

4:49

cost extra. so

4:51

they can afford to get the

4:53

consumer in early with a

4:55

big promotion. and then

4:58

they get locked in because you don't

5:00

want to switch the platform you're

5:02

using. and you stick with it. So

5:05

if you're building a company that is

5:07

based on this model. a

5:09

lot of your decisions are already

5:11

made for you. For McDonald's,

5:13

the important original customers

5:15

weren't people who bought

5:17

hamburgers. The important

5:19

original customers were people

5:22

who bought franchises that

5:24

McDonald's had a business

5:26

model like Carvel that was based

5:28

on on acquiring and

5:30

satisfying people who were to

5:32

run each of the

5:34

individually owned and operated stores.

5:38

And so, again, the system

5:40

determines where the good

5:42

decisions lie. Ironically,

5:44

the Mac, one of their biggest home

5:46

runs, was something that doesn't match

5:48

the system. It was invented by a

5:51

franchise, not by the home office

5:53

in Illinois. But haven't

5:55

really learned from the Big

5:57

lesson, instead that central

5:59

facility. Illinois is constantly

6:02

perfecting systemic changes. that

6:04

can make each McDonald's

6:07

franchise owner. a little

6:09

bit. more successful. The

6:13

internet opens the door for

6:15

all kinds of innovative business models,

6:17

most of which are copied

6:19

from other people who have innovated

6:21

their business models on the internet.

6:23

You couldn't possibly have Uber

6:26

or Lyft if you didn't have

6:28

that supercomputer in your pocket

6:30

that let you sign up with

6:32

a credit card and that gave

6:34

the institution your location whenever

6:37

you needed a car to you up.

6:39

Uber Lyft don't need to own

6:41

cars. what they need to

6:44

own is information, what they need

6:46

to have is trust, and in their

6:48

race to get big. sometimes

6:50

they what their real business

6:52

was. But now it's interesting

6:54

to watch them get back to the

6:56

basic principles that are at the core

6:58

of their business model. And

7:01

what about Trader Joe's? the

7:03

famous Trader Joe's supermarket. What

7:05

is their business model? Because

7:07

no Trader Joe's, not one. one, has

7:10

ever opened in a location that

7:12

had no access to food. And

7:15

people who shop at a Joe's are

7:17

not there to buy something they

7:19

can get from anyone else. In

7:22

In fact, a key part of their

7:24

business model. is to sell things

7:26

you can't get from other people. But

7:28

another part of it is that

7:31

they don't sell brands. Instead, They

7:33

work with many food providers

7:36

who put Trader Joe's name

7:38

on the thing they are

7:40

making. So are

7:42

messages. is, You don't need

7:44

more food, but you might want. food

7:47

entertainment. You might

7:49

want a low -cost item to

7:51

fill your pantry that puts

7:53

a smile on your face, and

7:55

you might want to buy

7:57

it in a place that isn't

7:59

it. like all the other

8:01

places. The more they do

8:04

that. the better their

8:06

business model works. Where it gets

8:08

interesting is when we watch

8:10

conflicts between two business models. Consider

8:12

the business model of Warner Brothers

8:14

any other movie studio. and

8:17

the business model of

8:19

Netflix. What business is

8:21

Netflix in? Netflix

8:23

is now in the business. of

8:25

getting people to not cancel. Netflix

8:28

account. account. That yes, there's

8:30

room to grow. They need to grow. Wall Street

8:32

wants them to grow. but

8:35

they're not going to get any more

8:37

of the mainstream folks that were easy to

8:39

sign up. to pay

8:41

for over the internet TV. And

8:44

so has to race to

8:47

produce enough. bingeable media

8:50

that people who are paying for Netflix

8:52

can't imagine quitting Netflix.

8:56

and then the second thing they need to do. is

8:58

go to the edges to

9:00

the fringes to find remarkable

9:02

content for Netflix that

9:04

get the people who haven't yet. signed

9:07

for Netflix, but who can afford it? to

9:09

take a deep breath and sign up for it. it.

9:12

This is almost exactly the opposite of

9:14

what the movie business has been

9:16

thinking about doing for a hundred years.

9:19

What makes you a hero in the movie business? is

9:22

when you make a blockbuster movie,

9:24

a movie for everyone. the

9:26

good movie of the summer. Jaws.

9:33

When you can make JAWS,

9:35

you can build a a career

9:37

around that. Right down the

9:39

center, a home run. the

9:41

model. The model that has

9:44

no scarcity. The model of Netflix. doesn't

9:46

know what to do with that. That's

9:48

not their job. And so

9:50

who are working in one part of the industry

9:52

look at the other part of the industry

9:54

and say, That makes no sense. the

9:57

people who are working at the checkout. at

10:00

Macy's, Look at the

10:02

people who are working in Roundup, Montana, and

10:05

they can't figure out why on earth someone

10:07

would stand in a building opening

10:09

big boxes of stuff and putting them

10:11

into small boxes. This

10:14

approach to understanding the system

10:16

and the business model within it.

