It took me years to understand the power of writing.

YouTube, TikTok, and Instagram are nice. But think about why we’re still writing emails, sending text messages, and using Twitter.

We can see how people think by reading the words they wrote. I am often distracted by the noise in most videos. If you look around, wisdom usually comes in the form of words.

Here I’ve collected some emails, memos, and letters written by people who have changed our lives.

Let’s go.

If we have any hope of a thriving planet—much less a business—it is going to take all of us doing what we can with the resources we have. This is what we can do.

I never wanted to be a businessman. I started as a craftsman, making climbing gear for my friends and myself, then got into apparel. As we began to witness the extent of global warming and ecological destruction, and our own contribution to it, Patagonia committed to using our company to change the way business was done. If we could do the right thing while making enough to pay the bills, we could influence customers and other businesses, and maybe change the system along the way.

We started with our products, using materials that caused less harm to the environment. We gave away 1% of sales each year. We became a certified B Corp and a California benefit corporation, writing our values into our corporate charter so they would be preserved. More recently, in 2018, we changed the company’s purpose to: We’re in business to save our home planet.

While we’re doing our best to address the environmental crisis, it’s not enough. We needed to find a way to put more money into fighting the crisis while keeping the company’s values intact.

“Truth be told, there were no good options available. So, we created our own.” One option was to sell Patagonia and donate all the money. But we couldn’t be sure a new owner would maintain our values or keep our team of people around the world employed.

Another path was to take the company public. What a disaster that would have been. Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility.

Truth be told, there were no good options available. So, we created our own.

Instead of “going public,” you could say we’re “going purpose.” Instead of extracting value from nature and transforming it into wealth for investors, we’ll use the wealth Patagonia creates to protect the source of all wealth.

Here’s how it works: 100% of the company’s voting stock transfers to the Patagonia Purpose Trust, created to protect the company’s values; and 100% of the nonvoting stock had been given to the Holdfast Collective, a nonprofit dedicated to fighting the environmental crisis and defending nature. The funding will come from Patagonia: Each year, the money we make after reinvesting in the business will be distributed as a dividend to help fight the crisis.

It’s been nearly 50 years since we began our experiment in responsible business, and we are just getting started. If we have any hope of a thriving planet—much less a thriving business—50 years from now, it is going to take all of us doing what we can with the resources we have. This is another way we’ve found to do our part.

Despite its immensity, the Earth’s resources are not infinite, and it’s clear we’ve exceeded its limits. But it’s also resilient. We can save our planet if we commit to it.

From: Steve Jobs sjobs@apple.com

Date: October 24, 2010 6:12:41 PM PDT

To: ET et@group.apple.com

Subject: Top 100 – A

Here’s my current cut.

Steve

2011 Strategy – SJ

• who are we?

• headcount, average age, …

• VP count, senior promotions in last year

• percent new membership at this meeting

• what do we do?

• pie chart of units/product line and revenues/product line

• same charts with tablets + phones merged together

• Post PC era

• Apple is the first company to get here

• Post PC products now 66% of our revenues

• iPad outsold Mac within 6 months

• Post PC era = more mobile (smaller, thinner, lighter) + communications + apps + cloud services

• 2011: Holy War with Google

• all the ways we will compete with them

• primary reason for this Top 100 meeting – you will hear about what we’re doing in each presentation

• 2011: Year of the Cloud

• we invented Digital Hub concept

• PC as hub for all your digital assets – contacts, calendars, bookmarks, photos, music, videos

• digital hub (center of our universe) is moving from PC to cloud

• PC now just another client alongside iPhone, iPad, iPod touch, …

• Apple is in danger of hanging on to old paradigm too long (innovator’s dilemma)

• Google and Microsoft are further along on the technology, but haven’t quite figured it out yet

• tie all of our products together, so we further lock customers into our ecosystem

• 2015: new campus

State of the Company – Peter & Tim

• FY2010 recap

• FY2011 plan

• where is our business – geo analysis (NA, Euro, Japan, Asia, possibly break out china) (present on map)

• key milestones, trends & future goals

• comparisons with Google, Samsung, HTC, Motorola & RIM

iPhone – Joz & Bob

• 2011 Strategy:

• “plus” iPhone 4 with better antenna, processor, camera & software to stay ahead of competitors until mid 2012

