Editor's Letter | Our factories are being wasted
He stood in front of Congress, leg braces cinched. A cane stood nearby.
"These are ominous days," he said in a sober tone.
President Franklin D. Roosevelt uttered those words to the collection of statesmen on May 16, 1940, over 18 months before Japanese planes attacked Pearl Harbor. But though the US was yet to have entered World War II in earnest, the threat of Hitler's Axis had been laid bare. The week before, German forces had ripped through Holland and Belgium and nearly forced surrender from France, supposedly the holders of Europe's strongest military force.
That show of strength, in addition to his observations of German military manufacturing capability, convinced FDR that the US must do more to protect itself and help allies in Europe. To do so, the President put forward a bold challenge to the American manufacturing industry:
"I should like to see this Nation geared up to the ability to turn out at least 50,000 planes a year."
To put this in perspective, America was only the 12th largest military at the time, smaller than Brazil, with only the 18th largest airforce, having produced fewer than 3K military planes in 1939. Germany, meanwhile, had increased manufacturing rapidly, producing under 2K airplanes in 1939, but reaching close to 8K the following year.
FDR's bold statement was met by scoffs in many circles with Hermann Göring, head of the Luftwaffe, calling it "pure propaganda." By 1944, the US produced nearly 100K planes. It couldn't have been done without the power of American manufacturers, particularly in the automotive sector, and without a coordinated federal plan.
We find ourselves in a similar situation today, fighting a fast-moving adversary with an under-equipped arsenal. The numbers are stark:
We need 3.5B N95 masks this year, the national stockpile has 11.6MM
We may need ~750K ventilators, we have ~175K across the national stockpile and US medical system
More than 2.6B rubber gloves are being ordered weekly, with a "chronic shortage" looming
To fill the void, private companies are stepping in. Gap, Hanes Brands, and Eddie Bauer are making protective gear. Under Armor plans to make 500K masks. Pernod Ricard, Dior and YSL are transforming their perfumeries into hand sanitizer plants. GE, Ford, and 3M are teaming up to produce ventilators. Even smaller companies are doing their part: a rocket startup is using their ethanol to make sanitizer too, while a small Italian 3-D printing company, Isinnova, churns out valves for ventilators.
And yet, despite these efforts, chaos reigns in the US as states are forced to compete with each other for supplies, and rogue sellers seize the opportunity to scam and price gouge.
There is a simple solution. The Defense Production Act (DPA), created in the 1950s, gives the federal government precisely the sort of power FDR used to boost wartime manufacturing. It allows the government to issue loans to private companies to help them boost capacity, in addition to ensuring that government orders are fulfilled first. It is also widely used, even by the current administration: the Department of Defense estimates that they take advantage of DPA 300K a year to secure materials for the military.
Yet, with regards to the coronavirus, the administration has used it sparingly, "invoking" it by chivvying GM to move more quickly, but not enacting it more widely. As the US faces the reality of needing to produce and distribute millions (if not billions) of vaccines in the next 18 months, the importance of a robust, unified supply-chain that funnels materials to those in greatest need is only going to become more critical.
FDR concluded his speech, alighting on these words.
"Defense cannot be static. Defense must grow and change from day to day. Defense must be dynamic and flexible, an expression of the vital forces of the Nation and of its resolute will to meet whatever challenge the future may hold."
The federal government must recognize the uniqueness of the current crisis, and act nimbly to address it.
Brief | Here's what you'll learn today
Frank O’Hara’s instructions for a crisis
What astrophysicists get stuck up their nose
Why the scooter market may consolidate
The sweaty victors of Covid-19
Luckin’s poisonous brew and Bezos’s zero chill
5G conspiracy theorists and Cash App scammers
The man who lost 30 years but became a hero
Winds of change sweep the winner’s circle
If you're new to The Generalist, you might enjoy our recent piece "The World After the Coronavirus," or our breakdown of the skirmish between two venture capitalists, "Keith Rabois v. Zach Weinberg."
Overheard | Words worth pondering
“In times of crisis, we must all decide again and again whom we love.”
- Frank O'Hara, Meditations in an Emergency
Good news | The antidote to the apocalypse
Kind words
"A social network where everyone is nice" is just the one we need at the moment. "Kind Words," released last year, is simple. You inhabit a small room in which to write, with lo-fi beats serving as your soundtrack. In addition to the missives you send out into the world, you can respond to others, once, before the conversation disappears.
