Understanding the Millennial Mindset

As I read this Fortune piece that outlines how and why millennials are investing with robo financial advisors (eg Wealthfront, Betterment) in place of traditional financial advisors (eg Schwab, Fidelity), I couldn’t help but think about the broader divide between the mindset of millennials and prior generations.

The Internet has completely changed everything.

I was born in 1990. I began using Google when I was 9. At the age of 9, I learned that I can access any piece of information for free, instantly. I remember trying to access Encyclopedia Brittanica (Microsoft’s online encyclopedia in the days before Wikipedia), and I was confused why they charged so much money — hundreds of dollars — for what I thought was a free commodity: information. I asked my Dad, someone who built his career on the Microsoft stack (Microsoft made their money charging for software; Google made their money giving software away for free), why the information was so expensive. He told me that it was expensive to pay people to curate the information, and that the only way Microsoft could justify Encyclopedia Britannica’s existence was to charge for access to that information. I didn’t like his answer because I loved the ease and simplicity of Google search. But he was right: humans are expensive.

Then Wikipedia emerged in 2001 and systematically dismantled Encyclopedia Britannica and all of the other online encyclopedias. Since then, Internet economics have come to dictate that all information should be free. I am no longer the in exception in thinking that information should be free and freely available to everyone. The vast majority of information is already freely available to the public, and the public has come to expect that information should be free. For every company selling proprietary information, there are a dozen tech startups trying to dismantle legacy information arbitrage businesses.

This is the difference between the millennial mindset. When my father was growing up, he had to turn to a financial advisor to manage his personal capital. He had to go to a doctor’s office and wait in line to seek medical help. He had to call a travel agent to not only book plane tickets, but to even find out when flights were departing. And he not only had to interact with others to get this information, he had to pay for information (the cost of information dispersion was built into cost of the service). The people whom he spoke to had to draw salaries. Millions of businesses were built, some large, some small, that just sold access to information. These were information arbitrage businesses. Internet economics destroy information arbitrage opportunities.

I grew up assuming that I could access everything for free. When Encylopedia Britannica tried to charge me to learn about nature, I was confused. This is the root of the millennial mindset: that I can learn anything about anything on my own and be reasonably self-sufficient. Most millennials know that they aren’t physicians and that they aren’t sophisticated money managers, but they also know intuitively and intrinsically that these services shouldn’t be as expensive as they were because at their core, these are just information arbitrage services. Paying for information doesn’t make sense to millennials.

The Internet is the most democratizing technology ever invented, and my generation has absorbed this in a way that most others in prior generations have not. This is the millennial mindset.

PS, the Internet is the most capitalistic invention since the invention of capitalism itself. One of the core tenets of capitalism is that consumers have complete information of what they are buying — the quality of the product, the price, prices for competitive services and items, etc. The Internet empowers consumers by reducing the cost of information to $0. Capitalism fuels the millennial mindset, and the millennial mindset fuels capitalism. It’s a beautiful, virtuous cycle.

PPS, there are still many legacy businesses predicated on information arbitrage. They are most heavily concentrated around the government: tax advisors, FDA consultants, etc. I suspect we’ll see these services democratize over the next 30 years, but it will be a slow, long haul.

Should Your Startup Go Full Stack?

I’ve written about the problems associated with selling into value chains where there are disparate P&Ls. In this post, I’ll dive into the solution to this problem: going full stack. I’ll also cover when going full stack makes sense.

Chris Dixon of a16z has noted the rise of a number of high-profile, full stack startups across many industry verticals. What is a full stack startup? Full stack startups are those that, rather than selling a novel piece of technology to incumbents, use the technology they’ve built to serve the incumbent’s customers directly, bypassing the incumbent in the process. There are many of examples of modern full stack startups and their respective antitheses. A few examples:

Uber vs Hailo - Everyone knows that Uber bypassed taxis and instead when straight to the end consumer. On the other hand, Hailo responded to Uber by selling an Uber-like platform to local taxi companies. Hailo has struggled while Uber has run away with the market.

Buzzfeed vs ThoughtLeadr - BuzzFeed is changing the media business because their entire strategy is based on sourcing and producing content that’s designed to be easily consumed through the best discovery channels: social media. Everything they do stems from a deep understanding of how users share content. As a result of that, they have devised an incredible formula that seamlessly intertwines native advertising with socially shared digital content. ThoughtLeadr and many companies like it are trying to empower media organizations to rethink content strategy and distribution around native advertising and social sharing. BuzzFeed does the tech and content production in house. To be clear, I am close with the team at ThoughtLeadr, and I actually love what they’re doing. BuzzFeed can’t be the only media property on the planet. The world needs companies that can help old-school media properties thrive in the digital age. ThoughtLeadr is doing just that.

