Dear friends, 

In JC’s Newsletter, I share the articles, documentaries, and books that I enjoyed the most in the last week, with some comments on how we relate to them at Alan. I do not endorse all the articles I share, they are up for debate. 

I’m doing it because a) I love reading, it is the way that I get most of my ideas, b) I’m already sharing those ideas with my team, and c) I would love to get your perspective on those. 

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💡Must-read

👉 Nick Kokonas (Tock, Alinea, …) - Know What You Are Selling (JoinColossus)

Nick is the CEO of Tock and co-owner of some of the world’s best restaurants & bars: Alinea, Next, and The Aviary.

Go fast and learn:

• "Own something, make lots of decisions that have outcomes, try to be right at least 51% of the time, do that often and repeat."

• Not everything has a measurable outcome.

➡️ It is a good lesson in KPIs-driven companies. Be clear on what you can measure and what you can’t. 

There is no magic business:

• Most businesses are not great businesses. If there is a great business out there with high margins, there's something else about it that's hard to get into.

Fun and delicious:

• And then the two words that we used in every interview and still do, fun and delicious. Because it's so simple but so hard to find.

• What is a way to make an adult feel like a kid again? A number of the dishes at Alinea came out of that question.

➡️ What I want for Alan. That we can bring joy, be fun even in health & well-being.

Being contrarian:

• Everybody in the industry telling me no and all of my employees rolling their eyes at me. (about asking people to pay X$ to book the restaurant)

• But then the first day we sold $562,000 in tickets to a restaurant for the first time ever. And I remember that as one of the happiest days of my life.

• In any business you're kind of constantly having to prove that it works outside of your own niche.

➡️ Experts will always tell you it is impossible. 

• So we gathered about 20 designers and engineers. We got a week to put out a new product. The people, again, who went, "That's not possible," simply were off the team.

➡️ You want optimists in your team!

Time slotted businesses:

• Dynamic and variable pricing for time slotted businesses. Any business that's time slotted should be dynamically and variably priced right down to your lawyer frankly. Your dentist. If everyone wants a 10 a.m. Saturday appointment because of work hours, why doesn't it cost more to go to the dentist.

➡️ How could it apply to the health system?

Free product:

• I looked at every booking system worldwide. And what they all did was that they copied part or as much as they could of the feature set of Open Table and then gave the product away for free to gather market share.

• But if you give something away for free the people that you attract are the people who need free. So in a weird way you get the worst customers. If people are that price sensitive they're probably not thriving.

➡️​​ Good point.

Engineers on the field:

• All of our engineers went and worked in restaurants as hosts.

• So they suddenly had empathy for the end user.

➡️ Sending the team to the field is super important.

Books:

• Last week sold $120,000 of books in a week for our restaurant with margins much better than the restaurant. But we actually sell them ourselves. I have mailing lists. I have websites. I have Instagram and Facebook.

• Not that hard. That goes back to the original thing, own it. The publisher doesn't own our books. We do. And sell it.

• So call the printers in China, pick your favorite book, find out some print brokers here in the US, and say, "What did the printing of those books cost? Send me a spreadsheet." And when they do and you find out that a $50 retail book cost about $2 to print.

• If you google my name and look on my Medium there's Why We Are Self-Publishing the Aviary Book.

• But if you have an audience already in whatever business you're doing, or a large social media following or any of that, doing a book and publishing it yourself is not hard. It takes a lot of effort. 

• Three years later we have six books out and they produce millions of dollars of revenue every year.

​​➡️ Super interesting about books!

Behavioural economics:

• And I called the guy and said, "I'm going to use 400 pounds of your beef a week for the next four months for our menu, which is about $300,000 of beef. What do we got if I prepay you?" And he was like, "What do you mean?" I'm like, "I want to write you a check tomorrow for all of it for four months." And he was like, "Well, no one's ever said that." So he called me the next day. He said, "$18 a pop." Half. Half price.

• "We need to call every one of our vendors every time and say we will prepay them."

• Now, there's risk involved in that, but you've mitigated that risk by much, much better food prices.

➡️ How we could build a lot more behavioural economics knowledge? Anticipate what people want, guide them, and have better costs. 

🏯 Building a company

👉 Tokenized loyalty programs (Magdalena Kala)

• Why do we need tokenized loyalty programs if we have perfectly well-functioning regular loyalty programs?

• Let me explain the benefits of tokenizing using one of the most popular loyalty programs in the US: Starbucks Rewards

• 1. Governance: brand tokens allow customers to vote on company direction (new SKUs, perks etc) Yes, Sbux could do polls today w/ 1 customer = 1 vote structure; tokenization allows for voting proportional to the strength of fandom (more tokens = more votes)

• 2. Ownership: If I earned my Sbux stars, I should be able to sell them. If I have 400 Sbux tokens & you have 250 (and need 300 to qualify for Gold, or just want more “voting power”), I can sell you extras at market rate - win-win!

• 3. Value appreciation: aka the most powerful reason for tokenization – points as shadow equity

• Imagine earning Sbux tokens as an early customer & seeing their value appreciate as brand expands (or getting actual equity allocation pre-IPO due to high token ownership! 🤯)

• “Shareholder mentality” enabled by tokenization can be esp powerful for young (private!) brands; when your best customers behave as owners, they are retained longer, they spend more, and they become your best marketing, spreading brand awareness & affinity to friends, online etc.

