FF Daily #313: Why America needs a billion people

March 3, 2021: The trade-offs of remote vs in-office work; The problem with revenue; Legendary material

Founding Fuel

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Good morning,

While public policy wonks in India are concerned about how to manage the future of 1.4 billion people, a counter-intuitive set of questions are emerging from another part of the world. For America to stay great, become greater, it must have more people, argues Matthew Yglesias in One Billion Americans. “It is beyond dispute that there are fewer American people than there are Chinese or Indian people, as is the fact that China and India are trying to become less poor and seem to be succeeding. Maybe they’ll just stumble and fail, in which case we will stay number one. But it would be unfortunate for hundreds of millions of people to be consigned to poverty forever. It’s not an outcome we have it within our power to guarantee. And even if we could, it would be hideously immoral to pursue it.

“By contrast, tripling the nation’s population to match the rising Asian powers is something that is in our power to achieve. It would require more immigrants and more programs to support people who want to have additional children.

“We should take that uncontroversial premise seriously, adopt the logical inference that to stay on top we’re going to need more people—about a billion people—and then follow that inference to where it leads in terms of immigration, family policy and the welfare state, housing, transportation, and more….

“There are 130 million Mexicans, 330 million Americans, and 1,300 million Chinese people. And to stay on top, we need a billion Americans… Of course tripling the population could also cause a number of problems. Traffic jams could get worse. Rent could go up. Water access would be stretched thinner. There’d be more pollution. These are, unfortunately, real concerns.

“What I want to convince you of is that the basic mathematical problem is real, and the various secondary problems that stem from growing the American population are solvable.

“Rather than being paralyzed by racial panic, ecopessimism, or paranoia about the loss of parking spaces, we should try to think this stuff through calmly and systematically—choosing to emulate our forefathers and mothers who managed to welcome millions of newcomers and ride oxcarts across the Rocky Mountains to build the greatest nation in human history, rather than throw up our hands at every moderately difficult logistical problem and whine that the country is full.”

Think about that. And have a good day.

In this issue

  • The trade-offs of remote vs in-office work
  • How to recognize revenue 
  • Legendary material

The trade-offs of remote vs in-office work

India started the second phase of its vaccination—covering people over 60, and those over 45 with conditions such as diabetes, hypertension, etc—on Monday. After a rather slow start with frontline workers, the pace is expected to pick up in the coming weeks and months. Vaccinating a good chunk of the population will kick off herd immunity (some believe India was going towards that even without vaccines) and a return to the new normal. Already several organisations are refining their plans for the coming months, placing themselves somewhere in the spectrum with completely remote on one end, and back to office ‘like before’ on the other. 

“Irrespective of what model you chose above, what the CEO and executive team does will be emulated by a large portion of the company.”

 

In a blogpost, Elad Gil, an entrepreneur and startup advisor, offers a view of the landscape, while highlighting some of the trade-offs that organisations will face as they make their choices. He wears an American lens, but the issues will resonate with business leaders in India too.

Here’s an excerpt from the post.

Process matters more remote: While a 30 or 100 person company may all cohabitat the same office space, a 500 person company undoubtedly has multiple offices in different and therefore needs to build tooling to allow for people to collaborate across offices and timezones. This means that being remote-only or remote-first comes with inevitable process costs (and in some cases benefits - e.g. all companies should have early goal setting and clear individual and team ownership of areas).

New projects versus scaling existing: Many CEOs I know feel that remote work is easier for existing, scaling projects or products that are in “turn the crank” mode, while new creative endeavours are easier with in person, rapid fire collaboration. This means it is easier to be a large company or specific subteams (with existing process and products) that is remote first, than a small company (which is still figuring it all out).

Synchronous vs asynchronous: In general remote (or distributed) teams have dramatically more asynchronous collaboration and communication than in person teams, for obvious reasons. This usually means more documentation, and use of tools that allow for non-real time communication.

Salary and compensation: The majority of companies will differentially compensate employees based on their locations (for example Facebook, Twitter, Stripe, Gitlab, VMWare, and others all adjust pay—Reddit may be the rare holdout). 

Dig deeper

How to recognize revenue

Most people think they are clear in their minds about what revenue is. But are they? This is a question Evan Armstrong flags off in his blog Napkin Math where he begins by defining what revenue is and how it is recognized.

“Learning to know what a revenue line means is a little bit of reading the tea leaves.”

 

“In its simplest form, it is the number of units multiplied by the sale price of those units. If I sell 20 units of Every t-shirt and each of them is sold for 5 dollars, I have a revenue of 100 bucks. That’s really all there is to the definition! Supposedly, nice and simple. 

“However, the role of revenue gets a lot murkier as the business world increasingly moves towards subscription models. This opacity generally manifests itself in the confusion between bookings, billings, collections, MRR, and revenue. Let’s walk through some definitions and numbers

Bookings: The amount a customer has agreed to spend

Billings: The amount a customer has been invoiced (billed) for

Collections: When you actually get that cash from a customer. In SaaS, this is generally before a service is provided, in retail when it is provided, and in service industries after the service is provided.

Revenue: The recognition of goods/services provided in the time period. 

MRR: The portion of revenue that is recurring on a monthly basis.” 

He then goes on to point out other subtleties. “There is also a difference between receiving cash for a good/service you provide versus being able to say it is revenue. Let’s take the example of a content subscription provider, perhaps an email newsletter bundle that is a great value at only 20 bucks a month. 

“If a customer purchases an annual plan, they will hand over the 200 dollars in exchange for a guaranteed 12 months of service. However, as the content provider, we can only recognize the cash as revenue once we have already handed over the proverbial goods. That means even if you pay us all upfront in month 1, we still can’t recognize that payment as revenue until the completion of our agreements with you.” 

Dig deeper

Legendary material

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