Revisiting The Generalist's 2020 Predictions
|Mario 🦊||Dec 13, 2020|
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The IPO frenzy reached its zenith with DoorDash and Airbnb making their public debuts this week. Both got off to an explosive start, with DoorDash finishing the week at a $55.5 billion valuation and Airbnb landing around $83 billion.
If you haven't had a chance yet, you can learn more about DoorDash and Airbnb, below. We also released a report on Affirm, the "buy now, pay later" business, which was expected to IPO in the next couple of weeks. They've delayed their filing along with gaming platform Roblox.
Here's a selection of recent pieces:
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REVISITING THE GENERALIST'S 2020 PREDICTIONS
On January 5, in blissful ignorance, I sent "The Nostradamus List" to 691 subscribers. No mention was made of a strain of influenza afflicting parts of China, no space allotted to lockdowns or social distancing or face shields. Climate change was the world's most pressing problem, while "zoonotic diseases" might as well been positioned alphabetically for the importance most ascribed to it.
Then, 2020 happened. In its superlative awfulness, the last (almost) twelve months have made any predictions short of total apocalypse look quaint by comparison. Still, there is value in reviewing and reflecting on what we thought might happen. Philosopher John Searle has a good line on the matter:
Prediction and explanation are exactly symmetrical. Explanations are, in effect, predictions about what has happened; predictions are explanations about what's going to happen.
To hone our predictions, we must practice explanation and visa-versa. And so, now more than 19,000-strong, we can look back on what I got right and (very) wrong in 2020. Here's a review of my 10 predictions.
Prediction 1: Beyond Meat will face a backlash
The market showed plenty of appetite for Beyond Meat in 2019, with the company ending the year 64.3% above its IPO price and many hailing the product’s potential impact on the environment and broader public health. Expect a turn in 2020.
Dissenters have begun to pay attention to the high levels of saturated fats in these ostensibly healthy products, in addition to the use of protein isolates from peas or soy. A price correction for BYND will be just the beginning of this changing narrative: other plant-based proteins will need to work harder to justify their ingredients list, while lab-grown meat will attract more venture dollars, but remain content to remain in the shadows a while longer.
Like just about every other non-Zoom equity, Beyond Meat suffered a setback in March, making my prediction look, briefly, plausible. There's no such hiding now, though: the stock rose over 80% since I made that call, pushing its price to just a tick below $140 a share and a market cap of $8.6 billion.
Still, there's reason to keep believing in a correction. $BYND is trading at over 20x revenue, despite just 3% year-over-year (YoY) growth last quarter and thinning gross margins. As competition increases — Nestlé's "Sweet Earth" brand is a direct substitute — Beyond's valuation may come under further pressure.
I award myself no points and may god have mercy on my soul.
Prediction 2: Trump will win, powered by deepfakes
...Expect a flood of concocted videos to surface on social media this summer. If Biden or Sanders win the Democratic candidacy, this will likely focus on their age and perceived infirmity. Sanders’s socialist leanings will also be exploited with ‘private footage’ — think Romney in 2012 — showing him spout hare-brained, radical leftist schemes...
Ironically, as the only certain liar, Trump will benefit, winning comfortably. Rather than countenancing rebuilding belief around a new, potentially flawed candidate, Trump-voting moderates will stick with the devil they know, while many others simply skip the polls, dissatisfied with all available options.
It feels good to be wrong. Rather than seeing democracy perverted by technological manipulation, the 2020 election passed without any indication of meaningful foreign intervention. That's not to say it hasn't been without controversy, of course, but the relative dearth of deepfakes should be seen as a victory.
It did not always look so rosy. In April of this year, Trump tweeted a deepfake of Biden sticking his tongue out, an ominous sign at the time. Thankfully, that didn't herald the start of a trend, with synthetic media playing a small role over the following months.
Indeed, the two most notable deepfakes of the campaign season served as satire. Nonprofit RepresentUS shared a doctored video of Vladimir Putin speaking English to promote electoral reform. South Park creators Trey Parker and Matt Stone released Sassy Justice in which a Trump-inspired character interviews celebrity deepfakes about deepfakes. Meta. My friends at Charge just shared a great piece on the subject.
