Speedwell Weekly Recap

Edition #2: Judging CEOs, app fails, Real Estate as CAC, forgotten Berkshire holding, and a new metric to judge retailers

This is a new series where we compile some of the best content we put out each week. You can expect to get a mix of interesting and insightful takeaways on various businesses and investing! Follow us at @speedwell_llc and @kevg1412 for more timely updates!

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Business Philosophy

The Inventory Value Capture Index

We published Part 3 of our series on The Consumer’s Hierarchy of Preferences (CHOP) framework, where we introduce a new financial metric we created to assess retailers: The Inventory Value Capture Index. Having trouble comparing retailers like Hermes, Lululemon, LVMH, and Zara, or assessing Shein or Aritzia? Look no further:

Speedwell Research @Speedwell_LLC

Almost all business strategy can be boiled down to (1) selling a lot for a little or (2) selling a little for a lot. But how do you know if a retailer is making the right trade-off between price and turns? The Inventory Value Capture Index explains all.

speedwellsnippets.substack.comThe Consumer’s Hierarchy of Preferences: Assessing Retail Strategies with The Inventory Value Capture IndexSpeedwell Research: Business Philosophy Series

Speedwell Research Universe

Meta

What is going to be the next big social media app? Well, it won't be any of these failed attempted by META...

Speedwell Research @Speedwell_LLC

In order to be efficient, you need to optimize limited resources. In order to not miss opportunities you need to risk waste. $META has had a mixed history balancing these forces. We found many failed experimental apps in our research diligence. ⬇️ Below are 10 of them ⬇️

RH

In the threads below, we share RH's Real Estate model and spirited quotes from CEO Gary Friedman. You can see how Friedman thinks like an owner (he is the largest owner at >20%! — with Berkshire the second largest with a ~10% stake). 

Speedwell Research @Speedwell_LLC

McDonald’s had the unique insight of owning the real estate on which they operated. The idea was that just selling burgers wasn’t going to capture most of the value they were creating. Fast forward half a century and RH, a furniture company, is reiterating the playbook. ⬇️

Speedwell Research @Speedwell_LLC

“It’s about the lack of imagination in retail. Most retail stores are archaic windowless boxes that lack any sense of humanity.” Before and after photos of RH transforming a Saks Fifth Avenue.

Speedwell Research @Speedwell_LLC

When a furniture brand opens a “not a hotel” and doesn’t place any of their furniture in it. Rooms start at $2,000 and there are no photos available of the bedroom’s interior anywhere. $RH

Speedwell Research @Speedwell_LLC

Gary Friedman of $RH was asked about a 10 point decel and when it’ll get better: “I don’t know. We are just telling you there’s been a change. It’ll hit our stock today. I got it, whatever. We are playing for the long run. I’m going to tell you the truth and be transparent”

Speedwell Research @Speedwell_LLC

One of the rare times a CEO makes the distinction between the business and its stock.

General Updates

History

Charlie Munger is famous for collecting stories and examples of failures. So after having shared a collection of failed Meta products, it’s only fitting to share a speech by Peter Kaufman, who was the driving force behind the creation of Poor Charlie’s Almanack.

Kevin G. @kevg1412

A Letter a Day -- Letter #65: Peter Kaufman (2020)

aletteraday.substack.comLetter #65: Peter Kaufman (2020)CEO of Glenair & Editor of Poor Charlie’s Almanack | An Unsung Hero

Berkshire is the second largest shareholder of RH. Warren Buffett has long praised Jamie Dimon’s annual letters, and recommended investors read them. But before Jamie was the CEO of JP Morgan, he was the CEO of Bank One, where he led their turnaround and subsequent acquisition by JP Morgan. It was his Bank One shareholder letters that initially caught Buffett’s attention.

Kevin G. @kevg1412

A Letter a Day -- Letter #64: Jamie Dimon (2001)

aletteraday.substack.comLetter #64: Jamie Dimon (2001)Chairman and CEO of JP Morgan | 2000 Bank One Shareholder Letter

RH went through a period of growing pains as both a public company and a private company. In the transcript below, Benchmark Partner Eric Vishria shares some of growing pains he experienced while building Rockmelt in a speech titled What Every Founder Needs to Know About Building a Management Team Before It's Too Late.

Kevin G. @kevg1412

A Letter a Day -- Letter #62: Eric Vishria (2013)

aletteraday.substack.comLetter #62: Eric Vishria (2013)Partner at Benchmark | What Every Founder Needs to Know About Building a Management Team Before It’s Too Late

Links of Note

• Lei Zhang on Hillhouse’s acquisition of Belle International

• Steve Jurvetson on celebrating the child-like mind

• Investing vs Speculating

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Thanks for reading this week’s roundup! If you have any questions or suggestions on what you’d like to see more of, please reach out!