10:19

doesn't just get reserved for entrepreneurs.

10:21

Consider what it means to be

10:23

working at a diner on

10:26

a busy highway. you're

10:28

never going to see these customers

10:30

again. The only reason they

10:32

have a server is because it

10:34

is easier to do that than to

10:37

have a cafeteria, a buffet. And

10:39

your job with little must fuss as possible

10:41

is to bring the food from the

10:43

kitchen to the table. as

10:46

quickly as you can and then get

10:48

on to the next customer. Only Only what's

10:50

on the menu. You can have a number two, a

10:52

a plane on that comes with cottage fries and

10:54

rolls. Your job is not to

10:56

have an argument with people. Your job is

10:58

not even to be particularly charming. Your

11:00

job is volume because the

11:02

person who is at the restaurant came

11:04

to this restaurant because they want to come.

11:07

and then they want to leave. On

11:09

the other hand, if you work

11:11

for Danny Meyer a Union Square hospitality

11:13

group restaurant where it might cost

11:16

$60 or $80 or $80 a person, including

11:18

tip, to eat there. your

11:20

job. is not to

11:22

bring the food from the kitchen to the table

11:25

as quickly as possible. if

11:27

they want that, They can stop

11:29

at any of the diners between their home

11:31

and the restaurant where you are working. No,

11:35

your job. is to create

11:37

an experience that they decided. was

11:39

worth paying for. And

11:42

so we're now seeing

11:44

the rise of ghost restaurants.

11:46

Ghost restaurants are restaurants

11:48

that fit a different business

11:50

model. the business model

11:52

of seamless That if you're

11:54

ordering for delivery, It

11:56

doesn't matter. if if the

11:59

restaurant has a story. storefront, the

12:01

storefront of a restaurant is one of its

12:03

biggest expenses. Why not take

12:05

five or ten different restaurants and put

12:07

them all under one roof on the

12:09

third floor of a cheap office building

12:11

on the outskirts of town? You

12:14

can have Thai food, Egyptian

12:16

food, Ethiopian food, French food

12:18

and Japanese food all made

12:20

from the same facility by

12:22

the same team of cooks.

12:25

Because Because business model of Seamless is,

12:27

I see it on my screen,

12:29

I order it. Why

12:31

should I be paying for all

12:33

of that other stuff? And

12:36

so we're gonna see the restaurant

12:38

industry change again and people

12:40

who work in it are gonna be

12:42

victims of that change unless they

12:44

see it coming and figure

12:47

out how to fit

12:49

into that model. Here's a

12:51

great quote from this

12:53

week's Fearless Flyer from Joe's about chocolate, lava,

12:58

There are three words you have

13:00

never heard in a row

13:02

before, chocolate, gnocchi. Some people look

13:04

at foods available to them and say,

13:06

why? We imagine foods no

13:08

one has thought of before and

13:10

say, why not? I'll

13:12

read ahead here a little bit. Spurred

13:15

into action by a

13:17

sweet chocolate gnocchi enjoyed in

13:19

a famed London shop, our

13:21

product innovator worked with an

13:24

Italian supplier to produce a

13:26

one of a kind creation

13:28

that captivates with chocolate complexity. So

13:31

apparently, this is

13:33

macaroni filled with

13:36

chocolate. I'll see if

13:38

I can find some and

13:40

report back to you. It's perfect

13:42

for Trader Joe's. It makes

13:44

no sense to put this in

13:46

the freezer at the local Safeway

13:48

because they have different models, different

13:51

ways of fitting into the systems of

13:53

our lives. And as these

13:55

business models proliferate, open

13:57

source closed source. source software,

14:00

for example, we will

14:02

continue to see different

14:04

behaviors. People think

14:06

that Twitter and Facebook are fun

14:08

playgrounds where they are the

14:11

customer, but you're not the customer.

14:13

That's not what their business

14:15

model is about. You're the

14:17

product. You're the one they

14:19

are selling to the advertisers

14:21

that pay the bills. What

14:24

each of us gets to do

14:26

is to follow the money or to

14:28

follow the influence or to follow

14:30

what the boss is keeping score of.

14:32

Because sooner or later, every

14:34

institution, nonprofit or

14:36

not, has a business model,

14:39

a model for what they're

14:41

here to do, the job that

14:43

they are measuring. Some

14:45

people in Roundup, Montana,

14:47

running profitable businesses that

14:50

fit into Amazon's business

14:52

model. And some of those

14:54

people are waiting for the coal

14:56

mine to come back, which isn't going

14:58

to happen anytime soon. Thanks

15:01

for listening. We'll see you

15:03

next time. Hey Seth, it's Maria.

15:05

Hey Seth, my name is Kyle.

