Steve Jobs and Jeff Bezos Enter a Room

In December 2000, the founders of Apple and Amazon were invited to critique a demo of the Segway. It was a wild two-hour session filled with gem quotes and business insights.

Sep 06, 2024

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Today, we are talking about one of the wildest pitch meetings ever: Steve Jobs and Jeff Bezos critiquing a demo for the Segway (yes, the two-wheeled vehicle Segway).

Also this week:

Costco Membership Price Hike
Founder Mode vs. Manager Mode
…and them fire posts (including “Film School Guy”)

The date is December 8th, 2000.

Steve Jobs is 45-years old. He returned to Apple three years earlier and saved the company with the release of the iMac (those candy-colored PCs). He’s firmly back in tech God mode and this is before Apple rips off the most successful decade of new product launches ever: iPod (2001), iPhone (2007) and iPad (2010).

Jeff Bezos is 36-years old and 6 years into his Amazon journey. While this is decades before he gets as jacked as Jason Statham in Transporter 2, Bezos is already the face of the early internet wave and a newly-minted billionaire.

These two tech titans — from different eras — are meeting in the conference room at the San Francisco Hyatt Regency.

Why? To tear apart the demo for what would become the Segway, the two-wheeled motorized vehicle that is now only used by mall cops and goofy-looking tour groups during European summer vacations.

The meeting was set-up by John Doerr, a billionaire investor at the august Silicon Valley venture capital firm Kleiner Perkins. Doerr had an established career at Intel before becoming a VC in 1980. It was a very different industry back then and when he left Intel, the company’s legendary CEO Andy Grove told him, “that's not a real job…it's like being a real estate agent." Doerr would go on to make some of the most baller early venture bets including Amazon, Google, Netscape, Sun Microsystems and Intuit.

In February of 2000, Doerr met entrepreneur Dean Kamen at the TED Conference. Kamen was a prolific inventor who had made a fortune by developing medical devices, including the world's first portable drug infusion pump, an insulin pump, and a kidney dialysis machine.

Kamen invited Doerr to try an early version of the Segway, which was covertly called Project Ginger at the time. The inspiration for this two-wheeled personal vehicle came after Kamen slipped in the shower and noticed how different parts of his body flailed around to keep his balance.

What if a machine could learn to balance like a human? Or in the case of a Segway, what if a motorized two-wheel personal vehicle could move and stay balanced by quickly adjusting to a human rider?

Kamen believed it was ridiculous that people would regularly drive a 4,000lb vehicle for a short trip to the grocery store and that there was an opening in the market for a more efficient personal transportation device.

Doerr agreed and after riding the early Segway, was so impressed that Kleiner Perkins acquired 7.5% of the fledging company for an investment of $38m (a ~$456m valuation).

By the time of the December 2000 meeting with Kamen, Doerr, Jobs and Bezos, the tech world was abuzz over Kamen’s next invention. Speculation ran wild with some believing that Kamen was building a jetpack (!) or a personal helicopter (!!!!).Leaning into the buzz, Kamen shopped the rights to a book on his future invention.

The book’s proposal included quotes from Jobs (“the most amazing piece of technology since the PC” and "[governments will] architect cities around it”) and Bezos, who invested in the company and became a major evangelist (“so revolutionary, you’ll have no problem selling it”).

When the book proposal leaked to the press, the hype reached such a crescendo that Harvard Business School Press paid Kamen $250k — without even knowing the full details of the device — for the rights to the Segway story. The coverage then fell to Steve Kemper, who shadowed Kamen and wrote a book titled Code Name Ginger: The Story Behind Segway and Dean Kamen's Quest to Invent a New World.

One chapter from the book covers the aforementioned product pitch meeting at the San Francisco Hyatt Regency.

In the next section, I’ll take large excerpts from the glorious day and add my amateurish notes.

The TLDR is that Jobs was the alpha in the room — which, to be fair, it was a consumer hardware pitch — and the reader gets a view into how he and Bezos think about business. While the meeting was only ~2 hours, a lot of valuable insights were shared on branding, go-to market strategy, marketing, design and manufacturing.

Let’s dive in.

Jobs and Bezos vs. The Segway

Kemper’s book chapter on the Segway demo meeting is titled “West Coast Ambush”, which teases the fact that Jobs and Bezos are about to tear the product apart. Imagine Shark Tank…but with the most successful entrepreneurs ever (and no royalty deal offers from Mr. Wonderful).

