Business

Starbucks makes it easy to load money into its app to use at a future date. So easy, in fact, that it's holding about $1.6 billion of its customers' money, interest free.

This makes Starbucks look kinda like a bank that sells coffee — and a pretty lucrative one at that.

McDonalds owns most of its buildings. And since ~85% of its locations are franchises, it gets much of its income from leasing its property to franchisees.

This makes McDonalds look a little bit like a real estate company that happens to sell burgers and fries.

And airlines? Their loyalty programs often have valuations that are higher than the value of the actual companies that run them. This means that airlines actually have a negative valuation, at least if you analyze them in an overly reductive way.

They make their money selling miles to credit card companies, not from flights.

As organizations grow, they have a tendency to find ways of sustaining themselves on activities that are adjacent to or otherwise removed from the value they originally offered.

This isn't inherently bad. But if you get distracted by growing for the sake of it, you can start to lose sight of your mission. As environmentalist Edward Abbey pointed out, “Growth for the sake of growth is the ideology of the cancer cell.”

So stay true to your north star — whether that's bringing something innovative to market, delighting others with your art, or opening doors so that others can enjoy the same level of success as you.

You might even discover you grow faster that way.

Henry Ford had the famous insight that if you assign each factory worker one task, you can dramatically increase production capacity.

Today, in most industrial systems across every market, this is the norm.

Richard and Maurice McDonald brought this idea to the food industry in 1940, and pretty soon, every major city in America had a McDonalds serving perfectly identical hamburgers and fries.

Fast forward over half a century, and we've now seen that an incredibly efficient system like this has some drawbacks. For one, when meals are created on an assembly line, they start to lose the personal touch that makes food so socially important.

Sweetgreen, a fast casual chain which serves salads and other bowls of fresh food, offers a partial antitode to this: In contrast to Chipotle, for example, only one employee assembles the entirety of each customer's meal in front of them.

It's a subtle change. But it adds just a little bit of humanity back to the industrialized process when someone can say, "Here, I made this for you."

Hat tip to Emily Heyward for the Sweetgreen example, from her book Obsessed: Building a Brand People Love from Day One.

Bureaucracy evolves as a defensive mechanism. As an organization acquires greater assets and reputation, it makes sense to implement procedures to protect them.

If you work in a hospital, there is a long list of things that need to be checked off before the scalpel comes out. When the stakes are high and making a mistake is easy, it's worth sacrificing efficiency.

If you're operating on a patient's right leg, how do you know if it's your right or your patient's right? If two Jane Smith's are scheduled on the same day, which one needs the lung transplant and which one is getting her gall bladder removed? And what happens when the assistant gets distracted by an emergency and forgets to swap out the surgery plan from the previous operation?

For those who work in this kind of environment, drawing an 'X' on the limb that needs amputating, handing out wristbands, and asking the patient for their date of birth a third time are essential practices.

There's a cost, however, to adding this kind of bureaucracy when it's not necessary.

Bureaucracy feels safe, because it is.

But if the resulting inefficiency steals precious time from the things that matter most, suppresses staff morale, and makes you less nimble in a constantly changing world, it might be time to reconsider your process.

Initial success doesn't guarantee future results.

Online mattress retailer Casper announced this week that it's being acquired by a private equity firm. The startup popularized direct-to-consumer mattresses in a box, went public at a $1.1 billion valuation, and then plummeted to around $575 million after its IPO.

Selling mattresses online is pretty easy (as of 2019 Casper had 175 competitors). But making a profit doing so is hard. In the third quarter this year, Casper lost a staggering $25.3 million, putting it in the majority of online mattress companies that have yet to make a profit.

Where's the money in the industry going? A big chunk of it is going to the online mattress reviewers, who receive free mattresses from companies to test. These sites typically receive around $50 for every referral they make that results in a purchase (and sometimes as much as $250).

Derek Hales, the creator of one of the most successful mattress review sites, Sleepopolis, apparently made $100,000 from just a single mattress company in 2016 through his referrals. He is more profitable than most of the mattress startups he's promoting.

In a crowded market, sometimes selling pickaxes to gold miners is a better strategy than actually mining for gold.