15:07

Greetings Seth. This is Steven out in

15:09

Madison, Wisconsin. Hi Seth. Alicia from

15:11

Charleston here. Hi Seth. This is Anupam.

15:13

Hi, this is Katelyn. Hi Seth.

15:15

Warm greetings from Kurosawa. Hey Seth. My

15:17

name is Nick Ryan from Pittsburgh,

15:19

Pennsylvania. Hey Seth. This is Rex. Hey

15:21

Seth. Hi, this is Vasily from

15:23

Greece. Hi, this is Roberta Perry. My question

15:25

is... And that

15:27

completes my question. Thank

15:30

you as always for listening.

15:32

I really appreciate it. If

15:34

you've got a question or

15:36

want to see the show

15:38

notes, visit akimbo.link. That's A -K -I -M

15:40

-B -O -D -L -I -N -K and

15:42

click the appropriate button. Hi,

15:45

Seth. My name is Nikki, calling

15:47

from Hollywood, California. I've spent the

15:49

last few months binge listening

15:51

to every one of your podcast

15:53

episodes and each time I become

15:55

even more of a fan. So

15:57

first, I want to say thank

16:00

you. for taking time to

16:02

create such interesting and thought

16:04

-provoking content, and for encouraging

16:06

us to be purposeful about

16:08

the changes we are creating

16:10

in our culture. You've

16:12

spoken about the need to

16:14

create your own story when the

16:16

story you have about yourself

16:18

doesn't serve you well. My

16:21

My personal story is filled

16:23

with varying degrees of

16:25

mental and physical abuse that's

16:28

left me with an overwhelming sense

16:30

of doubt. and

16:32

quite hopelessness. So

16:35

when I to do the work. that

16:39

is necessary of any creative

16:41

to put myself out there. I

16:46

feel defeated before I even

16:48

start. I'm

16:51

wondering if you could give the first

16:53

two steps that you would take. to

16:56

overcoming that so

16:59

that I can begin to to

17:01

create my own story and

17:03

then go on. to to do

17:05

the work that I know I need to do

17:07

as a a creative. Thank you so

17:09

much Seth. I really appreciate you. Thank

17:11

you for this, Nikki. So many

17:13

people wrestle with issues like

17:16

this. Some people wrestle

17:18

because they've been the victims of

17:20

verbal or physical abuse, some

17:22

people because of the situation of

17:24

their birth, or because of

17:26

a series of unlucky breaks, because

17:28

of economic hardship, the list

17:30

is really long. The

17:32

story we tell ourselves. could

17:34

very well. be centered on

17:36

the things that have happened in our past.

17:40

that we cannot change. but

17:42

we cannot change them. what

17:44

we can change if we choose. is

17:46

the story we tell ourselves. So

17:49

asked me for two steps. Here

17:51

are the two steps that I can propose. The

17:53

first step is. begin by

17:55

yourself. a story

17:58

that starts in a different order. order. The

18:00

things that happened in our past happened,

18:02

and they are part of who

18:04

we are. but we don't have to

18:06

lead with them. when we

18:09

remind ourselves of, here we go

18:11

again, when we remind ourselves of

18:13

what we're not good at or

18:15

what we're trying to overcome. they

18:18

get reinforced as parts of our

18:20

story, our self -narrative. Begin

18:22

with, I I am smart

18:24

and eloquent and healthy. Begin

18:26

with, I have contributed in this

18:29

way and this way and this way.

18:31

Begin with, I care enough. to

18:33

try make things better because those

18:35

things are also true. And

18:38

if we start with those, they're more

18:40

likely to be brought to the fore. which

18:43

leads to the second answer. Start

18:46

a a podcast. Do it

18:48

under another name. Do it anonymously.

18:51

Start a a Blog Blog day. Do

18:53

it under another name. Do

18:55

it anonymously. simply Simply it.

18:58

Every day your podcast. week

19:00

publishing your podcast every day

19:02

publishing your blog on and on

19:04

and on and maybe two people

19:07

four people will encounter it. it.

19:09

do not read the reviews in any

19:11

way. It's anonymous, it

19:14

doesn't matter. matter. it. Because

19:17

if you do do that, now

19:19

get to begin your story with this. I'm

19:21

a podcaster. I'm a writer.

19:24

I'm a blogger. I'm a painter.

19:27

I'm an actor. Simply

19:29

begin. And if you

19:31

begin and persist and tell yourself

19:34

that story, it is possible, not

19:36

guaranteed but possible. that

19:38

one day. you'll make

19:40

it not anonymous. that one

19:42

day someone will seek you out

19:44

and even pay you for your work.

19:46

Or not pay you, but thank

19:48

you, thank you. for contributing,

19:50

for doing something generous, for closing

19:52

a loop for them, for

19:54

making a connection happen. the

19:57

best way to tell our story.

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