While the book proposal for Code Name Ginger shares the most optimistic pronouncements from Jobs and Bezos, their actual meeting analysis is much more hard-hitting and skeptical.

Why did Doerr set up such a potentially tense meeting? Kemper’s book suggests that the VC wanted to exercise more control over the Segway’s development process and the meeting was a way to do so (by poking holes in Kamen’s roadmap).

Here is how the proceedings kicked off:

Evidently, [Steve Jobs is] always late, said Aileen Lee, John Doerr's associate. It was almost 8:30 A.M., half an hour after the meeting was supposed to start, and everyone in the locked and guarded ballroom was still waiting for Jobs. The December 8 meeting at the Hyatt Regency near the San Francisco airport had been Doerr's idea. He wanted Dean to brainstorm about Ginger with him and some friends, including Jobs and Jeff Bezos. The three billionaires could spare only a couple of hours, so Doerr's request required a long trip for a short meeting.

I’m not saying that it is okay to be tardy, but if you’re going to wait for anyone in the world to opine on your hardware consumer product, it’s Steve Jobs.

Although, it does seem a little harsh that the Apple co-founder showed up late only to eviscerate the product (it would have been nicer if Jobs was late because he was passing by Starbucks and brought a tray of Venti Cold Brews and slices of banana bread for the homies…which didn’t happen).

While everyone was waiting, Kamen started putting together the device, reminiscent of a scene from Mission: Impossible.

When the doors were locked, [Kamen] opened the duffels and the boxes, removed a couple of chassis and control shafts, and assembled two Gingers using a screwdriver and hex wrenches.

Kamen's team also fired up a Powerpoint presentation, which included a photo of him giving a demo of another device to President Bill Clinton at the White House. It was called the iBot, a wheelchair that could climb stairs. They def threw that photo up to flex Kamen’s inventor bonafides and Rolodex. Fair play.

Kamen demos iBot for President Clinton (this photo is different than the one from the slide show but from the same White House demo)

After putting together the demo Segway vehicle, Kamen started clowning around and tried to scare Bezos by pretending to crash into the Amazon founder.

The playground tactic didn’t work:

He finished [the assembly in] ten minutes, turned one on, and began tearing around the ballroom, looking happier with every revolution. Jeff Bezos arrived. Dean zipped up to him, stopping sharply at his shoe tips. Bezos didn't flinch.
"See how much I trust you?" said Bezos.
"Is that good judgment?" said Dean.
Bezos claimed the other Ginger, and his laugh soon gusted through the ballroom. Doerr entered wearing casual clothes and old sneakers. Dean surrendered his Ginger to him. Everyone was having too much fun to mind Jobs's tardiness.

Two funny parts about this excerpt: 1) Bezos’ iconic laugh finally makes a cameo; and 2) Bezos taking the other Segway is consistent with the fact that there are so many photos of Bezos riding a Segway on the internet…and none of Jobs. While there are quotes of Jobs praising the device, I couldn’t find a single JPEG of him riding these dork-mobiles.

Everyone knows that Apple is super-conscious about marketing and my intuition is that Jobs made sure there were no photos of him on this thing (as a hedge for if it failed). It reminds me of how Apple’s current CEO Tim Cook introduced the Apple Vision Pro in June of 2023 but was never seen wearing the headset until the day before it officially shipped in February 2024 (and Cook only did so with a managed cover story in Vanity Fair).

In this demo meeting, Jobs was probably thinking “don’t you dare take a photo of me, bro”.

Big Daddy Bezos is sitting on $150B+ right now and should just pay someone to get rid of these photos.

Let’s get back to the demo.

Jobs was finally in the cut but it’s worth noting that this wasn’t the first time he had seen the Segway. Kamen already demo’d the device at Jobs house but Doerr wanted Jobs to share his thoughts in front of everyone:

Dean didn't mind [that Jobs was late] either, for other reasons. He had flown his jet to San Francisco yesterday, carrying the Gingers. A limo hired by Doerr had whisked him and the machines to Jobs's house, where the two of them spent the afternoon. Jobs did most of the talking. Ranting, really, about Ginger's design. So Dean more or less knew what Jobs was going to say today and wasn't in a great hurry to have the Ginger guys hear it.
The others were so intent on Ginger that they didn't notice Jobs walk in. He was dressed even more casually than Dean, in sneakers, a black turtleneck, and Levi's in which a white pocket poked out of a big front hole. There was a hole in his wallet pocket, too. Within a couple of minutes, after some quick introductions, everyone settled around the big square table, Jobs at one corner, flanked by Dean and Doerr.