Oscar vs traditional healthcare insurers - Oscar recognized that health insurance should be completely rethought around smartphones. Smartphones enable new models where insurers consume vastly more consumer data (think movement, etc), and present a potent communication medium. Rather than trying to help traditional health insurers transform their entire businesses - customer acquisition, service, preventative care, etc - Oscar decided to build a brand new health insurance company that didn’t have any legacy baggage.

HealthSpot vs Teladoc - Teladoc owns and operates its own technology to enable virtual physician consults, whereas HealthSpot built/assembled technology and sold it to provider organizations. Healthspot recently ceased operations, while Teladoc recently IPO’d and is growing hand-over-fist as healthcare continues to consumerize.

One Medical Group (OMG) and Kaiser Permanente (KP) vs traditional healthcare providers - KP and OMG are two prominent examples of “full stack” healthcare providers. KP is enormous and has been around for a while and operates as an health plan and fully-featured provider organization. OMG is the leading pioneer of the Direct Primary Care model, which borrows many health-plan like features and functions. These organizations both invest heavily in their own technology development, and use that to offer differentiated healthcare services to their customers. KP and OMG stand in stark contrast to more traditional healthcare providers, who simply make money for doing stuff to patients.

I don’t mean for these examples to paint the picture that being full stack is always the right answer, and that being partial stack is the wrong answer. There are many successful companies that are explicitly not full stack: Workday, SalesForce, Slack, Zenefits, etc. These startups have been successful partial stack companies because they do not break the daily workflow of their users.

For example, let's look at SalesForce. Although sales professionals like to complain that SalesForce is clunky, slow and a not helpful in their daily workflow, SalesForce is just a tool that’s designed to reinforce a process that the sales people should have been adhering to in a paper world: contact and pipeline management. Zenefits users are still buying health insurance, and still filling out forms. The process itself really hasn’t changed; all Zenefits has done is unemploy health insurance brokers. Slack users are still designing, coding, etc; with Slack, they can collaborate with their colleagues more effectively. The same can be said of the other examples above.

On the other hand, tech companies should consider going full stack if they break the operational processes of the primary users of their solution. Uber could never sell into the taxi industry because Uber commoditized taxis, and taxi company owners didn’t want to subject themselves to that. Oscar could never sell its novel technology to traditional health insurers because it would have required rethinking every function in the insurance company. HealthSpot couldn’t usher traditional healthcare providers into a retail care delivery model.

Why can’t incumbents adopt technology solutions that completely break the daily workflow of their primary revenue-generating employees? In short, it’s too operationally disruptive. The organizations simply cannot absorb the change. When an employee’s daily workflow is completely rethought, the vast majority of her existing operational knowledge is not only worthless, but actually destructive in the new paradigm. Processes that made sense in the old paradigm no longer make sense in the new paradigm. Convincing thousands of employees and managers across disparate geographies and changing incentive structures to unlearn bad habits (to be fair, they were good habits in the old paradigm) is nearly impossible. In the case of Oscar, this is even more problematic as the changes would have spanned employees across every function in the company. Old and new paradigms simply cannot coexist in the same organization. Note: this is the fundamental problem that Clayton Christensen details in The Innovator's Dilemma.

As we see more verticals SaaS-ify, I suspect most startups will rightfully decide not to go full stack. For example, TalkDesk, ServiceMax, and Veeva rightfully didn't go full stack.  Although the new wave of vertical-SaaS vendors strive to be the all important system of record, they are generally seeking to re-inforce processes that should have already existed. In most cases, SaaS solutions are not radically changing the cost structure associated with delivering the services in question and are not re-inventing the business.

In summary, startups should go full stack if they are going to genuinely break the workflow of their target user. Otherwise, they should go partial stack.

PS, Given my background in electronic medical records (EMR), I'll add some commentary to that industry. EMRs break the daily workflow of the primary revenue generating employees of healthcare provider organizations. So why haven't EMR vendors gone full stack? Not a single traditional EMR vendor has even tried to offer healthcare services. There are a few reasons: during the golden era of EMRs, telemedicine wasn't reimbursable, so it wasn't practical to consolidate providers centrally given the intrinsically local nature of healthcare delivery. On the other hand, every novel tech-enabled healthcare service builds and manages its own technology in house: One Medical Group, Doctor on Demand, Teladoc, etc. The providers that are pioneering new delivery models recognize the importance of technology in their new models and are rightfully insourcing it to go full stack. This tech investment also serves as their barrier to entry and differentiator.

