Speedwell Research's News Update and Weekly Recap
Luxury Wins (Again), Value Extraction Risks, Early Airbnb History, Being Beloved to Drive Customer Loyalty
Welcome to Speedwell Research’s Newsletter. We write about business and investing. Our paid research product can be found at SpeedwellResearch.com. You can learn more about us here.
This is a weekly recap, where we summarize recent content you may have missed.
Table of Contents:
Speedwell Releases & Upcoming
Spotlight
Coverage Updates
Sharing Links
1. Speedwell Releases & Upcoming.
Research.
We released a memo on Airbnb’s business history.
This is the story of how 3 guys in San Francisco went from air mattresses to a $100B empire.
This is a free excerpt of our research report on Airbnb.
The Synopsis Podcast.
We posted two podcast episodes this week!
1) The first is an interview episode with Simon Kold! Simon is the author of the book “On the Hunt for Great Companies”! We talk about creating value versus extracting it, network effects, and dig into Ryanair and Dolby Atmos.
2) The second was an article episode on Airbnb Business History. This is an excerpt of our research report on Airbnb. We discuss how Airbnb went from air mattresses to a $100B empire. A masterclass in persistence, distribution hacks, market reframing, and how early signals compound into real business value.
Upcoming.
Podcast
Releasing next week, an exclusive interview with William deGale who manages $2bn in AUM and has returned ~17% per annum in his Global Tech fund since inception. Be sure to follow the podcast on Spotify or Apple Podcasts to get alerted when new episodes drop!
Research
Our next research report will be on AppFolio! This is a vertical market software company that caters to real estate property owners.
Coverage
There are no conferences or earnings for our companies next week.
Become a Speedwell Member today to get access to all of our research updates and our in-depth research reports!
2. Spotlight.
Below are select quotes from our various writings and podcast.
A Counter-Intuitive Tariff Impact on Retailers:
Synopsis Interview: Author of “On the Hunt for Great Companies” talks Amazon, Airlines, and Advantaged Businesses
The Quality and Value Link: “If you're a fundamental investor, what you're trying to do is determine whether the price that you pay is below the value that you perceive the company to be worth, right. You need to determine quality to be able to determine value, so I think you cannot just separate quality and value.”
People are Long Term Growth Drivers: “The longer your investment time horizon, your expected holding period, the more people matter because they compound and accumulate through both capital allocation and strategic decisions.”
The Difficulty to Untangle a Network Effect: “Network effects are strong enough that even if a competitor technology were to come out, that was a little superior, it wouldn't be sufficient to displace their position.”
The Importance of Looking at Competitive Disadvantages: “You have one type of competitive advantage, and then you focus on that… It's just like you have to invert, you have to look at the kind of disadvantages your company is facing as well.”
The Risk of Value Extraction: “The more they value extract, the less slack they're going to have in the future. And so customers are going to be much more ready to switch as soon as that moment arrives.”
Airbnb Business History
Belief Comes Before Ability: "There’s something I need to tell you. We’re going to start a company one day and they’re going to write a book about it.”
Critics Don’t Know: “When Chesky found a designer he highly looked up to and explained the idea to him, his response was terse: ‘I hope that’s not the only thing you’re working on.’”
Paul Graham on Airbnb Founders Grit: “You guys are like cockroaches. You just won’t die… If you can convince people to pay forty dollars for a four-dollar box of cereal, you can probably convince people to sleep in other people’s airbeds.”
Build a Business That People Love Rather Than Chasing Vanity: “Graham instilled in them a lesson from Jeff Bezos—it is much better to have 100 users that love you than a million that “sort of like you”.”
Read the Airbnb Business History memo here
The Consumer Hierarchy of Preferences: The Other Side of the Consumer Value Prop
Desires Drive Buying Decisions: “The Consumer’s Hierarchy of Preferences is the idea that consumers have an internal “weighting” of desires, and once a desire is filled to a certain degree, addressing their next order desire becomes more important. When a company addresses a sufficient number of a consumer’s desires, they make a sale.”
Bought But Not Beloved: “As consumers, we buy all sorts of things that get a job done for us, but we don’t love. That’s because these items hit a sufficient number of desires on the Consumer’s Hierarchy of Preferences to elicit a sale, but not enough to address all of our preferences.”
The Signs of Consumer Surplus: “When a consumer is totally satisfied with a purchase and raves about the company or product, it is because they have more preferences filled beyond the point that they would have already satisfactorily purchased the item. In such cases, the company is creating a consumer surplus. Great companies create consumer surplus (most companies don’t create any).”
When Consumer Surplus Fades, Churn Follows: “When the consumer surplus deteriorates, customers stop saying they ‘love shopping at Costco’, and eventually you start seeing that show up in higher shopper defections. To put it in finance terms, consumer surplus shows up in lower churn and thus higher customer lifetime value.”
Read The Consumer Hierarchy of Preferences: The Other Side of the Consumer Value Prop memo here
3. Coverage Updates.
Meta Antitrust
FTC Sues Facebook for Antitrust
“The Federal Trade Commission has sued Facebook, alleging that the company is illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct.”
“The FTC is seeking to force Meta to restructure or sell Instagram and WhatsApp.”
“Meta has argued that its purchases of Instagram in 2012 and WhatsApp in 2014 have benefited users, and that Zuckerberg's past statements are no longer relevant amid competition from ByteDance's TikTok, Google's YouTube and Apple's messaging app.”
“The FTC claims that Meta holds a monopoly on platforms used to share content with friends and family, where its main competitors in the United States are Snap's Snapchat and MeWe, a tiny privacy-focused social media app launched in 2016.”
“Platforms where users broadcast content to strangers based on shared interests, such as X, TikTok, YouTube and Reddit are not interchangeable, the FTC has argued.”
4. Sharing Links.
Check out Speedwell Research’s Drew Cohen’s YouTube Channel. It is focused on general investing and business content. Videos are released twice weekly. Feel free to drop questions you want answered on any video!
Diversification Explained
Understanding the purpose of diversification
Getting to the real risks
Breaking Down The $1 Trillion Trade Deficit
Understanding trade from First Principles
Warren Buffett’s View
Other Links.
A Letter a Day: Norges Bank Investment Management Portfolio Manager Stephanie Vardheim on the Life of a Portfolio Manager (link)
Leandro (Best Anchor Stocks) on The Hidden Costs That Hinder Long-Term Returns (link)
Michael Mauboussin on the Sources of Total Shareholder Returns (2023) (link)
And a special thank you to Matthew Harbaugh for helping put this weekly recap together!
The Synopsis Podcast.
Follow our Podcast below. We have four episode formats: “company” episodes that breakdown in-depth each business we write a report on, “dialogue” episodes that cover various business and investing topics, “article” episodes where we read our weekly memos, and “interviews”.
Speedwell Research Reports.
Become a Speedwell Research Member to receive all of our in-depth research reports, shorter exploratory reports, updates, and Members Plus also receive Excels.
(Many members have gotten their memberships expensed. If you need us to talk with your compliance department to become an approved vendor, please reach out at info@speedwellresearch.com).