We had the “Bezos laugh” cameo earlier, so it was nice to get the “black turtleneck and Levi’s jeans” costume cameo from Jobs. This meeting is really just a walk down tech memory lane.

Now, let me point you to the line where “Jobs did most of the talking”, which will be a recurring theme for the remainder of the meeting.

And, remember, Jobs is going to make everyone listen to him even after showing up 30 minutes late.

It’s worth it, though:

"Good morning to everyone," said [Tim Adam, who Kamen had hired to be the company’s CEO]. "Before we start, we'd like to ask you to hold your questions until after each presentation."
"Yeah, right!" snorted Bezos, followed by that honking laugh.
"Otherwise we might as well not be here," said Jobs.
"How long is your presentation?" asked Doerr. "Each pitch is about ten minutes."
"I can't do that," said Jobs. "I'm not built that way. So if you want me to leave, I will, but I can't just sit here."
Tim studied Jobs for a moment, then turned to the screen and put up a spec sheet about Metro and Pro. "As you can see—".

We are four words into the Segway demo and Jobs has already cut off the presentation.

Jobs is not here to listen to someone give a 10-minute rehearsed pitch. He’s here to kick ass and chew gum…and he’s all out of gum:

"Let's talk about the bigger question," interrupted Jobs. "Why two machines?"
"We've talked about that," said Tim, "and we think—"
"Because I see a big problem here," said Jobs. "I was thinking about it all night. I couldn't sleep after Dean came over." There were notes scribbled on the palm of his hand. He explained his experience with the iMac, how there were four models now but he had launched with just one color to give his designers, salespeople, and the public an absolute focus. He had waited seven months to introduce the other models. Bezos and Doerr nodded as he spoke.
"You're sure your market is upscale consumers for transportation?" said Jobs.
"Yes, but we know that's a risk for us," said Tim, "because we could be perceived as a toy or a fad."
If they charged a few thousand dollars for the Metro and it was a hit, said Jobs, they could come out with the Pro later and charge double for industrial and military uses.
Tim's eyebrows shot up approvingly. He looked at Dean, whose face was a mask, so he turned elsewhere. "Mike?" he said, looking at [his colleague] Mike Ferry for a marketing opinion.
"It's a good point," said Mike, giving his usual noncommittal response.

Boom. Jobs’ first business lesson.

Famously, when he returned to Apple in 1997, the company was on the verge of bankruptcy and one of the major initiatives to turn it around was to simplify Apple’s product line.

As the legend goes, Jobs was in a meeting on the company’s product roadmap. After hearing a bunch of stuff that clearly didn’t tickle his fancy, Jobs snapped, "stop...this is crazy". He walked over to a whiteboard and drew a 2x2 matrix laying out Apple’s new strategy, which was to focus only on four products:

Within this 2x2 matrix, Jobs — along with lead designer Jony Ive — put all of the company’s resources behind the iMac.

Don’t overcomplicate things.

That’s the exact message he was sending to Kamen.

With that point out of the way, Doerr quickly moved the conversation to another topic: design.

Jobs was just getting started and dropped an absolute gem of a line that involves something that happens to your pants if you eat too much Chipotle.

"What does everyone think about the design?" asked Doerr, switching subjects.
"What do you think?" said Jobs to Tim. It was a challenge, not a question.
"I think it's coming along," said Tim, "though we expect—" "I think it sucks!" said Jobs.
His vehemence made Tim pause. "Why?" he asked, a bit stiffly.
"It just does."
"In what sense?" said Tim, getting his feet back under him. "Give me a clue."
"Its shape is not innovative, it's not elegant, it doesn't feel anthropomorphic," said Jobs, ticking off three of his design mantras.
"You have this incredibly innovative machine but it looks very traditional." The last word delivered like a stab."There are design firms out there that could come up with things we've never thought of…things that would make you shit in your pants."

HAHAHAHAHA

“Things that would make you shit in your pants."

Is that crude? Yes. Did Jobs, Ive and Co. release the iPod, iPhone and iPad in the next 10 years? Also Yes!

