Goodbye Yellowbrick Road - Week in Review 17/12
Renter's Insurance, Corporate Dumbassery, and Elton John
So I was going to write about the intersection of religion and entrepreneurship, having been inspired by a Pew report that said less than 10% of Germans ‘say religion is very important in their lives’. However, I think the topic deserves more time and care, so I will work on it over the holiday with the goal of publishing a substantial piece in mid-Jan.
Alrighty, on to the stuff I saw this week.
Future of Insurance?
Zero-to-100 Million in Three Years by Daniel Schreiber
Lemonade is killing it.
Allow me to quickly explain what they do. Lemonade offers renters and homeowners insurance cheaply and nearly instantly via a mobile app. They use some seriously powerful ML stuff behind the scenes, which allows them to experiment with novel risk models and offer their customers extremely competitive prices. In fact, Chris Zeoli over at SignalFire notes that their price point could and should be much higher once Lemonade stops priortizing growth at all costs.
Regardless of pricing strategy, going from $1m to $100m ARR in 30 months is ridiculous. Even better, Lemonade has killed the upselling game. In a bit more than a year, they have moved from homeowners policies making up 5% of total sales to 35% today. As their CEO notes, the average premium of a homeowner is 6x than that of a renter. Not bad!
CEO Daniel Schreiber goes into some detail about Lemonade’s expansion to Germany. This section cracked me up: “AI Maya greets the user by introducing herself and asking their name. This works well in the US, but it turns out that the German consumer often doesn’t feel ready to share their name at the beginning of the interaction – so we’ve shuffled things around some.”. Ja, stimmt ;)
Nonetheless, I think it’s pretty interesting that Germany is the first foreign market for Lemonade. Home ownership in Germany is super low compared to peer countries, especially amongst poorer households, due to a strong history of socially subsidized housing and a cultural aversion to holding illiquid assets.
So why did Lemonade come to Germany? I have a few ideas. Clearly, Lemonade is in growth-at-all-costs mode. While premiums are higher for homeowner policies (unclear if the 6x from the article applies to European customers), it probably makes more sense for Lemonade to attack the German market because CAC is likely lower given the volume and relative uniformity of German renters while they have a significant interest in supporting the narrative of blitz-growth (just look at the tone of the article). Therefore, a strategy of cheaply acquiring many users quickly makes abundant sense for Lemonade at this point.
Finally, I’m curious to see how Lemonade expands throughout Europe, given the above chart. Probably Nordics next?
Why do Managers do Dumb Things?
Strategy Drunk by Nathan Baschez
Corporate dumbassery seems to be the rage these days. The WeWork fiasco is the most obvious example but things like the poorly executed and highly controversial Peloton ad, coupled with our Twitter-intensified rapid news cycles, means poor decisions at the corporate level reverberate prominently.
Nathan over at Divinations has an explanation for these poor choices. He calls it ‘Strategy Drunkenness’. Different than your run-of-the-mill incompetence, ‘strategy drunk’ is when managers, so obsessed with enacting change, ignore basic constraints of reality.
People not wanting the change or the tech, meant to enable the new strategy, not working are often afterthoughts for ambitious, strategy-drunk managers.
Nathan rightly points out that managers who don’t get at least a little strategy drunk will never create anything new. In fact, the tendency to be a dumbass, in the sense of sometimes ignoring game theoretical dominant strategies , is ultimately a positive for humanity, because this irrationality is at the core of innovation and entrepreneurship.
There is a lesson to be learned here for those in the political world. Among many other issues, it’s quite clear that Western democracy is a bit too obsessed with rationality. Left leaning folks, especially, swear that their beliefs and favored policies are best due to their overwhelming logic and rationality. The problem is, unfortunately, that there exist hard and irremovable constraints, chief among them the fact that people don’t want to experience some things, that very much limit not just what is politically possible, but more so what is tenable and workable.
The Life of Sir Elton John
More a Voyeur by Colm Tóibín
This review of Elton’s new memoir Me is simply a lot. I don’t want to say too much but will just pinpoint some of my favorite elements.
Unsupportive parents. Grinding to get traction in his career. Voyeuristic sexual appetite. Massive substance abuse. Horrific treatment of partners. Redemption later in life. All eclipsed by sheer musical talent.
An incisive piece of writing by a wonderful writer.
Song of the Week
Gil Scott-Heron - We Almost Lost Detroit
Is there anything smoother than the music of Gil Scott-Heron? The man’s music literally oozes cool, it’s frankly difficult to grasp the spirit that pervades his songs from the funky and strange instrumentals to his profoundly soulful voice.
More than anything, I find his music conveys an extremely unique American spirit. One characterized by violent emotion, loss and wonderment at the strangeness of the cosmos. I’m looking forward to getting back home for the holidays :). I’ll be heading to Wyoming and then NYC thereafter. Shout if you’re around.
Trivia Q: who are the two senators from Wyoming?
See you later Europe!