Scale Carefully. Random Takes. Will: Make The Save!

A Haunted Headcount. Mid-February Thoughts. A Goalkeeper For The Ages.

  • The desire to scale quickly has presented some very interesting scenarios for start ups across the world. The pressure to scale comes from institutional and private investors who want to see their positions with these companies yield positive returns – sometimes to the point of ad nauseum. The spectrum of financial metrics have expanded over the years, especially considering the level of sophistication some private equity firms have instituted to garner weekly, monthly, quarterly, and annual financial data. Here are a few financial metrics to ponder:

Gross Profit Margin. Runway. LTV.
Return on Sales. Operating Margin.
Net Profit Margin. Operating Cash Flow Ratio. CAGR.
Current Ratio. MRR. Working Capital. EBITDA.
Quick Ratio. Acid Test. CAC. COGS.
Gross Burn Rate. IRR.

Now that I have you Dazed and Confused (Milla Jovovich was memorable in that 1993 movie), I am a bit confused as well. My case in point is Peloton. Once the darling of Wall Street, this “fit-tech” company scaled quickly but now has fallen on hard times. They have taken a beating after peaking early in the pandemic as homebound consumers turned to Peloton’s bikes to stay in shape, but sales have since turned to a trickle with the stock falling 80% from its all-time high in early 2021. I do understand that people returning to gyms, the supply chain, and competitive pressure have slowed Peloton sales down, but what I do not understand is how their Board and senior executives allowed headcount to grow exponentially, leading to the span of control actually spiraling out of control.

Peloton is expecting a $313 million operating loss – and better late than never finally took action last week by replacing CEO John Foley…and unfortunately terminating 2,800 employees, which was 20% of their workforce. So, while the consistent spiral of Peloton resulted in the Board finally taking action, can someone please explain to me how a company can cut 20% of its workforce and maintain operating efficiencies?

If I am Peloton investor, my first and big question is WHAT THE HELL WERE THOSE 2,800 PEOPLE DOING AT PELOTON IN THE FIRST PLACE, IF YOU COULD JUST CUT THEM FROM YOUR PAYROLL? I’m not the sharpest pencil in the stack so can someone please enlighten me? Here is a side note just to add a bit of fuel to the fire: Last December, while Peloton’s stock continued to plummet, former CEO Jim Foley bought a $55 million home in the Hamptons. He hosted an invite-only holiday party for Peloton instructors, though he had canceled a company-wide holiday event and froze hiring. Foley is laughing all the way to the bank while 2,800 people are looking for a job. Disgusting behavior.

Some mid-February things I think I think:

  • Amazing that it had not happened earlier, but there was finally a failure with a private space entity. Last Thursday, space exploration company Astra had their first launch result in the rocket spiraling out of control and losing its payload of satellites. I’m sure Astra will be back bigger and better very soon.
  • I’m a decent athlete but to date I have not conquered the art of ice skating. Then I watch what Nathan Chen does to earn a gold medal. I cannot imagine having that type of ability while wearing ice skates. My friend Richie can…he is a big Brian Boitano fan. 🙂
  • What exactly is Russia’s end game with their buildup of troops on the Ukrainian border? Let’s hope the Russians pull their troops off the border soon before this escalates into all-out war.
  • LSU’s Joe Burrow against the University of Georgia’s Matt Stafford in tonight’s Super Bowl. I am hoping that this game follows the thread of those crazy-fun playoff games.
  • Inflationary woes continue to be top of mind. Some of this is due to the supply chain issues, which certainly are not getting any better with Canadian truckers blocking entry points into and out of the United States…but that is a story for another time. On September 25th of last year, I posted about the number of cargo ships that were in queue off the coast of California, waiting to offload their cargo at the ports of Los Angeles and Long Beach. That number was sixty-two. Almost five months later, this update comes to us from the Wall Street Journal: As of February 8th, the number of container ships queuing to enter the ports of Los Angeles and Long Beach declined to 78 vessels, down from the peak of 109 ships reached a month earlier, according to the Marine Exchange of Southern California. C’mon…there must be a way to speed up this process. Maybe we should employ SpaceX and NASA to help solve our supply chain issues? Moving the new StarShip spacecraft prototype to Kennedy Space Center’s 39A launch pad is a logistical nightmare:
Maybe SpaceX can solve the supply chain issue?
  • The day originated as a Western Christian feast day, to honor one or two early saints named Valentinus. That means tomorrow is Valentine’s Day – have fun and enjoy!

  • With an ownership group that includes Magic Johnson and Will Ferrell, the Los Angeles Football Club (LAFC) plays in the Western Conference of Major League Soccer. The club began play in the 2018 season at the beautiful Banc of California Stadium, and over the last few years one member of the ownership group is well known to insert himself into the thread of the team. Will Ferrell attends most home games, some away games, and is serious about soccer and his club. I can’t explain the nuances of Will Ferrell, and after he made another appearance at a team training session, I am sure the LAFC players feel the same as I do. The player front and center is Carlos Vela, who before joining LAFC, played with the Mexican National Team as well as big clubs in England and Spain. Vela’s smile and wonderment with Ferrell is priceless.
Is Ferrell ‘in character’ or is this just Will Ferrell?

Adios, pay it forward, be safe, enjoy the Super Bowl, and all of you have a very nice Valentine’s Day.

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