A lot of people shit their pants over that span!!! So, Jobs was probably right about making this recommendation.

But if we're being honest, a pants-shitting design probably wasn't enough to save Segway. As we'll discuss later, there were a lot of problems with battery technology, pricing and the go-to market plan.

Either way, the manufacturing strategy was next on the chopping block.

There wasn't much to say to [Jobs design pitch], so after a pause Tim began again: "Well, let's keep going, because we don't have much time today to-" "We do have time," said Doerr curtly, changing his own ground rules. "We want to get Steve's and Jeff's ideas."
"The problem at this point is lead time in our schedule," said Tim. Jobs snapped his head from Doerr on one side to Dean on the other, as if he'd been slapped. "That's backwards," he said, his voice rising.
"Screw the lead times. You don't have a great product yet! I know burn rates are important, but you'll only get one shot at this, and if you blow it, it's over."
Agitated, he turned to Bezos. "Jeff, what do you think?"
"I think we'd do a disservice to the machine if we didn't give a great design firm a chance," said Bezos in a calm, soft voice, trying to lower the volume. "I think Steve is right—that as he so elegantly put it, they could do things that would make us shit in our pants." Jobs grunted.
After another pause, Tim moved on to the issue of service, determined to move ahead despite the punches coming at him. Within two sentences, Jobs was on him again. Tim put up his next slide, about the new plant, but again Jobs came at him with a flurry of half-insolent questions. Where are you building a plant? Why are you building a plant? Why are you manufacturing the machine yourselves?
Partly, explained Tim, because giving our code to someone else would be a great risk. Not a good reason, in Jobs's view, because the code could easily be reverse-engineered. No it couldn't, said Tim. Could, said Jobs. He added that Tim should be spending money and management time on other things, especially since there was no way he could convince any world-class manufacturing and procurement people to move to New Hampshire [site of manufacturing plant], for God's sake, his tone implying that only slow-witted rubes could bear such a place. Dean lifted an eyebrow.

Jobs was sharing another hard-earned Apple insight.

For Apple, the business value for premium consumer hardware comes from the design, integration, marketing and distribution. Not the actual manufacturing.

This point is illustrated by a concept called the Smiling Curve, which aims to explain where value is extracted in the manufacturing process. It is called a smiling curve because the “valued added” occurs at the ends of the value chain while the middle of the process is commoditized.

In the case of the iPhone, Apple extracts all the value by completing the high-value work at the beginning (basic and applied R&D, product design, supply chain management) and at the end (marketing, brand management, after-sales services). A network of manufacturers in Asia — notably, Foxconn for assembly — is responsible for the middle (and lower value-added) part of the value chain.

To be sure, outsourcing all of a company’s manufacturing is not foolproof (and gutting a country’s industrial base by off-shoring abroad has long-term negative national security consequences).

However, Kamen was taking a huge risk — manufacturing in-house — for a completely unproven product. In fact, he leased a 77,000 square foot factory with no existing demand (as we’ll find out later, this was a very bad bet).

The next part of the meeting was about government regulations, which was very much in Bezos’ wheelhouse. Why? Because Amazon faced a number of regulatory issues in the first 5-6 years of its existence:

Taxes: One reason Bezos founded Amazon in Seattle, Washington was that the state had no income tax. Separately, he knew that most shoppers would be outside of Washington and Amazon didn’t collect sales taxes when it sold to people in states where it didn’t have a physical presence. By doing so, Amazon had a pricing advantage over its brick-and-mortar competitors. However, regulators would eventually get hip to this arbitrage and Amazon eventually started collecting sales taxes.
Online Sales: As an e-commerce pioneer, Amazon had to figure out data collection, secure online payments and customer privacy as the laws and regulations were being formed.
Anti-Competition Concerns: Amazon’s rapid rise as a major player for (initially) book sales led to tensions with book publishers over pricing and discounts.