• have LTE version in mid-2012

• create low cost iPhone model based on iPod touch to replace 3GS

• Business & competitive update

• show Droid and RIM ads

• Verizon iPhone

• schedule, marketing, …

• iPhone 5 hardware

• H4 performance

• new antenna design, etc

• new camera

• schedule

• CONFIDENTIAL

• cost goal

• show model (and/or renderings) – Jony

iPad – Bob, Jony, Dan Riccio, Michael Tchao ,Randy Ubillos, Xander Soren, Roger Rosner

• 2011 Strategy: ship iPad 2 with amazing hardware and software before our competitors even catch up with our current model

• Business & competitive update – Michael

• Apps, corporate adoption, …

• show Samsung, HP(?) and iPad ads

• 2011 Product Roadmap – Bob, Dan & Jony

• iPad 2

• new ID, H4, UMTS + Verizon in one model, cameras, …

• EVT units & cases

• HDMI dongle (use for projection of demos below?)

• iPad 3

• display, H4T

• DEMOS:

• PhotoBooth (Michael?)

• iMovie (Randy)

• GarageBand (Xander)

• text book authoring system (Roger)

• working display for iPad 3 (during break)

iOS – Scott, Joz

• Strategy: catch up to Android where we are behind (notifications, tethering, speech, …) and leapfrog them (Siri, …)

• Timeline of iOS releases from first until Telluride, including Verizon

• Jasper tent poles

• Durango tent poles (without MobileMe)

• Telluride tent poles (with “catch up” and “leapfrog” notations on each one)

• DEMOS:

• Jasper: AirPlay to AppleTV – video from iPad, photos from iPhone, ??

• Durango: ?? (without MobileMe features)

• Telluride: Siri, ?

MobileMe – Cue, SJ, Roger Rosner

• Strategy: catch up to Google cloud services and leapfrog them (Photo Stream, cloud storage)

• Android

• deeply integrates Google cloud services

• way ahead of Apple in cloud services for contacts, calendars, mail

– 2011

• Apple’s year of the cloud

• tie all of our products together

• make Apple ecosystem even more sticky

• Free MobileMe for iPhone 4, iPad and new iPod touch

• Jasper

• Sign up with Apple ID, Find My iPhone

• Durango

• Find My Friends, Calendar, Contacts, Bookmarks, Photo Stream

• April

• iWork cloud storage

• Telluride

• cloud storage for third party apps

• iOS backup

• new iDisk for Mac

• Growth

• projected growth, cost/user

• plan to scale to 100 million users

• transition plan for paid members

• what about email?

• DEMOS:

• Find My Friends

• Calendar

• Photo Stream

• iWork cloud storage (Roger Rosner)

Mac – David Moody, Bob, Craig Federigi, Randy Ubilos & ?

• Hardware roadmap

• Lion plan

• Mac App Store

• Final Cut Pro DEMO (Randy & ?)

Apple TV 2 – David Moody, Jeff Robbin

• Strategy: stay in the living room game and make a great “must have” accessory for iOS devices

• sales so far, projections for this holiday season

• add content:

• NBC, CBS, Viacom, HBO, …

• TV subscription?

• where do we go from here?

• apps, browser, magic wand?

Stores Update – Eddy, Patrice

• Music

• Strategy: Leap even further ahead of Google in music

• Beatles

• iTunes in the cloud

• App Store

• Strategy: Leap even further ahead of Google in discovering great new iOS apps

1. iAds Update – Andy Miller

2. Retail Update – Ron Johnson

PS. Jobs passed away on 5 October 2011. The world will never forget him.

To: Investors

Re: YouTube

From: RFB

September 2, 2005

Introduction

YouTube represents an interesting seed-stage investment opportunity. The company’s goal is to become the primary outlet of user-generated video content on the Internet and to allow anyone to upload, share, and browse this content.

The three entrepreneurs are scrappy and smart. They have built a very easy-to-use, fast-growing service that taps several strong veins: user-generated content, online advertising, wide proliferation of inexpensive digital video capture devices, and continued broadband adoption.

The company has also developed code snippets that allow users to embed YouTube videos directly into other sites. In this way, the company is building a wide content distribution network, in addition to its direct-to-site traffic.

Deal

Our proposal is to invest $1m in the seed stage, followed by a $4m Series A once specific milestones are met. Sequoia would own ~30% post Series A, with a pool of ~17%.

