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A weekly(-ish) newsletter on commerce, media, science, tech, investing, & internet culture by Alex Taussig of Lightspeed.

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A weekly(-ish) newsletter on commerce, media, science, tech, investing, & internet culture by Alex Taussig. I am a partner at Lightspeed in Silicon Valley.

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Firehose #171: Seeing is believing.

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I’ve spent the last few weeks trying to understand what’s going on in our country. The suffering and frustration of the Black community has been rightly driven to the forefront of public discourse, even amidst the deadliest pandemic of our lifetimes. Unlike COVID-19, institutionalized racism is a product of our own creation. It is, in fact, the original sin of the United States of America.
 

I’m reminded of this today, as I’m writing this newsletter on Juneteenth. In observation of this day of reflection, a friend of mine offered the following (slightly edited) reminder this morning in a Facebook post:

Per general consensus, the first African slaves arrived in Jamestown in 1619. Slavery ended in 1865. It is 2020. I did the math: this means Blacks were enslaved for 61% of the time they’ve been in America.
 

Put another way, Blacks have been something other than legal chattel for LESS than 40% of the time they’ve spent in the land of the free.

The legal chattel period may have ended in 1865, but legally mandated oppression (not “micro-aggressions,” not “implicit biases,” but explicit, unmistakeable black letter law) did not end until 1965.
 

This means Blacks have been LEGALLY subjugated for a little over 86% of the time they’ve been in America. Black people have been legally classified as something other than a sub-citizen that’s undeserving of equal rights for LESS THAN 14% of the time they’ve been in the land of opportunity.

Because we created this problem, we have the ability to solve it. All we need is political will. Just six years ago, only 43% of Americans believed that killings of unarmed Black men were signs of a broader problem with policing. Today that number is 76%. In the last three years alone, the #BlackLivesMatter movement itself has gone from 45% support to over 75%, with significant gains in the last two weeks across all political parties and demographic blocks. Compared to other political issues like gun control or impeachment, the speed at which #BlackLivesMatter has reached a supermajority of Americans is unprecedented.
 

The pace of change is a reason for hope. I found Ezra Klein’s interview with author Ta-Nehisi Coates on this topic to be illuminating. You can listen to the whole podcast episode on Vox, but here are the relevant excerpts:

I can’t believe I’m gonna say this, but I see hope. I see progress right now, at this moment.

I had an interesting call on Saturday with my dad, who was born in 1946, grew up dirt poor in Philadelphia, lived in a truck, went off to Vietnam, came back, joined the Panther Party, and was in Baltimore for the 1968 riots. Would’ve been about 22 at that time.

I asked him if he could compare what he saw in 1968 to what he was seeing now. And what he said to me was there was no comparison — that this is much more sophisticated. And I say, well, what do you mean? He said it would have been like if somebody from the turn of the 20th century could see the March on Washington.

The idea that black folks in their struggle against the way the law is enforced in their neighborhoods would resonate with white folks in Des Moines, Iowa, in Salt Lake City, in Berlin, in London — that was unfathomable to him in ’68, when it was mostly black folks in their own communities registering their great anger and great pain.

I don’t want to overstate this, but there are significant swaths of people and communities that are not black, that to some extent have some perception of what that pain and that suffering is. I think that’s different.

Ta-Nehisi goes on to discuss his theory for why this movement is suddenly universal. I was struck by one statement he made:

George Floyd is not new. The ability to broadcast it the way it was broadcasted is new.

Social media is a lot of things — some positive, some negative — but, among those, it is the most incredible machine for human empathy ever created. Black communities have been telling the rest of the country about police violence for years. It’s quite another thing to see it live in your social feed, not just once, but over and over again, from coast to coast, in every kind of community.
 

Seeing is believing. The nation can finally “see” the pain and suffering of the Black community because of social media and the intrepid activists wielding it. That’s a reason to be hopeful and believe that urgent change is on the horizon.

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#commerce

Chegg'ing along.

Chegg (NYSE:CHGG) started in the textbook rental business 15 years ago, but today roughly 80% of its revenue comes subscription services. These services include 24/7 homework help, tutoring, and skills-based learning modules through its subsidiary Thinkful.
 