Lots of red marker scribbled across this prediction.
Prediction 3: CBD will chill out
The snake oil of 2019 will lose some of its luster. The last 12-18 months have seen CBD lauded for its range of benefits and breadth of applications, appearing in lattes, dog food, cosmetics, vitamins, hair pomade, and dozens of other inexplicable creations...
Mercifully, a decline is upon us: per Google Trends, peak CBD appears to have hit in May of this year, with interest waning since. Expect to see a steeper slump in 2020 with CBD retreating from all but the most down-the-line formulations like hand creams and oral drops, as consumers demand more explicit proof of CBD’s supposed effects.
Despite a global stressor exacerbating the need for legal depressants, CBD purveyors seem to have suffered this year. An annual state-of-the-industry briefing from Leaf Report indicated prices fell 17% in 2020, the result of excess hemp supply and lower than expected demand. Companies like CV Sciences, Charlotte's Web, and Tilray all saw their share prices slide significantly.
I think I can reasonably count this as a hit.
Prediction 4: Fed Coin will materialize
“The Federal Reserve is not currently developing a US central bank digital currency,” chairman Jerome Powell wrote in a November letter to two congressmen, “but [we] continue to carefully examine the costs and benefits.”
2020 will see the latter outweigh the former as China moves towards a full-scale launch of its digital renminbi, expected to be usable on both WeChat and Alipay. With Russia, Iran, and North Korea also interested in using the blockchain to skirt the US-controlled financial system, the Fed will be compelled to ensure its position as the global reserve currency is maintained in the digital realm.
The coronavirus stimulus package hammered home the necessity for a digital method of financial distribution. That seems to have accelerated the Fed's interest in a blockchain-based solution, with Board Governor Lael Brainard noting it may bring "greater value and convenience at lower cost." As part of the same conference, Brainard also shared that the Fed is working with MIT to build and test a digital currency.
There's likely a long road before consumers interact with "Fedcoin." But Powell & Co. made meaningful steps this year, bringing it into clearer focus. I give myself a solid B.
VERDICT: MOSTLY HIT
Prediction 5: TikTok influencers will start to earn
Three years since its launch, TikTok has 500MM monthly active users, a feat that took Facebook four years, and Instagram six...[O]ne estimate suggests the top-end of TikTok influencers can earn hundreds of thousands compared to the tens of millions earned by YouTubers...
Look for this dynamic to shift in 2020 with TikTok building better analytics for brands, and making more of an effort to ensure smaller advertisers avoid FTC violations. To date, many smaller advertisers have neglected to properly tag their posts as sponsored. The result of these changes will be a more mature TikTok, friendlier to big brand dollars. As they open their wallets, expect a new level of professionalization among creators and the minting of fresh millionaires.
Despite falling foul of the Trump administration, TikTok's growth remained impressive. In Q3 of this year, TikTok was the world's most popular app, downloaded 200 million times. The increasing ubiquity and cultural relevance of the platform have proven invaluable for its creators. While there's still a significant earnings gap between YouTube and TikTok personalities, stars like Addison Rae, Charli D'Amelio, and Josh Richards accumulated millions in earnings this year.
That's seen some begin to flex their growing financial muscle in other spheres — D'Amelio announced her first startup investment this month, backing teen banking company, Step. With over 100 million TikTok followers, Step will hope to leverage the teen's distribution. We should expect other creators to follow suit into the private markets.
I'm counting it.
Prediction 6: DTC brands will take a beating
The tech industry ended the year in flames. WeWork had been shelled to pieces, Uber and Lyft smoldered, and Away was still ablaze. 2020 will see further casualties, particularly among direct-to-consumer brands.
Three unicorns will end the year struggling to justify their valuations*:
1. Allbirds, which raised $50MM from T. Rowe at a $1.4B valuation in October 2018, will lose share to Amazon’s $35 knock-offs, the knitted and recycled creations of Reebok and Adidas, and trendy alternatives like Veja and Cariuma. I expect the company to raise an additional $20MM-35MM at a discount from their last round, before negotiating a solid if unspectacular sale in 2021.
