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>In startups and small companies, the problem has been exacerbated by a relatively recent obsession with growth uber alles. Growth, growth, growth, with little

>In startups and small companies, the problem has been exacerbated by a relatively recent obsession with growth uber alles. Growth, growth, growth, with little regard to whether growth is sustainable, or to how costs scale with revenue. This is absolutely true. I'm getting downvoted farther down on this thread for a similar observation, and for attributing this obsession to the SV culture, in particular. This article is attempting to assert that Mr. Sherman was literally incapable of understanding basic math (i.e. the concept of margin). I think it's more likely that he was well-aware of the definition but was focused on growth at all costs. It's funny, because you look at companies like Twitter and Pinterest which come up to scale with absolutely no revenue model, let alone revenue. That seems to be "normal". Nothing to see here. But, when a company with actual revenue deeply discounts products to scale up, it's somehow shockingly bad. I'm not arguing that Ecomom had the right strategy here. I actually think they did not (partly for the reasons you mentioned). But, then in the same universe Pinterest could become the darling with millions of users and no revenue model? It's funny how twisted things are without people seeming to notice the contradictions.

mpyne 14y ago
It is certainly wise to be concerned with having a way to bring income to a profit-seeking entity. But companies like Pinterest and Twitter have very different business realities than companies like Ecomom which market in real goods which they have to pay to buy, pay to ship, pay to hold and even apparently pay to sell and ship again. When your business is all-online, even at scale, it may be feasible to figure out what you want to do after you make your service big (and indispensable).
- unclebucknasty 14y ago
  They are definitely different businesses. No argument there. But, there are still very real costs involved with the Pinterests/Twitters of the world--especially at scale. Money lost is money lost. Whether it's because your price point doesn't allow you to recoup inventory carrying costs or because you have costs with no revenue. But, I think the main point here is that it would seem more feasible to discount products and give up margin as a means to growth than it is to just grow with no idea of how you'll ever monetize. I guess I don't understand what good it is to have a big, indispensable business without knowing how or if it would ever make money. That we're having this discussion is kind of homage to how odd things have become.
greghinch 14y ago
> It's funny, because you look at companies like Twitter and Pinterest which come up to scale with absolutely no revenue model, let alone revenue. That seems to be "normal". Nothing to see here. But, when a company with actual revenue deeply discounts products to scale up, it's somehow shockingly bad. I think this is a function of the marked difference in needs between companies that deal in physical goods and those that offer services.
- unclebucknasty 14y ago
  I agree. I'm pretty sure that's part if what tempts people to grow confused and distort the situation. It's funny, because it's all just business at the end of the day. Costs are costs. Revenue is revenue. Profit is profit. And, the one that gets the relative free pass and accolades is the one that has only costs and doesn't even know how it will ever drive revenue, let alone turn a profit.
kevinpet 14y ago
I think you're getting down voted because you're claiming something directly contrary to the controller's words "he did not understand margin". When someone close to the events clearly says one thing, and a completely unconnected speculator says "surely he didn't mean what he clearly said", it's not really contributing much to the conversation unless you have some good support for that position. The whole entire absolute point of this story is that the company did everything reasonably well, except that they ignored margin, and the controller, who attempted to explain the problems to the CEO in terms of negative margin, has stated that the CEO did not understand margin.
- unclebucknasty 14y ago
  Right. I know the controller said it, but it doesn't make sense. That's my point. Sherman was a CEO, angel investor, and had been through rounds of VC and previous exits (plus he was over the age of 7). And we are to believe that he didn't understand that profit comes from selling a product for more than it costs? Come on. So, the "good support" for my position is logic and common sense. The controller contradicts himself too. On one hand he says the CEO didn't understand margin. On the other hand, he claims he understood it so well that he used his "master marketer" skills to deftly avoid the topic in management meetings. The story also reads like gossip. Very unprofessional and reaching to establish a certain narrative. Sharing one end of overheard private converstions? Conjecture and opinions about Mr. Sherman? You are the controller. Stick to what you know (finances) if you want to be credible. The man has passed and you're writing TMZ-style accounts? I just don't buy what people tell me if it doesn't make sense, no matter how close they are to the situation. In fact, if someone is very close, then they may have incentive to spin. And this smells like spin. So, I think encouraging others to think critically about what they are being told contributes greatly to the conversation. Since when did the HN crowd just go along with nonsense without hyperanalyzing every shred? That's part of why I come here.

mpyne 14y ago

It is certainly wise to be concerned with having a way to bring income to a profit-seeking entity. But companies like Pinterest and Twitter have very different business realities than companies like Ecomom which market in real goods which they have to pay to buy, pay to ship, pay to hold and even apparently pay to sell and ship again. When your business is all-online, even at scale, it may be feasible to figure out what you want to do after you make your service big (and indispensable).

unclebucknasty 14y ago
They are definitely different businesses. No argument there. But, there are still very real costs involved with the Pinterests/Twitters of the world--especially at scale. Money lost is money lost. Whether it's because your price point doesn't allow you to recoup inventory carrying costs or because you have costs with no revenue. But, I think the main point here is that it would seem more feasible to discount products and give up margin as a means to growth than it is to just grow with no idea of how you'll ever monetize. I guess I don't understand what good it is to have a big, indispensable business without knowing how or if it would ever make money. That we're having this discussion is kind of homage to how odd things have become.

greghinch 14y ago

> It's funny, because you look at companies like Twitter and Pinterest which come up to scale with absolutely no revenue model, let alone revenue. That seems to be "normal". Nothing to see here. But, when a company with actual revenue deeply discounts products to scale up, it's somehow shockingly bad. I think this is a function of the marked difference in needs between companies that deal in physical goods and those that offer services.

unclebucknasty 14y ago
I agree. I'm pretty sure that's part if what tempts people to grow confused and distort the situation. It's funny, because it's all just business at the end of the day. Costs are costs. Revenue is revenue. Profit is profit. And, the one that gets the relative free pass and accolades is the one that has only costs and doesn't even know how it will ever drive revenue, let alone turn a profit.

kevinpet 14y ago

I think you're getting down voted because you're claiming something directly contrary to the controller's words "he did not understand margin". When someone close to the events clearly says one thing, and a completely unconnected speculator says "surely he didn't mean what he clearly said", it's not really contributing much to the conversation unless you have some good support for that position. The whole entire absolute point of this story is that the company did everything reasonably well, except that they ignored margin, and the controller, who attempted to explain the problems to the CEO in terms of negative margin, has stated that the CEO did not understand margin.

unclebucknasty 14y ago
Right. I know the controller said it, but it doesn't make sense. That's my point. Sherman was a CEO, angel investor, and had been through rounds of VC and previous exits (plus he was over the age of 7). And we are to believe that he didn't understand that profit comes from selling a product for more than it costs? Come on. So, the "good support" for my position is logic and common sense. The controller contradicts himself too. On one hand he says the CEO didn't understand margin. On the other hand, he claims he understood it so well that he used his "master marketer" skills to deftly avoid the topic in management meetings. The story also reads like gossip. Very unprofessional and reaching to establish a certain narrative. Sharing one end of overheard private converstions? Conjecture and opinions about Mr. Sherman? You are the controller. Stick to what you know (finances) if you want to be credible. The man has passed and you're writing TMZ-style accounts? I just don't buy what people tell me if it doesn't make sense, no matter how close they are to the situation. In fact, if someone is very close, then they may have incentive to spin. And this smells like spin. So, I think encouraging others to think critically about what they are being told contributes greatly to the conversation. Since when did the HN crowd just go along with nonsense without hyperanalyzing every shred? That's part of why I come here.