CHGG found itself in the right place at the right time when COVID-19 hit the US:

We saw almost a doubling of the business overnight. And since March 15, we’ve seen sustainable growth. And it is global. We’re seeing it everywhere in the world. Students need help, and we help them.

COVID-19 has pulled forward significant market share gains for online education, and even through summer time, those gains have held. The implications for brick-and-mortar schools and universities are going to be vast this coming fall.

Hertz don't it?

The internet runs on FOMO, and now the stock market does too. Retail stock trading has become an entertaining pastime during “shelter in place.” Enter r/wallstreetbets, which self identifies as “like 4chan found a Bloomberg terminal.”
 

This week, Alex Danco writes about how this community and others glorify bet-it-all strategies for trading stocks with little research or forethought. He analogizes the premise behind r/wallstreetbets to that of the classic MTV show Jackass — to some, it’s fun to watch other people get hurt; and, if you’re going to get hurt, you may as well have an audience to give you props.
 

This community and others like it explain why Hertz, which filed for bankruptcy protection only a few weeks ago, suddenly found its supposedly worthless stock bid up. It even attempted to raise primary capital to take advantage of the unique situation, although the SEC rightfully intervened.


Danco explains how the timing of COVID-19 helped create this opportunity:

The groundwork for this strange show has been built up over a few years, but when the pandemic hit, all hell broke loose. A perfect storm of events come together: first, generational volatility in the stock market as everyone tried to get in front of (and then out from) a global pandemic; second, everyone getting quarantined at home and desperate to feel something, and third: no sports. 

#media

Snap back.

Snap* has spent the last year and a half getting its mojo back. Its last two Partner Summits have been transformative for the company. Packy McCormick of Not Boring wrote an insightful summary of this year’s event, which was chock full of new product announcements. In addition to its launch of Mini programs, which have the potential to build new use cases directly into the Snapchat app, Snap further cemented its position as the leading AR company in the U.S. with improvements to SnapKit.
 

I continue to believe that Snap is the best positioned of any company for the moment a “good enough,” standalone AR device hits the market. With tons of developer- and user-generated content, new users flooding into the service to try out AR for the first time will be blown away by what they can experience. Other than Snap itself, Apple* is the most likely player to release such a device and will go out of its way to align itself with Snap, if only to put pressure on Facebook.*

The Netflix of podcasts.

Spotify* is pulling the Netflix playbook in podcasts. For readers of this newsletter, it should be no surprise that I’m a proponent of this strategy. I’ve held the stock since early 2019, right around the time CEO Daniel Ek announced his intent to compete in the podcast market, simultaneously purchasing Gimlet Media and Anchor. The stock is up about 55% since then.

Ek’s justification for entering podcasts began with a simple observation:

Consumers spend roughly the same amount of time on video as they do on audio. Video is about a trillion dollar market. And the music and radio industry is worth around a hundred billion dollars. I always come back to the same question: Are our eyes really worth 10 times more than our ears?

Ek anticipated that “over time, more than 20% of all Spotify listening will be non-music content.” Because 70% of Spotify podcasts come from its own ecosystem, its economics on those are far better than the deal it has with the 4 big record labels for music. Spotify is also acquiring blockbuster podcasts like The Joe Rogan Experience (JRE) to bring new subscribers into the fold. This week, Jay Kapoor demonstrates in his Forbes post the significant value of bringing Joe Rogan onto the platform.

#tech

Synchronous video as a platform.

I’ve been blown away at how quickly synchronous video has taken over my life. First, COVID-19 normalized video chats. Previously, it felt like asking your chatting counterpart to extend extraordinary effort to connect over video. Now it is the default.
 

The power of setting “video on” by default is that, if you’re used to it in one component of your life, you find it helpful in other components as well. Case in point: I’ve found myself FaceTime’ing with my family more now that I’m using Zoom at work. My wife teaches over Zoom and is now doing video workouts with her trainer. I’ve been using tools like Icebreaker to socialize, and my kids have been using various online video platforms to take classes. As I wrote in Conference Hell a few months ago, it’s not likely I’ll attend another large event in person for a really long time because the video events I’ve done lately have been so enjoyable and productive.
 