2. Casper’s revised mission to be the ‘Nike of Sleep’ will not lead it into the public markets. With a $1.1B price-tag after a $100MM top-up in May, the company has still not posted a profit. In search of a compelling narrative for investors, the mattress-maker has expanded its product line to incorporate sleep-inducing lamps, grown its digital footprint by producing guided meditation, and shifted focus to providing a superior service with plans to staff sleep experts at every store. None of these will justify a tilt at an IPO with the likeliest outcome a round of venture debt, or cut-price sale. Walmart, or existing backer, Target, look likely buyers.
3. Away will remain a toxic tire-fire through Q1 with fresh revelations forcing more managerial turnover. Competitors like Rimowa and Paravel will turn on the gas, increasing advertising spend and taking market share. With its veneer tarnished, Away will have little choice but to close its doors or sell at a fraction of its $1.4B valuation; I would venture 1-1.5x of an entirely speculative $45MM in revenue.
Casper reached the public markets roughly a month after I wrote the above, invalidating the letter of my prediction; the debacle that ensued affirmed its spirit. The stock traded down sharply, even after the company cut its IPO price. The rest of the year has been similarly cruel, with shares down about 50%, valuing a company that raised $339 million in funding at just $270 million.
Allbirds endured a mixed year. The pandemic resulted in a sales slowdown, but the company did succeed in releasing a line of apparel that may improve average order size and frequency. That Allbirds raised an additional $100 million in funding at a valuation flat from its last round tells its own story.
As you'd expect, Away seems to have been particularly hard hit by the coronavirus's effect on travel, with half of the company's workforce furloughed in April. The suitcase maker has been unexpectedly un-newsworthy since then, though the fact that Away's "first-ever sale" occurred this fall may hint at looming financial difficulties.
All told, I think this prediction was broadly right, but for reasons I didn't incorporate into my rationale. With that in mind, I can only get partial credit.
Prediction 7: You will drink Blue Tea
Pantone’s color of the year has been announced: Classic Blue. This may be just the beginning of a cerulean craze, with butterfly pea powder poised for a pop-culture moment. Often described as Blue Matcha (or “the new matcha” by the NYT) butterfly pea powder shares little functional overlap with its namesake...prepare your feeds for the blue invasion.
For goodness' sakes. We all had much more to worry about than the color of our tea. This was a boring and unedifying prediction. I am writing "must do better" on my report card.
VERDICT: MISS AND DULL
Prediction 8: Sustainability will be the definitive status symbol
Metal straws may be distinctly out of vogue, but that won’t stop a commitment to the planet being 2020’s biggest flex. Expect red carpet treaders to discuss the environmental bonafides of their sartorial choices as consumers shift from fast-fashion factories like H&M to more mindful options. This will create an opportunity for a few resolutely environmentally conscious brands to breakout — By Humankind or For Days are candidates — encouraging a greater flurry of insurgents...
The pandemic appears to have accelerated interest in sustainability, with a McKinsey study indicating that consumers report acting with greater environmental-consciousness due to the virus. That includes gravitating away from fast-fashion and towards second-hand apparel.
Intriguingly, just this week, clothing marketplace ThredUP released a logo designed to signify that an item was pre-owned. The company hopes that the symbol of a looping clothes hanger is used on clothes outside its platform. It's one indication that brands believe they can cement sustainability as a status symbol.
That said, the world's mind was elsewhere this year. There were no glitzy red carpet statements (and no red carpets) that elevated the environmental cause or began a new green trend.
Net/net: the changes seem to be occurring, but without the issue stealing the limelight, I only deserve a share of the spoils.
Prediction 9: The Privacy Paradox will escalate
At some point in 2020 — at a dinner, or company drinks, or yoga — you, or someone you are with, will complain about the level of surveillance in our world. You might discuss the recent data breach (there will be more), the escalation of the Uighur crisis in China, the use of genetic records by police, or the slight discomfort of paying with your face. A few hours later, you will set a timer on your Alexa, query Google, and log onto Facebook.
This is the privacy paradox — the conflict between our desire to break away from abusive, data-hungry technologies, but the inability to do so given their ubiquity and usefulness. 2020 will see our cognitive dissonance strained further as we allow voice assistants into our cars, and add cameras to our streets.
Surveillance became a matter of public health this year as governments rolled out extensive tracking programs in response to the coronavirus. To stem the spread, Asian governments monitored cellphones (without user permission), the Kremlin leveraged facial recognition and the United States relied on data from mobile advertising firms. Meanwhile, companies responded to the challenges of a remote-only workforce by requiring the use of tools like Hubstaff, which tracks mouse movements and text entries.
In some instances, we should glad for improved monitoring — it has almost certainly saved lives. But many implementations, particularly from the private sector, represent egregious overreaches. The fear is that after the crisis is over, these practices will remain.
The privacy paradox seems to have deepened, making this a hit.
Prediction 10: The Third Halvening will lead BTC to all-time highs
Bag-holders that began 2019 in tears had something to cheer about in December: the price of bitcoin rose 88% over the intervening 12 months. While it wasn’t nearly enough to salve the wounds of those that bet heavily in 2017, it should have provided some succor.
Better days are ahead in 2020. On May 20th of this year, bitcoin production will be cut in half, meaning that 50% less bitcoin will be created every 10 minutes. This is the third iteration of ‘The Halvening’, having previously occurred in 2012 and 2016. In both instances, in the face of reduced supply, price shot up: 80x in the year after the first split, and 4x after the second.
Though some believe the effect of the halvening is already priced in, a significant bump can still be expected, driving the price above the previous high of $20K, before settling around $15K by the end of the year. This will be good news to many, disastrous news for one: rogue antivirus scion John MacAfee has promised to eat an intimate body part if the value of a single bitcoin does not reach $1MM by the end of 2020.
John McAfee's member is still imperiled. Beyond that looming excision, the notorious bitcoin bull will be very happy with the cryptocurrency's progress in 2020. Since my prediction, BTC's price rose over 150% from roughly $7,400 to its current position below $19,000.
That surge has been buoyed by institutional investors getting in on the action after sitting on the sidelines for 2017's run-up. The intervening years have allowed hedge funds and other managers to expand their mandate to include digital currencies. Corporate action has also helped — Square spent $50 million buying bitcoin. If that proves to be the start of a trend, with other tech companies buying the cryptocurrency to keep on their balance sheet, 2021 could prove even more ebullient.
In November, the currency reached a new all-time high of $19,834.93, making this a hit.
What will 2021 bring?
Next week will be the last edition of The Generalist in 2020. I hope to use the winter break to do some long-term planning, work on a few new initiatives I think you'll like, write some fiction, and recharge.
We'll kick off the new year with a fresh set of predictions.
This Puzzler comes courtesy of Chelsea H, who turned the tables on me by asking me to answer the delightful brainteaser below. If you have a favorite riddle you'd like to share with the crew, I'd love to hear it.
As I grow up, I grow down. What am I?
KOD was the first to snaffle up last week's quandary, responding in short order. They were joined by Kaitlyn R, Paul S, Ben M, Alex C, Chelsea H, Samyuktha V, and Malkie R.
With pointed fangs I sit and wait; with piercing force I crunch out fate; grabbing victims, proclaiming might; physically joining with a single bite.
What am I?
The answer? A stapler. Several plausible alternative solutions were supplied this week, including a fork, a tick, or a venus flytrap. That final answer (my personal favorite) came from Sterling S. Credit to all that answered.
I'm dumbfounded to say that The Generalist community is very close to reaching 20,000 members. When I went full-time on this project in August, I forecasted it would take 12 months to reach that benchmark. Which is a roundabout way of saying: thank you. I am bursting with ideas and excitement about what we all might do, build, and learn together. If you have a friend you think should be a part of our story, I'd appreciate you sharing this community with them. I'm confident we can hit the 20,000 mark before year-end.
With good vibes,