New York State of Mind

A bunch of new subscribers over the past few days -- welcome! Where did you all come from? Here's my
M.G. Siegler
New York State of Mind
By M.G. Siegler • Issue #89
A bunch of new subscribers over the past few days – welcome! Where did you all come from? Here’s my boring disclosure that this newsletter is very much a work-in-progress (see: here and here and here), but I’m getting closer and closer to the format I like as we quickly approach the one-year mark of this newsletter.
I’m currently back on the road in New York City, so I haven’t been able to catch up on all the Disney/Netflix drama yet, but I am most intrigued by this, as you might imagine. More soon.

The Links
Sapphire Reserve Cards Aren’t Very Rewarding for J.P. Morgan
Emily Glazer:
One problem for Sapphire Reserve: Fewer customers than the bank initially imagined are holding balances, according to the people familiar with the matter. That lowers interest income generated by the card and forces the bank to focus on merchant-driven “interchange” revenue—which at about 2.5% of dollars spent is generally less lucrative than interest income.
Cardholders have proven adept at squeezing the most rewards out of Sapphire Reserve, often using it for travel and dining, categories where J.P. Morgan generally pays more to cover rewards. Consumers also are likely to book travel through Chase’s rewards website for an additional 50% bonus that the bank covers.
Everyone knows that credit cards have a history of being decidedly unfriendly towards consumers. They lure you in with fairly low rates, then gouge people who hold a balance once that period is over. And so it’s fascinating that consumers are increasingly flipping the equation thanks to these crazy initial rewards cards like Sapphire Reserve. 
I feel like you increasingly see this card everywhere – I have one too! – so it’s not shocking that J.P. Morgan may be in a bit over its head here. Of course, they wouldn’t be if customers carried a balance, but the demographic they have targeted here increasingly doesn’t…
Like the raptors testing the fence in Jurassic Park, consumers are getting smarter (though I fear many of the folks who need to solve their credit issues the most aren’t yet in this camp, hopefully this trickles down).  •  Share
How Two Brothers Turned Seven Lines of Code Into a $9.2 Billion Startup
Nice feature on Patrick and John Collison, the co-founders of Stripe (a GV portfolio company). Ashlee Vance:
Stripe continues to attract startups. It intends to be behind the next Uber or Airbnb, to cash in on its meteoric growth. “If you think about the broad trajectory of the internet, most of the breakout successes are still to come,” Patrick says. But Stripe is also trying to make deals with Target Corp., Under Armour Inc., and other merchants to snag money available outside the startup scene, partnerships made more possible by the trust Amazon is showing.
I feel like this sentiment is often overlooked by many startups: it’s great and important to sell the world’s current big companies on your business, but you should absolutely also be thinking about selling the world’s next big companies. 
The world’s largest online-travel company
Speaking of legacy companies, here’s The Economist on Priceline:
But Mr Fogel, a former investment banker and trader, has worked at Priceline for 16 years and is credited with initiating the deal. Asked about his firm’s success, he attributes some of it to letting acquired firms go about their business. Kayak, an aggregator of travel listings that Priceline purchased for $1.8bn in 2012, for instance, still retains separate headquarters in Connecticut, six miles away from Priceline.
And then there are the lessons of the firm’s own history. One is not to try too many things at once. During the dotcom boom the firm took the “name your own price” concept to extremes, allowing people to bid on petrol, groceries and even mortgages. The ensuing bust was bleak: Priceline’s market value dropped by more than 99%, to $190m (the share price is up by 30,000% since that trough). That experience taught management to prize discipline and profitability. The corporate ethos today is one of a “workhorse, not show-pony”, says one person close to the firm.
Two great lessons:
  1. Acquire companies you trust to run their own businesses, then let them do that. 
  2. Don’t try to boil the ocean. Even Amazon started out selling books and not everything on day one.
Doc Rivers losing front-office responsibilities with LA Clippers
Adrian Wojnarowski spoke with Clipper’s owner Steve Ballmer:
“I’ve owned the team for three years now, and I really better understand what an owner’s responsibility is – and it turns out that running a franchise and coaching are two enormous and different jobs,” Ballmer told ESPN. “The notion that one person can fairly focus on them and give them all the attention they need isn’t the case. To be as good as we can be, to be a championship franchise, we need two functioning strong people building teams out beneath them. There needs to be a healthy discussion and debate with two strong, independent-minded people.
I mean, how did he not know that on day one? Ballmer is not a dumb guy. Why did it take him years to learn this? All he had to do was look no further than the fact that they are only three other teams that have a coach/GM in the NBA: San Antonio Spurs (Gregg Popovich), Pistons (Stan Van Gundy) and Minnesota Timberwolves (Tom Thibodeau) – and of those, only Popovich has really proven so far that this can work. And he’s widely considered one of the best coaches/basketball minds of all time. 
I’ll leave it to others to draw parallels to Ballmer’s tenure atop Microsoft.
Requiem for the iPod Shuffle
Steven Levy recalling back to 2005, when Steve Jobs unveiled the (recently departed) iPod Shuffle/Nano:
“This is a huge bet,” he said, describing how once or twice a year he gathered the top 100 people at the company—“not the top 100 in the org chart but if you were going to have 100 people on a rowboat with you, who would you want?”—to figure out big strategic issues. The previous year, he said, he had opened the meeting with a speech: “Our revenues have doubled in the last two years,” he told his team. “And our stock price is high and our shareholders are happy. We have a lot of momentum. And a lot of people think, ‘It’s really great, we’ve got a lot to lose, let’s play it safe.’ That’s the most dangerous thing we can do. We have to get bolder, because we have world class competitors now and we just can’t stand still.” The bold move was the Nano, replacing the wildly popular iPod mini with an even tinier, full-featured, color-screened successor. “We call this a heart transplant—stop one production line, start another. It’s amazing, and the team has done brilliantly and pulled it off.”
In the iPhone’s 10 year history, there’s never been such a drastic reinvention.
Easy to forget now just how divisive of a move it was to kill off the iPod mini for the iPod nano. People loved the iPod mini, I knew at least one person who stocked up on them, like people more recently did with Blackberries, because they didn’t think they could live without one.
Also fun:
That low price shouldn’t be dismissed. It was a feature that Jobs took pains to boast about even on the 2005 day when he introduced the Shuffle. iPods were too expensive, he said—even for him. He told me that he’d bought a regular iPod as a birthday gift for his son, who turned 13 that year. “It was great and he loves it,” he said. But then his daughters, who were nine and six at the time, started asking for their own. “There’s no way I’m going to spend 250 bucks apiece on them,” he said, clarifying that while he certainly could afford to buy them, he didn’t think it was right to give a child of that age such an expensive gift. The Shuffle changed that. “I will go buy them one of these for 100 bucks apiece,” he said. “They’ll probably lose them in 60 days. But they’ll get into it this way.”
Apple gets a lot of shit for selling their wares at inflated prices, but the $99 Shuffle, at the time, was a deal. And Jobs rightly knew Apple should hit such a price point (later dropped to $49!).
Giphy Break
500ish Words
The iPad Mini Mini, the iPhone Plus Plus
Next year’s supposed jumbo “iPhone Pro” versus the iPad mini…  •  Share
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M.G. Siegler
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