Unsurprisingly, Bezos had thoughts about the Segway’s potential regulatory challenges:

"We have an adequate staff", said Tim defensively, but it sounded as weak as the adjective. Tim had lost control of the meeting. That was probably Doerr's plan all along. Dean sat silently, offering no help or defense as Jobs rampaged through Tim's presentation.
[Another Project Ginger colleague] Brian Toohey spoke next, on the regulatory obstacles Ginger would face and how he intended to overcome them. Brian was a big, burly man who knew how to boom his voice, which may explain why he got two minutes into his spiel before Jobs began interrupting. Doerr suggested that instead of going through each slide, everyone should "take a study hall and read the deck" that Brian had handed out, then ask questions. Bezos had already read it, so he started chatting quietly (for him) with Dean.
"Jeff, have you read the entire deck?" said Doerr in a schoolmaster's voice.
"Yes, John, I have," said Bezos, amused.
When the study hall ended, Bezos held up Brian's handout. "I think this plan is dead on arrival," he said. "The U.S.A. is too hostile." The "car guys" were going to lobby against Ginger and they were going to win.
"No they're not," said Brian, smiling.
Bezos suggested starting slow, using one city or country as an experimental station. Once Ginger's benefits were clear, the company would have a wedge to pound into U.S. regulations. The perfect place to begin, thought Bezos, was Singapore. "You only have to convince one guy, the philosopher king, and then you have four million people to test it."
Vern Loucks, who had been quietly watching the fireworks up to this point, said, "You mean Goh Chok Tong. He's not a king, he's the prime minister. I can get us in to see him if we want to do that," he added.

Bezos’ argument makes sense.

Singapore — the city-state famously built by the absolute OG founder CHAD Lee Kuan Yew — is a territory with a few key decision makers.

Jobs wasn’t convinced, though.

In the next bit, he countered Bezos’ advice by highlighting the importance of marketing and messaging. More than maybe any other entrepreneur ever, Jobs knew the power of storytelling and that there was only one chance to make a first impression:

But Jobs was still shaking his head at Bezos's suggestion. Because of the Internet, he said, slow was no longer possible. People would learn about Ginger in a flash of bits and bytes, and would want one now. So a small launch in a foreign place was foolish, because if the machine was unavailable in the United States, the company would blow its chance for $100 million of free publicity in its biggest market. Plus, Singapore was a nest of pirates, and the company would end up spending a fortune fighting them. If the company wanted a slow, controlled launch, better to start on a handful of U.S. college campuses.
"If you show this to Hennessy," Jobs said to Doerr, referring to John L. Hennessy, president of Stanford University and a world-class engineer, "he'll shit in his pants." Evidently Hennessy did that more readily than Jobs did. "And if you offer to give him a hundred of them if he'll run a safety study and a usage study, that's a done deal in ten minutes," continued Jobs. "You do that at ten colleges and maybe at Disney, so people can see them but not buy them."
But he warned that even this sort of slow launch was filled with dangers. If one stupid kid at Stanford hurt himself using a Ginger and then announced online that the machine sucked, the company was sunk, because there was no way to control that or counter it if people couldn't ride one for themselves. With a big fast launch, on the other hand, a few malcontents wouldn't be heard above the general hoopla. "I understand the appeal of a slow burn," he concluded, "but personally I'm a big-bang guy." For the first time that day he smiled. "The risk with a fast burn," he continued, "is that it exposes you to your enemies. You're going to need a lot of money to fight thieves."
"We have a few things they can't get," said Dean. "Specialty components with only one source."
"They'll figure out a way around that," said Jobs.
"I've spent nine years looking," said Dean, "and I don't think so."

One of Bezos’ key management tenets at Amazon is the idea of “one-way door decisions vs. two-way door decisions”.

“A one-way door decision is one that has significant and often irrevocable consequences,” according to the Amazon Web Services blog that ranks at the top of Google searches for queries on examples of Amazon one-way doors decisions that I just typed into the browse right now. “Building a fulfillment or data center is an example of a decision that requires a lot of capital expenditure, planning, resources, and thus requires deep and careful analysis. A two-way door decision, on the other hand, is one that has limited and reversible consequences: A/B testing a feature on a site detail page or a mobile app is a basic but elegant example of a reversible decision.”

Where to launch the Segway was a one-way door decision and Jobs was right. Ultimately, Segway rolled out first in America but a lot of factors led to a muted response. But before we discuss what happened, here’s how the meeting ended:

"I think the emphasis of this conversation is wrong," said Bezos. "You have a product so revolutionary, you'll have no problem selling it. The question is, are people going to be allowed to use it?"
Jobs said he lived seven minutes from a grocery and wasn't sure he would use Ginger to get there. Bezos agreed. Schmertzler wondered if it might be wiser to start with commercial sales. Bezos liked the idea—it was safer and could give the business a solid foundation for growth.
By then it was 10:30. Bezos and Jobs had to leave. As they stood, Dean rose too. He had been almost silent, listening to Jobs like everyone else. Now he thanked Jobs and Bezos for coming. "This is the most energetic discussion we've ever had," he said, "and like all good energetic discussions it leaves you with more questions than answers, and leaves you questioning everything you thought you knew." He paused. "And that's good."

