FF Daily #404: When your company is like a city or a nation

June 22, 2021: Reid Hoffman and Chris Yeh on blitzscaling; India’s vaccine barons; The poaching wave; The disciple

Founding Fuel

[Photo by Karen Uppal on Unsplash]

Good morning,

Towards the end of their book, Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies, Reid Hoffman and Chris Yeh devote a chapter to the consequences of blitzscaling. One only has to look around to get the systemic impact of tech companies with hundreds of millions of users. It can be disconcerting. There have been demands for breaking them up, or even shutting them down. However, before rushing to do any of these, it’s important to pause and understand what’s really happening. 

Hoffman and Yeh write: “New technologies have always had the potential to lead to new problems. Newspapers led to demagogic ‘yellow journalism’. Advertising led to snake oil salesmen. The answer wasn’t to ban newspapers or advertising, but to build policies and institutions to mitigate the risks involved. That’s why we have libel laws and regulators like the FCC. And with time, audiences themselves become more sophisticated and develop their own ‘immune responses’.

“Critics of social media are correct when they point out the corrosive effect social media have had on both the civility of political discourse and the ideal of objective, evidence-based truth. These are real problems, and that means we should try to fix them. Social media should be more transparent about who is paying for advertisements, and should require the same standards for truth in advertising as any other medium.

“On the other hand, there are technologies emerging from blitzscaling companies that could pose real, systemic problems (yet get far less media attention). Synthetic biology, driven by CRISPR-Cas9 targeted genome editing, has the potential to produce huge benefits in medicine and agribusiness, but brings with it the systemic risk of bad actors engineering a deadly global pandemic. Changes and developments in this field have occurred so quickly that it is difficult for governments to create intelligent regulatory regimes to manage these risks. Responsible blitzscalers should give serious considerations to systemic risks and seek structural dialogue that involves a broad set of stakeholders rather than defying or stonewalling regulators. 

“Conversely, regulators shouldn’t assume that they know better than industry and make unilateral decisions. Broad collaboration with transparency and open communications is the best way to both identify the systemic risks and figure out the least costly interventions to reduce them while still encouraging rapid innovation.”

Hoffman and Yeh end the chapter with this important observation: “Like it or not, when your company is a City or a Nation, you need to start thinking like a mayor or a president and set rules for the good of humanity as a whole rather than just for the good of your profits.”   

In this issue

  • India’s vaccine barons
  • The poaching wave
  • The disciple

India’s vaccine barons

One narrative has it that two of India’s largest companies couldn’t ramp up vaccine production because of a lack of access to vital ingredients. This is why a counter-intuitive narrative by Aparna Gopalan in The Intercept had our attention. She didn’t have too many kind things to say about these companies. 

“Almost all of India’s vaccine supply comes from the country’s two largest vaccine producers: Serum Institute of India, led by CEO Adar Poonawalla, and Bharat Biotech, run by founder Krishna Ella. While both companies have repeatedly advertised their vaccines as the cheapest in the world, they seldom mention that those vaccines are also the world’s most profitable. For each dose sold to private hospitals, Serum makes profits of up to 2,000%—what Poonawalla might consider ‘super profits’—and Bharat Biotech up to 4,000%. In comparison, based on the estimated cost to make one dose, Pfizer’s and Moderna’s profit margins are 650% and 500%, respectively.”

Gopalan points out that “the media’s portrayal of Serum’s vaccine exports as a charitable ‘bid to protect the world’ obscures the fact that Serum is charging poorer countries up to $7 for the same vaccine dose that the European Union is getting from AstraZeneca at $2.”

And that “Bharat Biotech, which developed Covaxin with public funds, has been charging Indians exorbitant rates for each shot—up to about $5.40 for states and about $16 for private hospitals—despite founder Ella’s early assurance that the vaccine would cost less than a bottle of water.”

Dig deeper

The poaching wave

Even as people speculate whether or not a third wave will hit India, thought leader Ram Charan is unambiguous about an altogether different kind of wave in the offing. “My daily contact with business leaders across the globe shows that no company has all the talent it needs internally, and every company is vulnerable to losing the talent they have. Competing for talent is a necessity, and it is not a level playing field,” he writes in Chief Executive.

“The more successful you are, the more likely you will become a target of talent poaching”  

“A headhunter may see your company as a source of talent for multiple clients. Or another company may simply see your key person as the best fit for their needs. Losing one key person may mean losing many more if the person takes his or her team along, as is common in financial services firms. It has happened with marketing and sales teams and in the semiconductor industry.”

There are four pointers he has to offer on how to pre-empt this.

Dig deeper

Still curious?

Experiences with our teams, says Nitin Srivastava, have made us rethink our corporate objectives and the gains are extraordinary. Read: Unleash the potential of your people

The Disciple

In this short but profound clipping from Sangeet Ratna, a film by Alan Kozlowski, Pandit Ravi Shankar meets his teacher Ustad Allauddin Khan even as he reflects on music and the teacher-disciple relationship. 

What’s helping you get through these tough times? Send us the song, poem, quote that is your balm now. And we will share it through this newsletter.

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Warm regards,

Team Founding Fuel

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