Verticalizing synchronous video is not without challenges, however. Most founders underestimate the infrastructure needed to run synchronous video in the cloud globally with high SLAs. At the time of its S-1 filing, Zoom had 13 co-located data centers (now close to 20). The public cloud wouldn’t cut it for Zoom to dynamically deliver low latency, bidirectional video to two arbitrary users connected around the world. Not every service needs to be as reliable as Zoom itself, however, and in many cases, Zoom itself will suffice as a third party tool. The overlay of “buildability” on this market map would be helpful.

#science

Is COVID-19 a blood disease?

COVID-19 is commonly considered a respiratory illness, but scientists are looking for new framing to explain the virus’s wide variety of symptoms. New research shows that COVID-19 can infect the endothelial cells that line the inside of blood vessels. COVID-19 damages endothelial cells in the lungs, heart, kidneys, liver, and intestines. This observation is unexpected because previous respiratory viruses like H1N1 and SARS did not spread past the lung. Damage to endothelial cells could explain COVID-19 symptoms like blood clots and painful fingers/toes, as well as comorbidities with high blood pressure, high cholesterol, and diabetes.

Lives lost.

Adjusted for population, from the time the 15th COVID-19 case was confirmed, the U.S. lost 3.4x more lives than Germany did. Compared to South Korea, Singapore, and Australia, we lost 100x more lives by the same measure. With states opening back up and many experiencing increasing COVID-19 cases, the deaths will tragically continue to accumulate for some time.
 

When we look at the Federal government’s inconsistent and incompetent response to COVID-19, we can see why a country like South Korea fared so much better:

For a more granular perspective, we compared the American response to the actions taken by South Korea. By the time South Korea experienced its 15th confirmed case on Feb. 2, it had spearheaded a massive public information campaign, mobilized private sector players to produce testing kits, and expedited regulatory approval for these newly developed tests. Within a week, tests were widely available. Within three weeks, schools and public spaces were closed, large gatherings had been banned, and 26,000 people had been tested.
 

In contrast, President Trump consistently ignored confidential and public early warnings from experts and intelligence agencies prior to the 15th confirmed U.S. case on Feb. 14, then acted far more slowly and inconsistently than South Korea. The White House banned flights from China on Feb. 2 but later permitted more than 40,000 travelers from China to enter the U.S. From February through April, President Trump made dismissive and contradictory statements to which government agencies and the public paid close attention.


Often taking cues from the president’s words, state by state measures were rolled out piecemeal. Florida and Georgia, for example, waited until April 3 to issue stay-at-home orders while South Carolina held off until April 7.


Another crucial failure involved testing. Three weeks after the 15th Covid-19 case had been confirmed in the U.S., only about 10,000 tests had been administered. By an equivalent point in its epidemic, South Korea had administered approximately 17 times more tests per capita than the U.S. had done. This testing fiasco crippled vital early contact tracing efforts when hot spots could have been contained.

#culture

Revolution's magic number (video).

Nonviolent protests are more than twice as likely as violent protests to accomplish their goals. Historically, if more than 3.5% of the country’s population participates in such protests, the effort is guaranteed to succeed. The number of people sympathetic to the cause needs to be much higher, but active participation is a good indicator of broader sentiment in the population.

In the U.S., that threshold is ~11 million people.

According to a recent Pew survey, 6% of Americans (nearly 20 million!) say they have attended a rally or protest in the last month. That number is closer to 10% for Black, Hispanic, or Asian respondents. It’s 13% for those aged 18-29. The only age block below the 3.5% magic number in the last month is those aged 65+, and some of that reluctance is likely to come from fears of COVID-19 exposure.
 

Any way you cut it, it appears we’re on the verge of major change.

Disclaimer: * indicates a Lightspeed portfolio company, or other company in which I have economic interest. I also have economic interest in AAPL, ADBE, AMT, AMZN, BABA, BRK, BLK, CCI, CRM, GOOG/GOOGL, FB, HD, LMT, MA, MCD, MSFT, NSRGY, NEE, PYPL, SHOP, SNAP, SPOT, SQ, TMO, VEEV, and V.

Lightspeed Venture Partners, 2200 Sand Hill Rd, Ste 100, Menlo Park, CA 94025 USA Sent to ataussig@gmail.com — Unsubscribe