Imagine being a fly on the wall for those two-ish hours.

Based on the Segway's launch, it might have been the highlight for the product's journey.

The Segway’s Legacy

About a year after the Jobs and Bezos meeting, Kamen revealed the Segway to the world. He did so with Diane Sawyer on Good Morning America.

Due to the hype, anything that didn’t cure cancer or let someone walk on water was almost certainly going to arrive with a thud. For a Time Magazine interview around the Segway's release, Kamen even had to joke that “it won't beam you up to Mars or turn lead into gold.”

The product’s rollout was the embodiment of “overpromise and underdeliver” (a skill I have gotten really good at in my marriage).

Technically, the Segway did help you “walk faster" but there was a massive chasm between expectation and reality.

Kamen had prepared a manufacturing facility to produce 6,000 Segways a week. However, at the end of the first year, he was only able to produce...wait for it...10 Segways a week.

The company soon pivoted to different model types, but the business never took off and the Segway was acquired by British entrepreneur Jimi Heselden in 2009. Unfortunately, this next chapter of the Segway story had a sad twist: Heselden died while riding his Segway off a cliff.

Absolutely bonkers.

In an article for Slate in 2021, Steve Kemper reflected on the history of the Segway and also explored whether the leak of his book proposal for Code Name Ginger might have contributed to the product’s failure.

Why? Because those hyperbolic pull quotes from Jobs (“most amazing piece of technology since the PC”) and Bezos (“so revolutionary”) kicked off a hype cycle that no product could have lived up to.

“Once you saw the Segway, it was just a scooter,” writes Kemper. “It could never quite recover from that letdown. And that’s why I can’t stop thinking that the Segway might still have had a chance but for the hype.”

Jobs and Bezos definitely whiffed on their most optimistic takes. However, their meeting analysis made a ton of sense. Feels like the Segway just wasn’t meant to be.

In addition to overhype, Kemper says the Segway failed because:

Way too big: Kamen went with a bulkier design in hopes that the Segway would receive interest from corporations and large organizations (potential orders from the US Postal Service and Disney workers at Disneyland never came through). Its weight — at 65lbs — was a major turnoff for normal consumers.
Larger size = lower battery life: By ditching a “trim, sporty version”, Kamen created a vehicle that was too heavy and drained battery life very fast (battery tech was nascent in the early-2000s and the Segway’s design — with the battery department “hermetically sealed” — meant it was very hard to do perform quick battery swaps).
Regulatory hurdles: Kamen had to work with dozens of cities and states to write new legislation allowing the Segway on sidewalks. The process was time-consuming and he couldn’t cover the entire country by launch.
Too expensive for retail: While Bezos said the device would “sell itself”, Kamen probably should have done some market research. The $3,000 price tag (or ~$6,000 in 2024 dollars) hugely restricted the addressable consumer market.

Many years after the Segway launch, Bezos had a notable hardware failure of his own: in 2014, his company invested $170m+ into the Amazon Phone, which was failed right out of the gate. Reflecting on the flop, Bezos said “if the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle.”

I think it was this mentality that led him to be seduced by the Segway (it’s the same mentality that led to the creation of Amazon in the first place). Transportation is a massive category and both Amazon and Apple have moved into the industry. Amazon has been much more successful with a sprawling logistics network along with a fleet of plane and van delivery vehicles. Meanwhile, Apple recently shut down a self-driving car project that it spent $10B and 10 years developing.

In 2015, Segway was acquired by Chinese manufacturer Ninebot and the company stopped producing the personal transportation vehicle in 2020.

For this invention, Kamen took a huge shot and missed. It happens.

While the Segway never revolutionized transportation, the two-wheeled vehicle has made me shit my pants on multiple occasions including Hilarious bits from Will Arnett (aka Gob Bluth in Arrested Development aka probably my favourite sitcom ever) and Kevin James (aka Paul Blart in Mall Cop).