Competition

There are several direct and potential competitors to YouTube. These include:

• direct competitors (dailymotion, vimeo)

• community photo sites (flickr, webshots)

• online photo sharing sites (ofoto, shutterly, snapfish)

• large internet players (Google & Yahoo video search)

• entertainment sites (big-boys, ebaumsworld)

• file sharing services (Ourmedia.org, putfile)

• IPTV companies (Open Media Network, Brightcove)

YouTube appears to have a clear lead over its two direct start-up competitors. The other categories of potential competitors are not necessarily focused on video content, or are not focused on user-generated content within the context of a community-based site. Nevertheless, the company will need to stay very focused over the next 3-6 months to ensure that it builds a rich set of features and content depth to increase its defensibility.

Hiring plan

We need to help the company quickly hire a CEO and VP BD/Sales. The founding team is enthusiastic about bringing on an experience CEO to help lead the company. However, I’m not sure whether we can land a CEO before the Series A. I would appreciate any ideas on potential candidates for either role. My preference would be to launch a search immediately and to have a CEO in place within 90 days.

Two additional former PayPal engineers are set to join in the next week. Both are exceptional.

The plan is to house the company in our incubation area for the near term. That will help us frequently interact with the team until we can surround the company with an experienced management team.

Key risks

Competition/defensibility As outlined above, YouTube faces significant potential competition. The company needs to remain laser focused on improving the user experience to ensure that it continues its early growth trajectory.

Revenue model

I believe that YouTube has a clear advertising revenue opportunity. However, we don’t yet know what form of advertising would work best. Specifically, can the company develop attractive ad products that are not intrusive to the consumer experience? We can model revenue as follows: unique videos streamed per day x % of videos monetized x CPM x 365 = estimated annual revenue. Several of the parameters are unknown:

• We don’t know what CPM rates YouTube could Video ad CPMs could range from a low of $5 to over $30.

• We don’t know what percentage of inventory (videos served) could be monetized.

• We are not sure how much YouTube could grow from its current level of 100,000 videos served per day.

Below are different scenarios and their associated revenue potential:

We will need to test these assumptions carefully over the next few months to get an accurate handle on the company’s revenue potential. We also need to test the success of the company’s content distribution network, and whether we can generate advertising revenue from this network. (Google earns ~55% of its revenue from Google-owned sites, and 45% from Network websites.)

Serving 10-30 million videos may appear daunting, as it represents >l00x increase over the company’s current activity levels. But the company has achieved its current scale in only two months, and only has 15,000 videos today. (For point of comparison, Flickr and Webshots, two comparable photo community sites, serve 200-500x as many pageviews per day as YouTube.)

Scalability

As the table above indicates, YouTube will need to scale significantly from its current level for the company to achieve meaningful revenue. We need ensure that YouTube can inexpensively scale orders of magnitude from current levels.

Balancing growth

YouTube has already drawn the attention of larger media companies (e.g., Turner, Transcosmos) that see the potential of distributing YouTube content. As with any marketplace, we need to ensure that we balance demand and supply. It would be inadvisable to grow the viewer base significantly without a substantial increase in the number of videos available on the site. The company cannot afford to disappoint large numbers of customers due to inadequate depth of content.

Exit

We cannot point to many high comparable exit valuations.

A few comparable companies include Webshots, flickr, Ofoto, Shutterfly, and Snapfish. While these companies deal only with still images, there are some similarities with YouTube. None of these companies have had exceptional exits. CNET bought Webshots for ~$70m, Yahoo! bought flickr for <$50m. Apparently Shutterfly is preparing to file its IPO. Ofoto and Snapfish were acquired by Kodak and HP, respectively, although financial terms were not disclosed.

Another comparable is Blogger, acquired by Google in 2002 for an undisclosed amount. There are some other examples of businesses that built successful models leveraging user­ generated content, including Tripadvisor, acquired by IAC in 2004 years ago for over $100m (to the best of my knowledge).

Recommendation

I first met with the company three weeks ago, and we are in pole position for the financing. Several VCs have been cold calling the company, and a few media companies have also approached YouTube. I’d like to give the company our decision on Monday.

I recommend that we proceed with the financing as proposed.

YouTube has a great founding team that has hit on several promising themes. The company follows a trend of user-generated content that started with text (biogs), images (flickr, webshots, ofoto), and audio (podcasting). Video is a natural next step, and YouTube is well positioned to capture the lead. The company has not yet enabled advertising revenue streams. But our checks with Yahoo! and Adbrite indicated very strong advertiser demand for online video advertising. We will rapidly need to surround the company with management talent, specifically a CEO.

Contents

Investment summary

Competitive analysis

Technology overview

Team bios

Company presentation

Company metrics

Investment summary

Founded by three early PayPal employees. Two engineers, one designer. Seed-stage investment opportunity. Top 10,000 internet site within two months of launch.

Business

YouTube’s goal is to become the primary outlet for user-generated video content on the internet. The company provides a very easy-to-use interface for users to upload, share, and browse their content.

Every digital camera now ships with digital video recording capability. But consumers have no easy way to share their personal video content – files are too large, hosting and bandwidth is expensive, and there are no standardized video file format

Users upload videos to YouTube. The encoding backend converts uploaded videos to Flash Video, which works on ~98% of web browsers. The streaming format means that no file downloading is required

Market

YouTube provides a platform and community for video self-publishing. We’ve seen similar self­ publishing emerge for text (biogs), photos (flickr, webshots, hotornot), and audio (podcasting). This presents interesting advertising revenue opportunities.

There are also interesting vertical market opportunities: eBay auction videos (e.g., autos), real estate videos, etc.

Financials – TBD

The company currently serves 100,000 videos per day, at an all-in hosting cost of $4,000 per month.

The team has developed a software abstraction layer that enables it to use very inexpensive hardware and bandwidth to deliver videos.

Competition

Big players: Google Video Search, org, Open Media Network

Small players: DailyMotion, Vimeo, Putfile

Team

Steve Chen. UIUC, CS. Recruited as one of PayPal’s earliest engineers

Chad Hurley. PayPal’s first designer, responsible for site design and logo

Jawed Karim. UIUC, CS. Graduate CS student at Stanford. Also one of PayPal’s earliest engineers

Proposed terms

Two-stage, milestone-based financing: $1m seed stage, $4m Series A

SC to own ~30% after Series A

Proposed Series A milestones:

• Develop comprehensive business plan, including financial plan

• Develop self-serve advertising product

• Sign up at least five (5) advertisers who place $5,000 or greater advertising orders

• Ensure platform scalability to handle at least one million video views per day

• Recruit a VP of Business Development

Competition

There are several potential and direct competitors to YouTube.

Direct competition The two direct start-up competitors are Dailymotion and Vimeo.

• Dailymotion is based in France. It positions itself as a site to ‘watch, publish, share.’ The site has pretty good UI, but its navigation and layout is not as intuitive as for YouTube. All videos are encoded and rendered in Quicktime. Quicktime has lower penetration than Flash, so users may be faced with needing to download the player to experience the site.

• Vimeo is for sharing your video clips. Vimeo was started by Connected Ventures in New York. Their mission is to “develop and manage good websites.” They also run a popular site called CollegeHumor. The also claim to draw inspiration from flickr, and launched in February 2005. Vimeo also uses Quicktime. Their site layout is not very intuitive, and makes it hard to find content (e.g., there is no search capability).

The graph below shows the comparative daily pageviews for YouTube, Dailymotion and Vimeo. YouTube’s traffic has rapidly overtaken that of these two competitors.

Community photo sites

Community photo sites share many features with YouTube: tagging, social networking, discussion groups, ease-of-use. However, they seem focused on still images rather than video.

YouTube admits that it drew inspiration from the popular site Flickr. Flickr has ~200-300x the number of daily pageviews of YouTube. Yahoo! acquired Flickr earlier this year for an undisclosed sum, believed to be ~$30m. Reid Hoffman was in investor in Flickr, and assures the YouTube team that they have no plans to launch a video product in the next 1-2 years.

Webshots is another potential competitor. CNET acquired the company in 2004 for ~$70m at a time that they forecast $15-17m annual revenue. The founding team all just left the company, and it unclear how much new product innovation there is. Webshots seems very focused on photos for now.

Online photo sharing sites

The main online photo sharing services, Ofoto, Shutterfly, and Snapfish, are also potential competitors. They do not have community-like features. They also earn revenue primarily from printing. As a result, I think they will remain focused on photos.

Entertainment sites

There are several popular online entertainment sites that have significant traffic: Big-boys, ebaumsworld, ifilm.

According to YouTube: “Big-boys and ebaumsworld get a lot of traffic but that’s to be expected for the type of content they host. You are guaranteed to have something interesting, something shocking to watch when you visit these sites. However, the disadvantage is that they can never transition their sites into an actual product. Due to the content on the site, they’re forever stuck in that segment of the market. If I were to categorize the content on YouTube today, I would break it down into two large categories: personal videos and viral videos. The viral videos, due to copyrights and obscene content, I admit, big-boys and ebaumsworld may beat us there. Although, we have seen our share of viral videos on YouTube. The bigger draw for YouTube is all the personal videos, the ones of your pet, your kid, your family, your vacation, so on. Big-boys and ebaumsworld, due to their origins, can never transition their product into something that hosts these other types of files.”

Big-boys and ebaumsworld also position themselves as much broader entertainment sites, offering “Jokes, Pictures, Office Humor, Flash Animation, Soundboards, Prank Calls, Audio, Video, Games, Illusions, Magic.”

“IFILM is one of the leading video-entertainment destinations on the Web, offering channels of movies, short films, TV clips, video-game trailers, music videos, action sports and its celebrated Viral Videos collection. IFILM.com delivers more than 30 million streams per month, making it one of the top ten streaming media sites in the world.” IFILM is a clear potential competitor, although they don’t have the same focus on user-generated content, nor YouTube’s community features.

Larger competitors

Google and Yahoo are building video search products. Google requires the user to download a new “Google Video Viewer” while Yahoo plays videos in the native file format. In neither case are they providing the simple consumer upload and share experience, nor the community features.

File storage services

Putfile and Ourmedia.org are examples of file storage providers that essentially provide a free, web interface to FTP. None of them seem to have a compelling product, and do not focus solely on user­-generated video content.

IPTV

Finally, there are companies such as the Open Media Network and Brigthcove that are focused on the delivery of mainstream video over the Internet. I do not believe that this competes directly with YouTube’s proposition.

The table below attempts to summarize the competitive matrix:

The Technology Infrastructure (company supplied)

As mentioned previously, in order to keep costs down, our video distribution technology is built on clusters with multiple machines in each cluster for redundancy and higher throughput. When a video is uploaded to the site, it is sent to a single machine within a single cluster. This is chosen based on space and, in the future, cpu/bandwidth utilization on the machine and cluster. Newly uploaded videos are picked up by two services running on each of the machines, 1) convert and 2) replicate.

The converter will analyze the video and look at things like framerates, aspect ratios (16:9 vs 4:3), audio encoding (sampling rates, audio codec), and the video codec used on the original video. It uses these heuristics to best convert the video to play on YouTube with adjustments to things inserting the black bands on top/bottom of a 16:9 video, altering the sampling rate to best conform to the incoming sound, guess at frames per second of the incoming video, etc. As part of this process, video stills of each video are also generated.

At the end of this process, the video server communicates back to the central database changing the status from “Uploaded” to “Awaiting Replication”.

While all this is going on, the replication service is standing by looking for videos that need to be replicated. When a video enters this queue, it’s picked up by the replication service and the video is replicated to every machine within the video cluster. After the replication is finished, it talks to the database and marks the video as “Processed”.

A newly uploaded video will go from a “Uploaded”-> “Awaiting Replication”-> “Processed” state in about 1-2 minutes.

The best part about this technology is that it really is infinitely scalable. We can add more capacity directly at the video conversion/transport layer at will,

The math for this comes out to:

By bandwidth —

$239 / 1 machine/ 1 month

1 machine has 2000 GB transfer/ month

2000 GB * 1000 MB / GB = 2,000,000 MB transfer/ machine/ month

7 MB average size of video

2,000,000 / 7 = 285,714 videos served from each machine/ month

$239.0 / 285,714 = $0.00083 cost per video served.

By storage —

$239 / 1 machine/ 1 month

1 machine has 2×160 GB HD for 320 GB

320 GB * 1000 MB/ GB = 320,000 MB/ machine

7 MB average size of video

320,000 / 7 = 45,714 videos/ video cluster

$239/45,714 = $0.005228 cost per video stored

$0.005228 * 2 machines/ cluster = $0.010456 / video replicated

The video serving technology provides a substantial barrier to entry. The video clustering solution sounds obvious and straight-forward post implementation but it certainly wasn’t when we were faced with the question of — “how do we keep costs down while having access to massive storage/bandwidth?” There’s also the encoding technology. We’re constantly improving this side of the product by incorporating the latest codecs.

Team bios

Chad Hurley is a co-founder of YouTube. Chad has an experienced background in web development and graphic design. He was the first member of the PayPal design team, where he lead efforts to develop the interface for the original Palm-based program that enabled secure wireless money transfers between handhelds. As the product evolved, he effectively designed auction features which solidified PayPal’s long term success and is a credited member of two critical auction patents. Chad looks forward to building an empowering video service for the world.

Jawed Karim is a co-founder of YouTube. He was previously a computer science student at the University of Illinois, where he was recruited by Max Levchin to become one of the earliest engineers at PayPal. They helped the implementation of PayPal’s first real-time anti-fraud models for credit card and bank payments, working closely with Roelof Botha. As part of PayPal’s Architecture Team (a group of five out of a total of over 100 engineers), he later worked on challenging scalability problems to ensure PayPal’s ability to scale to 80 million users and beyond. He is currently a graduate student in computer science at Stanford.

Steve Chen is a co-founder of YouTube. As the Chief Technology Officer for YouTube, he is responsible for leading the engineering efforts in distributed video clusters and meeting the high­ availability demands of video. Before YouTube, Steve spent 6 years at PayPal on the technology team. At PayPal, he led the engineering teams behind products such as PayPal China, PayPal Developer XML APis, and PayPal Shopping Cart.

from: Paul Graham

to: Fred Wilson, AirBedAndBreakfast Founders

date: Fri, Jan 23, 2009 at 11:42 AM

subject: meet the airbeds

One of the startups from the batch that just started, AirbedAndBreakfast, is in NYC right now meeting their users. (NYC is their biggest market.) I'd recommend meeting them if your schedule allows.

I'd been thinking to myself that though these guys were going to do really well, I should introduce them to angels, because VCs would never go for it. But then I thought maybe I should give you more credit. You'll certainly like meeting them. Be sure to ask about how they funded themselves with breakfast cereal.

There's no reason this couldn't be as big as Ebay. And this team is the right one to do it.

--pg

from: Brian Chesky

to: Paul Graham cc: Nathan Blecharczyk, Joe Gebbia

date: Fri, Jan 23, 2009 at 11:40 AM

subject: Re: meet the airbeds

PG,

Thanks for the intro!

Brian

from: Paul Graham

to: Brian Chesky cc: Nathan Blecharczyk, Joe Gebbia

date: Fri, Jan 23, 2009 at 12:38 PM

subject: Re: meet the airbeds

It's a longshot, at this stage, but if there was any VC who'd get you guys, it would be Fred. He is the least suburban-golf-playing VC I know.

He likes to observe startups for a while before acting, so don't be bummed if he seems ambivalent.

--pg

from: Fred Wilson

to: Paul Graham date: Sun, Jan 25, 2009 at 5:28 PM

subject: Re: meet the airbeds

Thanks Paul

We are having a bit of a debate inside our partnership about the airbed concept. We'll finish that debate tomorrow in our weekly meeting and get back to you with our thoughts

Thanks

Fred

from: Paul Graham

to: Fred Wilson

date: Sun, Jan 25, 2009 at 10:48 PM

subject: Re: meet the airbeds

I'd recommend having the debate after meeting them instead of before. We had big doubts about this idea, but they vanished on meeting the guys.

from: Fred Wilson

to: Paul Graham

date: Mon, Jan 26, 2009 at 11:08 AM

subject: RE: meet the airbeds

We are still very suspect of this idea but will take a meeting as you suggest

Thanks

fred

from: Fred Wilson

to: Paul Graham, AirBedAndBreakfast Founders

date: Mon, Jan 26, 2009 at 11:09 AM

subject: RE: meet the airbeds

Airbed team -

Are you still in NYC?

We'd like to meet if you are

Thanks

fred

from: Paul Graham

to: Fred Wilson

date: Mon, Jan 26, 2009 at 1:42 PM

subject: Re: meet the airbeds

Ideas can morph. Practically every really big startup could say, five years later, "believe it or not, we started out doing ___." It just seemed a very good sign to me that these guys were actually on the ground in NYC hunting down (and understanding) their users. On top of several previous good signs.

--pg

from: Fred Wilson

to: Paul Graham

date: Sun, Feb 1, 2009 at 7:15 AM

subject: Re: meet the airbeds

It's interesting

Our two junior team members were enthusiastic

The three "old guys" didn't get it

from: Paul Graham

to: Fred Wilson

date: Mon, Feb 9, 2009 at 5:58 PM

subject: airbnb

The Airbeds just won the first poll among all the YC startups in their batch by a landslide. In the past this has not been a 100% indicator of success (if only anything were) but much better than random.

--pg

from: Fred Wilson

to: Paul Graham

date: Fri, Feb 13, 2009 at 5:29 PM

subject: Re: airbnb

I met them today

They have an interesting business

I'm just not sure how big it's going to be

fred

from: Paul Graham

to: Fred Wilson

date: Sat, Feb 14, 2009 at 9:50 AM

subject: Re: airbnb

Did they explain the long-term goal of being the market in accommodation the way eBay is in stuff? That seems like it would be huge. Hotels now are like airlines in the 1970s before they figured out how to increase their load factors.

from: Fred Wilson

to: Paul Graham

date: Tue, Feb 17, 2009 at 2:05 PM

subject: Re: airbnb

They did but I am not sure I buy that

ABNB reminds me of Etsy in that it facilitates real commerce in a marketplace model directly between two people

So I think it can scale all the way to the bed and breakfast market

But I am not sure they can take on the hotel market

I could be wrong

But even so, if you include short term room rental, second home rental, bed and breakfast, and other similar classes of accommodations, you get to a pretty big opportunity

fred

from: Paul Graham

to: Fred Wilson

date: Wed, Feb 18, 2009 at 12:21 AM

subject: Re: airbnb

So invest in them! They're very capital efficient. They would make an investor's money go a long way.

It's also counter-cyclical. They just arrived back from NYC, and when I asked them what was the most significant thing they'd observed, it was how many of their users actually needed to do these rentals to pay their rents.

--pg

from: Fred Wilson

to: Paul Graham

date: Wed, Feb 18, 2009 at 2:21 AM

subject: Re: airbnb

There's a lot to like

I've done a few things, like intro it to my friends at Foundry who were investors in Service Metrics and understand this model

I am also talking to my friend Mark Pincus who had an idea like this a few years ago.

So we are working on it

Thanks for the lead

Fred

from: Paul Graham

to: Fred Wilson

date: Fri, Feb 20, 2009 at 10:00 PM

subject: airbnb already spreading to pros

I know you're skeptical they'll ever get hotels, but there's a continuum between private sofas and hotel rooms, and they just moved one step further along it.

[link to an airbnb user]

This is after only a few months. I bet you they will get hotels eventually. It will start with small ones. Just wait till all the 10-room pensiones in Rome discover this site. And once it spreads to hotels, where is the point (in size of chain) at which it stops? Once something becomes a big marketplace, you ignore it at your peril.

--pg

from: Fred Wilson

to: Paul Graham

date: Sat, Feb 21, 2009 at 4:26 AM

subject: Re: airbnb already spreading to pros

That's true. It's also true that there are quite a few marketplaces out there that serve this same market

If you look at many of the people who list at ABNB, they list elsewhere too

I am not negative on this one, I am interested, but we are still in the gathering data phase.

fred

From: Howard Schultz

Sent: Wednesday, February 14, 2007 10:39 AM Pacific Standard Time

To: Jim Donald Cc: Anne Saunders; Dave Pace; Dorothy Kim; Gerry Lopez; Jim Alling; Ken Lombard; Martin Coles; Michael Casey; Michelle Gass; Paula Boggs; Sandra Taylor

Subject: The Commoditization of the Starbucks Experience

As you prepare for the FY 08 strategic planning process, I want to share some of my thoughts with you.

Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.

Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces. For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista.

This, coupled with the need for fresh roasted coffee in every North America city and every international market, moved us toward the decision and the need for flavor locked packaging.

Again, the right decision at the right time, and once again I believe we overlooked the cause and the affect of flavor lock in our stores. We achieved fresh roasted bagged coffee, but at what cost? The loss of aroma -- perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and grinding it fresh in front of the customer, and once again stripping the store of tradition and our heritage?

Then we moved to store design. Clearly we have had to streamline store design to gain efficiencies of scale and to make sure we had the ROI on sales to investment ratios that would satisfy the financial side of our business. However, one of the results has been stores that no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store. Some people even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee. In fact, I am not sure people today even know we are roasting coffee. You certainly can't get the message from being in our stores. The merchandise, more art than science, is far removed from being the merchant that I believe we can be and certainly at a minimum should support the foundation of our coffee heritage. Some stores don't have coffee grinders, French presses from Bodum, or even coffee filters.

Now that I have provided you with a list of some of the underlying issues that I believe we need to solve, let me say at the outset that we have all been part of these decisions. I take full responsibility myself, but we desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience. While the current state of affairs for the most part is self induced, that has lead to competitors of all kinds, small and large coffee companies, fast food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers. This must be eradicated.

I have said for 20 years that our success is not an entitlement and now it's proving to be a reality. Let's be smarter about how we are spending our time, money and resources. Let's get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others. We source and buy the highest quality coffee. We have built the most trusted brand in coffee in the world, and we have an enormous responsibility to both the people who have come before us and the 150,000 partners and their families who are relying on our stewardship.

Finally, I would like to acknowledge all that you do for Starbucks. Without your passion and commitment, we would not be where we are today.

There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire. In mere moments, he was surrounded by flames. Through the smoke and heat, he barely made his way out of the chaos to the platform’s edge. When he looked down over the edge, all he could see were the dark, cold, foreboding Atlantic waters.

As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or, he could plunge 30 meters in to the freezing waters. The man was standing upon a “burning platform,” and he needed to make a choice.

He decided to jump. It was unexpected. In ordinary circumstances, the man would never consider plunging into icy waters. But these were not ordinary times—his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a “burning platform” caused a radical change in his behaviour.

We too, are standing on a “burning platform,” and we must decide how we are going to change our behaviour.

Over the past few months, I’ve shared with you what I’ve heard from our shareholders, operators, developers, suppliers and from you. Today, I’m going to share what I’ve learned and what I have come to believe.

I have learned that we are standing on a burning platform.

And, we have more than one explosion—we have multiple points of scorching heat that are fuelling a blazing fire around us.

For example, there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem…

[The original memo continues on with multiple paragraphs of ‘Why We’re Doomed.’]

…This is what I have been trying to understand. I believe at least some of it has been due to our attitude inside Nokia. We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.

Nokia, our platform is burning.

So here’s what we’re going to do: first, I’m going to spend a lot of time publicly denigrating Symbian, even though we continue to sell millions of phones equipped with that operating system. That’s what successful CEOs do—insult their core product, even if it commands a healthy percentage of the world market. Then I’m going to chuck the software in favor of Microsoft’s Windows Phone, which has negligible market-share. By “chuck it,” I mean exactly that: a dwindling pipeline of new phones, and no assurance for anyone who’s supported the ecosystem that we’ll continue to meet their needs for the foreseeable future. Why, people won’t be angry about that at all! Trust me, our market-share won’t collapse in record time, and nor will our stock price. I don’t have any reason to see the stock price fall, believe me.

And Meego? Sorry, we gotta drown that baby. Sometimes that’s what being CEO is all about: drowning babies.

As our market-share continues to not-crash, we’ll release a couple phones running Windows Phone. Those devices will sell pretty well, mostly because Microsoft and various carriers will throw millions of dollars into marketing them, but they won’t make a dent in Apple’s or Samsung’s overall market-share. They won’t really loosen Google Android’s hold on the midrange of the smartphone market, either, come to think of it.

As a result of our efforts, Windows Phone will gain a couple points’ worth of market share, even as Nokia continues to bleed cash. But that’s okay, because my old friends at Microsoft—realizing that Windows Phone is basically dead without Nokia’s full commitment to the platform—will swoop in and purchase our long-storied company, turning it into a glorified hardware-manufacturing arm.

In exchange for so drastically affecting Nokia’s market-share and stock price and selling its hardware unit, I’ll be given $25 million, none of which I’ll give back, because I might be going through a divorce and need the cash. Oh yeah, and in recognition of this sterling performance, Microsoft might actually make me CEO. Isn’t that awesome? For me, I mean?

But the Finns are resourceful people, and I’m sure you’ll handle all this with your usual aplomb. Think about all the stories you’ll tell, years from now, about how Nokia was once a European powerhouse with the mobile world at its feet! Your children will be impressed.

Let’s send this platform to the bottom! This will be fun!

Stephen