Online Dating Empowers Women

I'll preface this blog post by saying that this blog post is meant to highlight trends in America in the 2005-2015 era. This post isn't meant to be a 100% accurate, definitive truth about dating. There are millions of women who will say this doesn't apply to them, and that's right. I acknowledge this. Rather, this post is meant to articulate the changes online dating has brought to a significant percentage of women in America. Here we go:

Before the Internet became commonplace in America, American women generally met men in one of two ways: out at a bar, or through a referral. In the last few years, online dating has exploded on mobile devices and has become a major channel through which men and women connect. For the purposes of this blog post, I’ll outline some of the key differences between online dating, meeting women out at bars, and referrals that I’ve observed as a single male in my mid twenties living in Austin, TX.

Defenses - women generally have their defenses up when they’re out at bars at night. They know men are out to hit on them, that most men are trashy, and as a result, women explicitly choose to play “hard to get.” This is entirely rational behavior given the general male populace. Contrast this with online dating, in which there’s no need to have one’s defenses up. Women can choose who they want to speak to online, and block those whom they don’t. Although women can always end a conversation when out at a bar, it’s a lot harder to leave a physical, in-person conversation due to social pressure and logistical space constraints than to simply hit the “block” button on a mobile app.

Solo vs groups - as a man, it’s dramatically more difficult to approach a group of women rather than just one. This makes it very difficult to get one-on-one time with the woman I’m trying to speak with, simply because she’s with a group of friends. Women rarely go out alone. But online, all conversations happen in one-on-one settings. This enables men to speak to women who they otherwise wouldn’t have been able to, and conversely allows women to speak to men who they otherwise wouldn’t have spoken to.

Inversely, women act differently individually than they do in groups. When they’re out with friends, there is a certain level of group-think at play. The woman generally follows the wishes of the collective group, even if she would prefer not to. Similarly, women will speak differently with men when they know their friends are around than when friends aren’t around. A woman may choose to flirt less with a man because she knows her friends are around than if her friends weren’t.

Power to choose - women can choose who they want to have conversations with online. Although this is technically true out at bars, in practice women have little control over who they speak when they’re out. Through the course of a night, any number of men may approach a woman. Women are free to reject the men, but aren’t typically going up to speak to men. There are exceptions, but in general, women are waiting to be hit on. But online, services like Tinder and Bumble explicitly force women to opt into the conversation before the conversation even starts. This means women don’t waste their time with men who they don’t want to, and vice versa. Rejecting a group of men in person is substantially more difficult than it is to reject a single man online.

Similarly, online dating makes it much easier for women to proactively reach out to men that they’d like to speak to. Although women can always talk to a man out a bar, it’s much more difficult to approach a strange man at a bar than it is online. Moreover, since women aren’t expected to speak to strange men out at bars, women have less practice talking to strangers at bars than men do, compounding the problem further.

Online dating radically changes the dating process. Rather than going out and hoping to be hit on, women can very proactively manage the "top of the funnel" in their dating lives by leveraging technology. Women can manage this process discreetly, with no external pressure, motivations, or constraints. Specifically, online dating empowers women to: talk to more men, talk to more men that they would like to speak to, quickly filter out the men that they don’t want to speak to, speak to men without the social pressure that friends exert on them, and to reach out to men that they otherwise wouldn’t have. Although apps like Tinder have created a perception that online dating exists only to support "hook ups," this is patently false. There are many desirable characteristics of online dating, and that's exactly why men and women alike have adopted dating apps like Tinder so quickly.

The Power of Perspective

I'm reading a fantastic book, Managing the Equity Factor. One of the key tenets of the book is that communication changes people's perceptions of reality. This anecdote from the book is so compelling that it warrants its own blog post. For context, this is a letter written from a freshman in college to her parents:

Dear Mom and Dad

Since I left for college I have been remiss in writing to you. I am really sorry for my thoughtlessness in not writing before. I will bring you up to date now, but before you read on, please sit down. You are not to read any further unless you are sitting down. Okay?

Well, then, I am getting along pretty well now. The skull fracture I got when I jumped out of the window of my dormitory when it caught fire shortly after my arrival here is well healed. I spent only two weeks in the hospital, and now I can see almost normally and get those sick headaches only once a day.