And never forget that demented parody from South Park that includes fake Bill Gates and also a fake Steve Jobs saying “we’re going to have to rethink cities” while a Segway-like vehicle is demo’d by…uhhh…I can’t really explain but you can see for yourself in this clip.

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Links and Memes

Costco Membership prices are up…for the first time in 7 years in the US and Canada. Gold memberships went from $60 to $65 (while Executive went from $120 to $130).

On a related note, Berkshire Hathaway board member Chris Davis once asked Charlie Munger why Costco didn’t drop the membership card and just let anyone shop and raise prices by 2% (still great value), thus making up for lost membership fees (and more). Davis relayed the story on The Knowledge Project podcast and here was what Munger told him:

“Think about who you’re keeping out [with a membership card]. Think about the cohort that won’t give you their license and their ID and get their picture taken. Or they aren’t organized enough to do it, or they can’t do the math to realize [the value]…that cohort will have a 100% of your shoplifters and a 100% of your thieves.
Now, it’ll also have most of your small tickets. And that cohort relative to the US population will probably be shrinking as a % of GDP relative to the people that can do the math [on Costco’s value].”

To be sure, this was a pure thought experiment. Costco’s membership fees are super high margin (on ~$5B a year) and accounts for the majority of Costco profits. Its retail margin is tiny on ~$230B of annual sales. Costco would need another $150B-200B in retail sales to make up for the profit loss on those membership fees.

The customer filter is also a major reason why Costco has very low shrinkage, a fancy word for things getting stolen. With shrinkage at only 0.1% of sales, the $400B retailer is 10x better compared to an industry average of 1.4% (another reason for low shrinkage is that it’s really hard to steal a 60-pack of canned tuna or 15-pack of Heinz Ketchup).

To be honest, I did awful Costco math for years. I only got a Gold Membership three years ago. Then, every single time I did a shop, the cashier told me to upgrade to the Executive tier. Based on my spending levels, the 2-3% cash back on the Executive card would have paid back in a few visits. But I was literally too lazy to walk over to the membership counter.

Anyway, this is a long way of saying that my inability to do the Costco value math is probably related to how I made so many awful investments in zero-revenue SPACs during the 2020-21 bubble.

***

Founder Mode vs. Manager Mode: Y-Combinator co-founder and prolific writer Paul Graham dropped the most-talked about tech essay in a while. Titled “Founder Mode”, it’s a brief overview of a talk that Airbnb founder Brian Chesky gave about how he was given bad advice on how to scale his company.

The TLDR: business school and consulting types advise that founders should "hire good people and give them room to do their jobs” when scaling a company. Graham says that this type of delegation often leads to the hiring of “professional fakers” and letting them “drive the company into the ground”. That’s manager mode.

Founder mode means that leaders should stay closely involved with (and maybe even micromanage) every part of the business. There are a ton of caveats but the essay seemed to touched a nerve because it put a framing — founder mode vs. manager mode — on a tension that a lot of companies face. Commenters were quick to point out that some “managers” are very Founder Mode-y (Satya Nadella at Microsoft) while there are a lot of founders that...aren't great (SBF, Elizabeth Holmes).

Conversely, the most hands-on founder types are well known (think Steve Jobs holding annual retreats with 100 top Apple execs or Elon Musk sleeping on the SpaceX factory floor or Jensen Huang with 50+ direct reports at Nvidia).

Graham thinks “founder mode” should receive the same amount of study as existing business management. Until those studies drop, my perception of “Founder Mode” is similar to what former Supreme Court Justice Potter Stewart said about porn obscenity: “I know it when I see it.”

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Some other baller links:

“Why Can't the U.S. Build Ships?”: A fascinating deep-dive on why America doesn’t have a competitive ship-building industry. During WWI and WWII, the country was able to speed-run shipbuilding and manufacture the most global tonnage but — due to a protectionist industry combined with high steel and labor costs — it was an inefficient shipbuilder during peace time. Now, China is making 1.7k+ commercial ships a year while America is making less than 10 (yes, as in single digits, not a typo). (Construction Physics)
“How Fox Threw a Tom Brady Hail Mary and Won”: A behind-the-scenes recounting of how Fox Sports nabbed the GOAT quarterback to announce NFL games on a $375m contract over 10 years. (The Ringer)

…and here them fire posts: