Contrarian Thinking: The Platform Effect

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The Platform Effect

Here's What You Can Do To Leverage This Trend 

I got a bud named Joe.

When my fiancée and I had our very first weekend together in our then long-distance relationship, it came with an unexpected surprise; a burly, bearded ex-marine turned Alaskan bush pilot named Joe. He was in town, needed a place to crash and my gent being the military man he is, is quite used to roommates. So, there we were; me, him… and Joe. Romantic eh?

Fast forward three years and quarantine comes along while none other than our favorite third wheel is in town. Thus, of course, he has been with us now for a few months.

Joe has become our de facto shared best bud, whom we love to whiteboard with, have patch competitions with, and build businesses together. But I digress, this isn’t an ode to Joe, it’s an ode to the ideas coined inside our little California bungalow. Because you see we all would have wine and diatribe about some of these very events happening, BUT we made the classic human mistake. We SPOKE A LOT and WE DID NOTHING. You see all of us humans have ideas, but we get scared to put them out into the world because being wrong sucks. But turns out inside our little bungalow we saw some trends a coming. Namely one in particular. The Rise of the Platform. And so now, I share with you some of the biggest trends shaking up worlds I care about… and I ask you what do you think? And even more… what are you going to do about it? 

Overarching theme: Platforms are eating the world.

Andreessen Horowitz famously engineered the line, “Software is Eating the World,” as the thesis to their multi-billion venture capital fund. I think they were right then but they are wrong now. These days those noshing on the world are not software so broadly… but platforms specifically. Platforms are the ones gobbling up industries whether unrelated or parallel (aka Whole Foods to Amazon), gobbling up content producers (aka Disney & Star Wars) and increasing gobbling up our consumer dollars (US Consumers spend 3% of all US consumer spending w/ FAANG). Just think about the companies you frequent: 

• Uber – platforms for cars
• Fivrr – platform for outsourced work
• Spotify – platform for music
• Netflix – platform for tv/movie/video
• Drizly – platform for alcohol sales

A fun statistic - Bezo's himself is worth enough where he could buy Viacom, Ferrari, The NFL, Top THREE European Sports teams and have $7-8B left over for fun. 

The problem with this is increasing concentration as the big get bigger and the small go to the scrap heap. Be wary how you spend and where you position your company. Here are two examples I've been obsessing over, more in the newsletter if you want to subscribe click the link in the comments below: 

Content Is King – Joe Rogan’s $100MM Spotify Deal

Now this may seem like old news. But Joe said something that made me pause. He said, “Joe Rogan is the Howard Stern of the podcast generation.” You see Stern is largely attributed as being THE launch of Satellite Radio as said verbatim by its founder. He catapulted radio into the web age. Now Rogan is doing the same for monetization of podcasts. Spotify just set the firing round off against Apple in the war for the podcast platform of the future.

 How to take advantage:

1. If you don’t have a podcast WTF are you doing with your life? I say that with tongue firmly in cheek because I no longer have one, but I’m planning on it. I just need to figure out my niche. I’m going to use StartFire to produce mine… but wtf am I going to babble on about? Any thoughts? Email me what you think I give that others don’t?
2. Paywalled podcasts – If I had to pay for my top 5-10 podcasts a $4-5 a month fee, I’d do it in a heartbeat. News is already happening. Podcasts next?

Alcohol & Cannabis Collide - Drizly

If you haven’t heard of Drizly, it is the largest alcohol distribution company in the US and Canada with 100+ markets, the largest selection of beer, wine and spirits all delivered to your door. Here’s the kicker, last week they sneakily took on their very first cannabis company. They will begin distributing in Boston and I imagine have a nationwide rollout.

 How to play it:

1. If you have a cannabis company get them on that platform.
2. If you haven’t listened to my near-constant screeching, think about a cannabis allocation to your investments.

The Big Four – Facebook, Netflix, Google, Amazon

Scott Galloway has a very aggressive take on the four biggest platforms out there. If you haven’t seen his talks or read his piece post Corona virus, step to it. The gist of it is – they are way too big, control way too much, continue to dominate and monopolize small companies and we let them do it.

 How to play it:

1. I have no idea. Stage an Amazon coupe? But just don’t try to blackmail Bezos w/ nudes because he gives zero f’s about that.

My New Favorite Trend Spotter

Many years ago, I got introduced to The Hustle by a friend Noah Kagan of OKDork. I was obsessed with their copy writing so I found out that their founder, Sam Parr, was a fan of butterfingers and sent him an enormous box of those candies (made out of what exactly??). I interviewed him and we’ve stayed in touch. Now he’s out with a new newsletter called Trends.co that I subscribe to that highlights emerging signals and trends so you can capitalize on them. Thanks Sam. Use this link to get $100 off your subscription.

 Here’s a snippet of fun facts from them:

• Skincare chemicals like hyaluronic acid, L-cartinine, niacinamide, and tretonin have 165,000-750,000 searches every single month
• Airpods generate more revenue than Twitter, Spotify, and Shopify?
• Over 4k people have "Everested", without ever having set foot in Nepal
• Over 50k people search for "sea moss" every month
• That perfume has margins of 98%?!
• LTV of a dental patient is $4.5k so marketers can work with $150-300 CPLs
• The "black hair care industry" alone is estimated to be $2.5B, so naturally the #naturalhairmovement is taking off

How to play it? Sign up duh.

Howard Marks said, “We can’t predict the future BUT we can prepare for it.”

So go grab a whiteboard, and maybe a Fuzzie to inspire your creativity, and ask yourself what will eat my world? And am I ready for it?

Codie Sanchez

Cannacurious? Here's our contrarians' guide to investing and getting a career into cannabis, or find out more information below:

IG: @codiesanchez

EEC: www.entourageeffectcapital.com

CS: www.codiesanchez.com

This article is presented for informational purposes only, is an opinion, and is not intended to recommend any investment, and is not an offer to sell or the solicitation of an offer to purchase an interest in any current or future investment vehicle managed or sponsored by Entourage Effect Capital, LLC or its affiliates. Any such solicitation of an offer to purchase an interest will be made by a definitive private placement memorandum or other offering document.