What Chegg, China and Pfizer Have in Common

Takeaway: Navigating a world that is about to run counter clockwise is going to take a different kind of understanding.

How should you think about a technology company blaming technology for its collapse?

In less than four years the shareholder value of Chegg Inc., the online education company based in Silicon Valley, has evaporated, dropping by 99 percent. Last week, it announced another round of layoffs, the second major cut in six months, as it struggles to navigate the same 'Wile E. Coyote Moment' as pretty much the entire S&P 493.

From SFGATE's coverage:

Chegg announced the new layoff round in a filing with the Securities and Exchange Commission. The company delivered the news alongside another brutal quarterly financial report; Chegg lost more than $212 million from July through September.

In a press release accompanying the SEC filing, CEO Nathan Schultz, called it a “trying time” for his company. He spoke of “recent technology shifts and generative AI,” which have created “significant headwinds.”

“As a result, we are undertaking an additional restructuring,” Schultz said. “There continues to be a market of students looking for the high-quality, proven, and differentiated learning expertise Chegg provides, and we believe our brand and product experience are resilient and will endure.”

I wouldn't invest on it.

Believing the horseless carriage will endure — that a product experience baked and positioned in the past is ready for the head-snapping change just around the corner — isn’t a vision to invent the automobile.

Assuming stability is one of the ways ruins get made.

The leadership skills in short supply are (1) understanding the 'kinetics of collapse'; (2) understanding market innovation as a form of economic development; and (3) understanding how to move at “warp speed” to blend and activate the first two.

President Xi, Meet Johnny Rotten

From 'Wile E. Coyote' last week:

“As 2022 draws near, it is time to face the world’s predictable unpredictability,” wrote The Economist in The New Normal is Already Here. Get Used to It, its commentary closing out 2021. “The pattern for the rest of 2020s is not the familiar routine of the pre-covid years, but the turmoil and bewilderment of the pandemic era. The new normal is already here. Any boss who thinks their industry is immune to such wild dynamism is unlikely to last long.”

It’s not just at an industry level.

Perhaps the single greatest global story of the past half century has been China’s economic transformation. What looms as the single greatest global story of the next quarter century is the structural transformation that Donald Trump will make happen across a mind-blowing, sweeping curve of life for decades to come.

Welcome to The Trump non-linearity, where The McKinsey Method no longer works. Via Truth Social, Late Calls Take Over Economists’ Lives Under Trump in Bloomberg this week:

“Models rely on stable relationships and assumptions, but right now we don’t really know what the assumptions are and the relationships might not be stable,” said Subbaraman, who hosted a call with 250 global clients until midnight US time on election night. In Econo-speak, Trump injects a lot of “structural breaks” and “non-linearity” into forecasting. Amid the uncertainty, some are turning to scenario analysis: instead of using formulas and inputs to derive a single forecast, a range of possibilities is presented, often with probabilities attached.

UBS analysts spent five months developing a global tariff model that includes variables like import substitution, exchange rates and how much companies are likely to absorb in their profit margins. Chief economist Arend Kapteyn and team laid out more than a dozen potential scenarios, which included global growth easing to 2% if Trump adds tariffs as promised instead of the baseline 2.9% estimate for 2026. Scenarios are all very well for government officials or business leaders who have time to formulate their response to events. But for market participants buying and selling securities in anticipation of events, often a more pointed and singular view is needed. “This is the period of most uncertainty, but we need to take a stance in our book,” says Monica Hsiao, chief investment officer and founder of Hong Kong-based Triada Capital. “Trump is someone you can’t always analyze,” she added. “He’s mercurial.”

Resilience accommodates the unexpected.

What you do is not as important as how your capabilities relate to what others are doing, within the context of an ecosystem. The term of art here is ‘positional value’. And that 'art' is about envisioning and helping shape networks — systems of markets — that contribute in the weaving of leverage and power.

You want to get to a place where the organism behaves as environment, and the environment behaves as organism. In the lingo evolutionary biology, the organism is the cause and effect of itself, its own intrinsic order and organization.

Donald Trump, quite simply, will force the world to mold its/our thinking to his mode of being, his cognitive makeup. There are no more ‘remnant contexts’ to take refuge in.

Pharma’s “Holy Shit” Mode

“I think right now [the pharmaceutical industry] is in sort of like ‘holy shit mode,'” writes Nathaniel Weixel for a piece in The Hill last week (“Drug industry treads carefully after stunning RFK Jr. nomination)”.

The selection of Robert F. Kennedy Jr. to lead the Department of Health and Human Services sent shock waves through the pharmaceutical industry.

Lobbyists said they anticipated Kennedy would get some kind of role in the administration but were surprised at his being picked for HHS secretary. They are now scrambling to figure out what kind of damage Kennedy could inflict were he to be confirmed.

Still, lobbyists said they are advising clients to let the nomination play out among Senate Republicans. They are preaching patience, as they don’t want to risk expending political capital to wind up on President-elect Trump’s bad side before he even takes office.

“A lot of companies are going to be reluctant to engage in politics,” said Richard Hughes IV, an attorney at Epstein Becker Green.

Hughes said it wasn’t necessarily a given that Trump would be friendly to the industry, but Kennedy’s confirmation would add a completely different element that could make the government outright hostile toward innovative drugs, especially vaccines.

