Published in the San Diego Union-Tribune, November 23, 2020
Let’s imagine that you are rich and powerful and famous. In other words, you are a master of the universe, and you pick a co-founder who is also rich and famous and powerful, a mistress of the universe. People hang on your every word, and you both are at the very top of the power pyramid.
So what should you do with the next chapter of your lives?
One possibility is to use your talents to advance society and address some of the world’s systemic problems. You know, step off the main stage and devote your energy to the hard stuff.
But instead, you decide to raise $1.75 billion to start something called Quibi, which will offer short-form content on a phone. No problem here. You know who we are.
Early on, one of the worker bees advises, “Make sure the content can be seen on TVs, not just phones.” Like a pesky bug, that idea is dismissed out of hand. After all, those two folks, Meg Whitman and Jeffrey Katzenberg, did not get where they are by being dissuaded from their vision. They know where they are going because they have been there before.
I wanted to know where they were going as well, so I turned to Benjamin Mullin and Lillian Rizzo, writers for the Wall Street Journal, who had some insights about Quibi’s history.
As the project evolved, their article says that other executives and advisers “recommended, to no avail, that the service allow social-sharing features similar to YouTube, TikTok, etc.” Unfortunately, those ideas were also rejected. Do you think that there is any correlation between not listening and rejecting ideas with the fact that the two co-founders were of “a certain age” and their audience was much younger? Remember, it’s what you don’t know that you don’t know that will kill you.
The next leadership opportunity for greatness arrived in April. The product was ready, and the pandemic was starting to rage. And there was a discussion about whether to launch or pause.
You can imagine this moment, all eyes on the co-founders, standing at the front of the glass conference room, looking at their executive team with the infamous line from Adm. David Glasgow Farragut, “Damn the torpedoes, full speed ahead” circling in their heads. They looked out across the landscape and decided that the pandemic was their friend, the moment that would give them the catapult. After all, people would be at home. How could we miss, caution was for losers, fortune favors the bold? And the business model was simple, only $8 per month. Who could turn that down? Imagine the convenience of viewing meaningless content for those “in-between moments” of the day when people are waiting in line at the dry cleaners. (Did they ever interview anyone who was actually waiting for their shirts?)
Now one of the reasons they pushed ahead in April is that they had “committed to advertising campaigns and had high fixed costs on content and staff.” The issue of fixed and variable costs is a good one for startups to consider carefully. But by the same token, there is an equally pernicious concept called “sunk costs.” Does it make sense to throw good money after bad simply because you are already halfway down the rabbit hole? Do you really think there is a golden rabbit at the bottom or just a very deep hole?
Six months after Quibi launched, it was shut down, the company declared bankruptcy, and $1.4 billion could be found at the bottom of that rabbit hole. It seems those torpedoes were right on target.
The master and mistress of the universe did a post mortem. Katzenberg and Whitman said the company “likely failed because its idea wasn’t strong enough and the timing wasn’t good enough.” Likely? Are you kidding me?
Now, let’s go back to the beginning. Why did they feel that had to do this deal? What was the driving force, when after all, you were already rich and powerful and famous and let’s be honest, delivering content on a phone is not “likely” to change the world?
The Quibi adventure was a massive miscalculation. But leaving aside their arrogance and stupidity, the real question is — why did you even do it?
Rule No. 686
When is enough, enough?