Feeding Italy
A cooperative of African migrants is bringing fruit and vegetables to the residents of Rome. The group of Nigerians, Malians, and Senegalese immigrants are working "twice as hard" to provide cauliflower, cabbages, yogurt, and other goods as Italians are forced to stay home. Many of those that work for the cooperative were previously mistreated while employed by other growers in Italian citrus groves. Still, they are excited to serve their neighbors. "It’s a beautiful thing that we are helping feed the community in these terrible times," one said.
Mad inventors
The coronavirus crisis is serving as inspiration for inventors, with rather mixed results. Recent concoctions include: the "hygienehook" which allows you to open doors without touching them, a wrist-mounted sanitizing spray, and "Immutouch," a device that buzzes when a user's hand approaches their face.
An astrophysicist got magnets stuck up his nose, trying to create a Covid-19 safety device. More here
Short bites
Enjoy some beautiful, modernist sandcastles. More here
A father in the Netherlands took a timelapse video of his daughter Lotte from age 0 to 20. More here
Sandra the orangutan says wash your hands. More here
The Getty Museum challenged the public to recreate great works of art while quarantined. More here
1000 words | Something to look at
We may be headed for the "deepest recession on record," according to Bank of America. The financial institute released that prognosis this week, along with consumer spending data from March 7th through the 24th. With a decline of ~30% in spending across the board, travel was particularly savaged. Airlines, cruise operators, lodging and entertainment companies saw declines of over 100% year-over-year, only possible because of the refunds many were forced to issue. That information, along with the 10MM unemployment claims filed over the past two weeks, led to BofA predicting three-quarters of GDP contraction, for a total decline of 10.4%.
Startups have also been affected. As Billy Gurley noted, "'Risk on' happens slowly. 'Risk off’ happens overnight.” A few examples of those caught out:
Classpass revenue dropped 95%
The Wing revenue dropped 95% "overnight"
Wonderschool revenue dropped ~50%, majority of staff cut
Airbnb bookings dropped 40%, $800MM in ad spend frozen
Dirty Lemon laid off 50% of staff
RigUp laid off 25% of staff
Zip Recruiter cut 40% of staff
Lime shutdown services in America and Europe
Rover cut 41% of staff
Knotel cut or furloughed 50% of staff
OneWeb declared bankruptcy
Beyond a correction in valuations and an acceleration of the shift towards pure software businesses that began after WeWork's collapse, the startup ecosystem should expect a change in mindset. The gospel of hyper-growth pushed by venture investors over the last decade is giving way to a mantra of profitability and resilience. For many, this may be too sharp a pivot to make, forcing many to consider options they may have balked at twelve months ago, including mergers or sales. Softbank has long advocated for a union between Doordash and Uber Eats; that may now look like an enticing proposal. Masayoshi is said to be making the same pitch to the founders of Grab and Gojek. Beyond those listed, scooter companies like Lime, Bird, Revel, Spin, and Scoot — locked in pyrrhic, money-burning struggles — may also see the value of consolidation in the months ahead.
The signal | Breakout trends
John F. Kennedy once said, "The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger — but recognize the opportunity."
(Aside: would love confirmation that this is true. The evidence is equivocal.)
As some industries struggle to stay afloat, others thrive. The online fitness industry has seen a huge uptick with interest increasing 4x over the past month. That's good news for online class startups like Future, and Obé, along with connected hardware manufacturers Peloton, Tonal, and newcomer Ergatta. Mirror CEO Brynn Jinnett said that "sales have more than doubled since the advent of Covid-19."
Meanwhile, traditional gyms are playing catch up. Orangetheory has started to release daily 30 minute workouts, while Gold's Gym, Crunch, the YMCA and Barry's Bootcamp have begun to upload libraries of their own.
Long tail | The week's best of the rest
Out of Luck(in)
Once hailed as the fastest company to reach unicorn status, Chinese coffee chain Luckin is in hot water. The company's shares nose-dived as much as 81% on Thursday, after the company disclosed that their COO and other workers had fabricated billions of yuan in sales. As a result, some financial commentators expect investors to treat China's high-growth companies a little more cautiously going forward.
Chinese startup funding is down 65% from last year. More here
Electric car startups in the People's Republic are hemorraging Silicon Valley talent. More here
Relax, Jeff
You do not become one of the richest people in the world by having some chill. Despite the rest of the world taking stock in the face of Covid-19, Jeff Bezos is continuing to push staff at his private rocket company, Blue Origin, to launch the New Shephard craft. That would require staff from Washington, one of the states hardest hit by the virus, to travel to Texas. The vehicle is primarily devised for wealthy tourists to experience life in space. Earth to Bezos: it might be time to reevaluate your priorities.
Amazon fired a warehouse worker that walked out over coronavirus safety concerns. More here
Twitch, Discords and other gaming services are booming. More here
Corona conspiracy
Three cellphone towers were set alight in the UK this week as the hare-brained theory that 5G networks cause Covid-19 gathered momentum. Videos of the fires circulated online with voices offscreen shouting "Fuck the 5G" and "Viva La Revolution." Actor Woody Harrelson is among those intrigued by the unsubstantiated drivel.
Square's Cash App is being used for a series of coronavirus scams. More here
Putin is pushing the narrative that Covid-19 started in the West. More here
"Acceptance of fraud is going to have to be high," said one watchdog about the US government's $2.2T relief package. More here
Graduating in Minecraft
As seniors process the sudden loss of college life, some are turning to an unusual place to help them cope: video game Minecraft. Students across the US, including those at UPenn, Northwestern, UCLA, and BU have fired up servers and begun to meticulously recreate their respective campuses. “I didn’t have the chance to properly mourn or finish out my senior bucket list, say goodbye to my friends and teachers,” one senior said. "[This is] making the process of leaving feel less sudden and more gradual."
A journalist threw their boyfriend a birthday party in Sims. More here
Massive online games like Final Fantasy and World of Warcraft are the closest thing to socializing in person. More here
Ignoring health warnings, influencers flee their homes. More here
The detour | An intriguing digression
French submariners may have no idea what is happening among us surface-dwellers. Per a retired admiral, mariners aboard their mission are frequently spared unpleasant news to keep their spirits high. They are unlikely to learn more until as little as two days before they return.
In many ways, that premise echoes the life story of Hiroo Onoda, a Japanese soldier that spent the better part of 30 years living in a state of ignorance, unaware that World War II had ended.
Stationed on Lubang Island in the Philippines at the end of 1944, Onoda had been ordered to stay and fight until he was dismissed. He fulfilled that order with rather valiant stubbornness, surviving on bananas, coconuts, and rice pilfered from a local village and ignoring the radio messages and leaflets that proclaimed the end of the war. Onoda believed those messages to be enemy propaganda, designed to lure him from his post. His behavior was not entirely laudable, however. Trained in guerilla warfare, Onoda often mistook residents of the island as enemy combatants killing as many as thirty people over the years.
Having been discovered by a student that went looking for him, Onoda only agreed to come home after the commander that had given his original order came to Lubang to dismiss him. It was 1974. Upon his return to Japan, he was hailed as a hero and pardoned for those he killed. Some lobbied for him to run for office, enamored with the traditional values that he represented, values that in some sense had disappeared from modern Japan. That hints at the difficult transition Onoda faced, returning to a very different homeland than the one he had left. "There are so many tall buildings and automobiles in Tokyo," Onoda was said to have remarked with disillusionment.
Jobs | Only the openings you need
Business Operations Manager - Komodo Health - NYC - Apply here
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HQTeam - Dorm Room Fund - Remote → Apply here
VC Senior Associate - Samsung Catalyst - SF - Apply here
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VC Senior Associate - HyperFund - SF - Apply here
Chief of Staff - Lime - SF - Apply here
VC PM - All Raise - SF - Apply here
Launcher - Atomico - SF - Apply here
Puzzler | Riddles and conundrums
I like indigo but not blue, onions but not turnips, forms but not shapes. Using the same logic, do I like tomatoes or avocados?
New faces abound in this week's winner's circle, with MWF securing first prize by providing a correct answer within a matter of minutes of last week's email. They were joined in short order by Monica V, SEV, Kaitlyn R, and Tom G. A rather glittering constellation. In case you missed it, here is the riddle in question:
What is 3/7 chicken, 2/3 cat and 2/4 goat
The answer was Chicago, as in Chicken Cat Goat.
Thank you all for reading. Wishing you a serene Sunday that reenergizes for the week ahead. 💙