👉 The CEO That Jeff Bezos Called “His Teacher” (NFX)

• When we got to a more diversified set of businesses, the role of the S- team started to change. It was less about operating the individual businesses and more about deciding on the mechanisms for the business.

➡️ Good overview of the role of the Units (operating the business) vs. the cross-unit work which is about building the mechanisms for the business. We could apply that within the Unit for the areas and crews too. 

• Ask your team, what do the leadership principles mean to you? How do you think you’d employ them in your work?

➡️ Pushing this question to make sure we have the same understanding of the leadership principles. 

• We would always say uninspected data is always wrong. This obsession with the inspecting process really led to some of the operational excellence that was vital for things like Prime.

➡️ How can we inspect more our data?

• We had a lot of work to do to create a service-oriented architecture out of a more traditional legacy architecture. That may have actually been the hardest management problem in those middle years.

➡️ Good questions to be asked about our architecture and the implications. 

• To invest in so many different businesses, something many consultants would tell you is crazy to do, you have to make sure you protect the nascent businesses because the mothership is going to want to destroy them.

• He made sure the third party business that we built, where we invited other retailers to sell against our retail team in the same store, was protected.

➡️ I feel we are building the right culture to keep experimenting with nascent businesses. What do you think?

🗞 In the news

📱Technology

👉 Is the music industry’s future on the blockchain? (Platformer)

• One question Royal raises is what happens if every song has its own stans who benefit financially the more it is played. 

• “Your fans become your biggest promoters and your distribution,” Ehrsam said. “We’ve seen that with Bitcoin in the past. When you own it, you want to evangelize it. I think we’ll see that with music in a similar way.” 

• Ehrsam also predicted eventually we will see new kinds of creative work coming from fans.

• “I suspect that now that people have ownership over this IP, they’ll probably figure out other things to do with it, too,” he said.

👉 The World Is Catching Onto The Power of Decentralized Brand Building (First Born)

• If you believe in the project, youʼll go beyond setting the NFT as your profile-pic (PFP). Suddenly, youʼre willing to lend your energy, network, and skills to ensure the project stays relevant. If the project stays relevant, the community strengthens. And so does the brand.

👉 Rivian: The Most Remarkable Adventure (Not Boring)

• We are putting 1% of Rivian’s equity into Forever, providing it with a substantial and growing financial platform to focus on high impact climate initiatives with an emphasis on preserving and restoring wildlands, waterways and oceans.

​➡️ I love that notion of giving a % of your equity either to your members or some important mission. 

🏥 Healthcare

👉 Teladoc plans to fend off competitors by building a full suite of products (Medcitynews)

• Teladoc CEO Jason Gorevic said the company continues to acquire and retain customers by having a full suite of solutions. He expects that point solutions will have a harder time going forward.

👉 Sana Secures $20M in Series A Extension Funding to Break up the ‘Big 5’ Health Insurance Monopoly (Business Wire)

• Sana, a provider of health insurance for small and midsize businesses, announced today the closing of $20M in series A extension funding.

• In addition to these efforts, Sana plans to invest the capital in key aspects of their value-based care approach, including zero- cost care options, digital health offerings, care navigation, and building a new network of high-quality providers committed to fair pricing practices. The funds will also fuel the expansion of Sana’s direct sales model.

➡️ Their product marketing on their website is good. 

👉 HTN Weekly Health Tech Reads 12/12 (Health Tech Nerds)

Bright Health:

• Bright is receiving a $750 million capital infusion, $550 million from Cigna's Evernorth division and $200 million from NEA.

• It expects to lose another $400 million to $500 million in Adj. EBITDA in 2022. Bright expects to go from that loss to Adj. EBITDA breakeven in 2024.

• The insurer, while it captures the premium dollar, has a capped profit margin and lower long term EBITDA margin target. The care delivery side of the business captures the medical expense on the insurance side as revenue, and doesn't have the same cap on profit margin, leading to a higher long term EBITDA margin. It's a smart business play.

The importance of all-in-one:

• Interesting read from Crossover's CEO Scott Shreeve highlighting the plight of point solutions selling to employers these days. It's a quick, light read, and the chart below highlights the confusing array of different vendors all pitching employers at the moment. Link.

👉 HTN Weekly Health Tech Reads 3/6 (Health Tech Nerds)

Bright Health:

• Bright Health had a terrible, horrible, no good, very bad quarter. Somehow it managed to lose over $800 million in Q4 alone. The news sent Bright's stock price tumbling ~30%.

• It posted an MCR of 124% on the Bright Healthcare business and 190% on the NeueHealth business in Q4, which flies in the face of everything they've been saying about their confidence in how they've been pricing their insurance product.

• Bright's CFO mentioned they've been manually processing claims because of operational issues with the claims platform, and they didn't properly account for claims lag. Link.

➡️ Bright is burning a LOT of money and likely went public far too early.

Ro:

• Ro acquired sperm testing startup Dadi at a price rumored to be around $100 million. Seems to make a ton of sense for Ro as an expansion of their platform. Link.

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