One Step Up Issue #23
This week we look at why trying to predict the future is futile, Starbucks's hidden gem, naming and branding, the story of the founding of the US Fed Reserve and a former McDonalds cashier
On uncertainty and predicting the future
Letter written by the then US Secretary of Defense, Donald Rumsfeld, to President George W. Bush, sharing an article authored by Lin Wells (a colleague of his at the Pentagon), on the difficulty of predicting the future.
Starbucks: Monetary Superpower
Starbucks is a great company - but it might not be for their coffee, or muffins, or anything they sell for that matter.
Want to know why?
Every time you top up your Starbucks card, you are effectively lending money to the company at 0% interest. And Starbucks currently has over a billion dollars of this on its balance sheet. A billion dollars. Let that sink in. Unused customer credits. To make it better, they do not need to hold a part of this amount with a bank like a PayPal needs to do (because a customer might withdraw their balance), but can choose to invest this in growth and expansion (or any thing they seem fit).
The cherry on the cake?
Each year Starbucks recognizes that a portion of its stored value liabilities will be permanently lost. This is known as breakage. Starbucks recognizes this amount as profit. In 2018 the company recognized $155 million in breakage, around 10% of all stored value balances. Wow! Starbucks already pays just 0% on its debts to customers, but add in breakage and that equates to a roughly -10% interest rate!
Thread below:
Syllables, Scrabble Letters, and Picking Brand Names
The short answer is that when you successfully make up a new word and introduce it into everyday language, you own it. It becomes a major differentiating asset that cannot be confused with anything else or encroached upon by competitors. At the very best, you end up defining a whole new category – Kleenex, Levi’s, Polaroids, Nikes, eBay. The downside to creating your own brand is that it is hard, and most of the time, very expensive and time consuming to hammer a new word into the consumer vocabulary.
Fascinating article on how to name your brand with specific guidelines and examples.
A former McDonald's cashier is attempting to build the next great billion dollar sports franchise.
The story about the founding of the United States Federal Reserve:
Till next time.