Fortunately, the fire in the dormitory and my jump was witnessed by an attendant at the gas station near the dorm, and he was the one who called the fire department and the ambulance. He also visited me in the hospital, and since I had nowhere to live because of the burnt-out dormitory, he was kind enough to invite me to share his apartment with him. It's really just a basement room, but it's kind of cute.

He is a fine boy, and we have fallen deeply in love and are planning to get married. We haven't set the exact date yet, but it will be before my pregnancy begins to show. Yes, Mother and Dad, I am pregnant. I know how much you are looking forward to being grandparents, and I know you will welcome the baby and give it the same love, devotion, and tend care you gave me when I was a child.

The reason for the delay in our marriage is that my boyfriend has a minor infection, which prevents us from passing our premarital blood tests, and I carelessly caught it from him. But I know that you will welcome him into our family with open arms. He is kind and, although not well educated, he is ambitious. Although he is of a different race and religion from ours I know your often-expressed tolerance will not permit you to be bothered by that.

Now that I have brought you up to date, I want to tell you that there was no dormitory fire,. I did not have a skull fracture. I was not in the hospital. I am not pregnant. I am not engaged. I am not infected, and there is no boyfriend in my life. However, I am getting a D in History and an F in biology, and I wanted you to see these grades in their proper perspective.

The TV OS Of The Future Will Decouple Video And Software

I was at the Formula 1 US Grand Prix a few weeks ago. It was pretty awesome, even though I couldn’t see the cars travel the entirety of the 3 mile track due to the hills. To mitigate this, I used the F1 iOS app to track driver standings in real time. While I repeatedly shifted my glance between the track and my iphone, I realized that there should be drones hovering over the entire track, and that the camera feeds from the drones should be select-able from the app so that I can focus on a particular hairpin turn with replay controls. And that I should be able to follow a particular driver through the track from the various drone cameras.

It was a cloudy day, so I thought about enjoying that same experience at home on my couch. And then it occurred to me that the new Apple TV should enable the experience I had just imagined. Indeed, Apple is envisioning exactly the type of experience I just described as evidenced by their close work with the MLB. They recognize the opportunity of interjecting software into a video feed.

The MLB demo, as awesome as it is, demonstrates the single greatest problem with the Apple TV: content providers need to decouple video feeds from apps. To be fair to Apple, they can’t control this, but it will adversely impact app quality and innovation on the platform, ultimately to the detriment of consumers.

So what specifically is wrong with the MLB app that Apple showcased? It’s great to be able to see the scores for all of the games, and then jump into a game. I’m sure the product management team for the MLB recognized this as low hanging fruit for baseball fans. This isn’t the problem. Rather, the problem is that I may want my MLB experience to be highly integrated with Twitter and fantasy league(s) that I’m in. As the a hypothetical consumer that pays for MLB all access, I probably follow quite a few baseball-related twitter accounts, and I probably play a lot of fantasy sports across a few leagues.

Or maybe I want to see exact flight path of the ball in slow motion compared against the last 3 balls thrown by the same pitcher. Or the guy on 1st base creeping off to steal 2nd base, even if the main camera isn’t showing it.

The possibilities are endless. The MLB could theoretically build all of these functions, but they won’t. Depending on the “use case” for watching baseball, viewers will want to layer in different content and watch the game in different ways. The MLB will never accommodate everyone’s desires.

The solution is to decouple the video feed from the MLB app. If ABC/NBC/FOX/CBS were to provide all of the camera feeds from a game as an API for Apple TV, 3rd party developers could implement those feeds to create unique experiences for every kind of fan - the data junkie, the selfie-aholic, the fantasy nut, etc.

Just imagine the endless possibilities to make live football smart. I should be able to switch to any camera in the stadium, rewind any play, draw the flight path of the ball, the running path of the receivers, mark up the play with with my own X’s and O’s, etc. As the NFL layers in sensors into player’s pads and helmets, I should be able to see the force exerted in a particular hit, and Tweet a video of my buddy sitting next to me spill his beer in awe from the camera that’s built into my TV.

The official apps from the NFL and the broadcasters will never provide the ultimate experience for any fan. The only way accomodate everyone’s “use case” for watching football is to decouple the content from the app itself. This will empower 3rd party app developers to layer software into the video-consumption process in a way that accommodates any use case.

Although the new Apple TV has launched with official apps from most of the major networks and sports leagues, the apps are universally primitive UIs to select particular video segments and highlight reels. I expect that this will be the case for a while. But at some point, it will become clear that content and software should be separate.