“The way that President Trump has set it up for him, you know, he’s basically said that [Kennedy’s] going to have carte blanche. So, will he check himself? Will members of President Trump’s party in Congress check him?” Hughes said.

“Striking at the heart of a science-based industry like this by saying nonsensical stuff and actually having power to do something about it is bad news,” said a lobbyist who works for drug companies. “I think right now they’re in sort of like ‘holy s— mode.'”

Which makes Pfizer's Primary Care President Navin Katyal’s LinkedIn post yesterday, promoting a promotion for PfizerForAll, notable because the storyline of value doesn’t fit strategically with the massive, comprehensive, entangled stream of structural breaks that is about to redline, making the current dashboard pointless:

“In August, we launched PfizerForAll – a digital platform designed to make managing healthcare quicker and more convenient for millions of Americans. I recently had the opportunity to reflect on the goals of PfizerForAll with @Fast Company, and to dive into the impact we hope to make by helping reduce the friction and frustration people face as they seek care. You can read the article below and check out the platform at PfizerForAll.com.

When the air turns crisp and the holidays are just around the corner, that often means the return of “tripledemic” season—the convergence of COVID-19, RSV, and influenza. While the U.S. Centers for Disease Control and Prevention (CDC) projects that combined peak hospitalizations could be as high as last year, getting people vaccinated can still be challenging. Annual flu vaccination rates have steadily fallen since the pandemic’s onset. At the same time, one in five Americans planning to get their shots fail to follow through for a litany of reasons, not least of which is the difficulty of easily finding and booking them.

To this end, Pfizer—best known for its pioneering COVID-19 vaccine—has launched PfizerForAll, a user-friendly digital platform designed to make accessing healthcare and managing health and wellness more seamless for people across the U.S. From finding and scheduling adult respiratory vaccinations to booking same-day telehealth appointments with independent healthcare providers for people living with migraine or suffering from common respiratory symptoms, PfizerForAll aims to help deliver a more seamless experience for getting care.”

[As an aside, not sure I would pass this off as an “article” (as in something written by an independent journalist) so much as it is an advertisement. This "article" was written by FastCo Works, which is “Fast Company’s branded content studio. Advertisers commission us to consult on projects, as well as to create content and video on their behalf.”]

The bigger problem for a “vaccine” business -- any vaccine business -- is the end of the Standard Model. This end is not at some point in the future. That future is now, and it's evenly distributed.

I would suggest any 'drug + retail pharmacy system' whose business forecast, pitch deck and storyline of value to The Street uses data from the CDC and the word "vaccine" -- e.g., cancer vaccine (projected @ $42 billion); flu vaccine (projected @ $17 billion); hepatitis vaccine (projected @ $13 billion); shingles vaccine (projected @ $13 billion); covid vaccine (projected @ $10 billion); CMV vaccine (projected @ $3 billion) -- is foundationally fragile at best.

The entire concept is the problem.

Good strategy leads to a strong probability of recurring or continuing advantage. For almost 175 years, the pharmaceutical industry has believed that “drug” and “drug development” were the source of that recurring advantage. It isn't.

As MIT economist James Utterback writes: “Firms are remarkably creative in defending their entrenched technologies, which often reach unimaginable heights of elegance in design and technical performance only when their demise is entirely predictable.”

While the vaccine market is congratulating itself on Harnessing the Power of mRNA to Transform Medicine, as a new economy business concept, it’s going to have a hard time. The rest of the world has moved on (it didn’t help when President Biden went on 60 minutes to declare “the pandemic is over”.

There is only one way out.

The stuck organism must devolve. In order for the pharmaceutical industry to go from a peak of local success (e.g., What's Next? The Future of mRNA Vaccines for “Every Imaginable Infectious Disease”) to another higher peak, it must first go downhill. To do that, it must reverse itself and for a while become less adapted, less fit, less optimal.

Which doesn't sell well on Wall Street. At least in the conventional sense.

The new words dominating narratives are "scrambling" (as in "Governments around the world are scrambling to avoid the tariffs Trump has promised"), "hope" (as in "Investors had hoped that campaign rhetoric would be threats only"), and "chaos" (as in "Trump's chaos cabinet").

I would use "reality."

The Trump Non-Linearity

Strategic fit to the world-according-to-Trump is going to need a new kind of rational magic to describe and enact, a different framework to create and compete with the gravity-altering agenda — the “holy shit moment” — now in front of every brand, business, industry and government in the world.

Riding the steady-breaking Big Wave of Big Disruption means rewiring our mental circuits as quickly and thoroughly as possible. In a way, “strategy” has become more like surfing in Nazaré, home to the biggest surfable waves on the planet and what big wave surfers say is very the definition of Oh Shit moments. (The video footage of these record-breaking rides is mesmerizing.)

Mexico’s president Claudia Sheinbaum said she will send a letter to Donald Trump to warn him that his pledge to impose across-the-board tariffs of 25 percent on Mexico and Canada will cause inflation and job losses in both countries.

“To one tariff will come another and so on, until we put our common businesses at risk,” Sheinbaum said at a press conference on Tuesday, Reuters reported. She plans to send the letter later today, urging dialogue and cooperation.

Good luck.

It doesn’t sound weird enough to me.

/ jgs

John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy and innovation at a system level. To engage with a mind stretch: [email protected]