Micah's Read of the Week, Vol. 46
Micah's Read of the Week, Vol. 46
The end of the millennial lifestyle subsidy, hotel industry changes, Southwest Airline's amazing origin story, a podcasting hype house from hell, Show and Album of the Week, and more.
Hello, and welcome to Micah’s Read of the Week.
This is a newsletter filled with things Micah Wiener finds interesting.
Check out the introduction post here and the entire archive of previous newsletters here.
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Farewell, Millennial Lifestyle Subsidy
Last week, we took a look at how inflation is creeping into our lives and why it’s here to stay. This piece from the NYT details other unexpected areas of rising costs. The thesis: technology VC firms have been offering their services at an unnaturally discounted rate for years. And now it’s over.
A few years ago, while on a work trip in Los Angeles, I hailed an Uber for a crosstown ride during rush hour. I knew it would be a long trip, and I steeled myself to fork over $60 or $70.
Instead, the app spit out a price that made my jaw drop: $16.
Experiences like these were common during the golden era of the Millennial Lifestyle Subsidy, which is what I like to call the period from roughly 2012 through early 2020, when many of the daily activities of big-city 20- and 30-somethings were being quietly underwritten by Silicon Valley venture capitalists.
Collectively, we took millions of cheap Uber and Lyft rides. We plunged Movie Pass into bankruptcy by taking advantage of its $9.95-a-month, all-you-can-watch movie ticket deal, and took so many subsidized spin classes that ClassPass was forced to cancel its $99-a-month unlimited plan. We filled graveyards with the carcasses of food delivery start-ups — Maple, Sprig, SpoonRocket, Munchery — just by accepting their offers of underpriced gourmet meals.
These companies’ investors didn’t set out to bankroll our decadence. They were just trying to get traction for their start-ups, all of which needed to attract customers quickly to establish a dominant market position, elbow out competitors and justify their soaring valuations. So they flooded these companies with cash, which often got passed on to users in the form of artificially low prices and generous incentives.
Now, users are noticing that for the first time — whether because of disappearing subsidies or merely an end-of-pandemic demand surge — their luxury habits actually carry luxury price tags.
So how much are things going up?
Some of these companies have been tightening their belts for years. But the pandemic seems to have emptied what was left of the bargain bin. The average Uber and Lyft ride costs 40 percent more than it did a year ago, according to Rakuten Intelligence, and food delivery apps like DoorDash and Grubhub have been steadily increasing their fees over the past year.
Remember scooters?
The clearest example of a jarring pivot to profitability might be the electric scooter business.
Before the pandemic, you couldn’t walk down the sidewalk of a major American city without seeing one. Part of the reason they took off so quickly is that they were ludicrously cheap. Bird, the largest scooter start-up, charged $1 to start a ride, and then 15 cents a minute.
But those fees didn’t represent anything close to the true cost of a Bird ride. The scooters broke frequently and needed constant replacing, and the company was shoveling money out the door just to keep its service going. As of 2019, Bird was losing $9.66 for every $10 it made on rides, according to a recent investor presentation. That is a shocking number, and the kind of sustained losses that are possible only for a Silicon Valley start-up with extremely patient investors. (Imagine a deli that charged $10 for a sandwich whose ingredients cost $19.66, and then imagine how long that deli would stay in business.)
A Bird now costs as much as $1 plus 42 cents a minute in some cities.
Of course, profitability was never the most important goal for these start-ups. Following the Amazon playbook, the most important goal for most: scale.
Companies like MoviePass were trying to defy the laws of gravity with business models that assumed that if they achieved enormous scale, they’d be able to flip a switch and start making money at some point down the line. (This philosophy, which was more or less invented by Amazon, is now known in tech circles as “blitzscaling.”)
The author notes that while this isn’t good for those who enjoy these services, a return to reality shouldn’t be a surprise, and isn’t necessarily bad.
At a broader level, it’s probably good to find more efficient uses for capital than giving discounts to affluent urbanites.
While it’s painful to pay subsidy-free prices for our extravagances, there’s also a certain justice to it. Hiring a private driver to shuttle you across Los Angeles during rush hour should cost more than $16. The fact that some high-end services are no longer easily affordable by the merely semi-affluent may seem like a worrying development, but maybe it’s a sign of progress.
This leads us to:
Tweets of the Week
The cost of travel is going up too. The average daily rate of an Airbnb rental increased 35 percent in the first quarter of 2021, compared with the same quarter the year before, according to the company’s financial filings.
Hold on one minute, that free breakfast and daily cleaning might also be going the way of a cheap scooter ride…
Hotel industry emerges from pandemic with new business model, possibly fewer workers
Companies — and travelers — have learned how to get by without things like daily room cleanings and free breakfasts, and changes could be long-term.
As Americans travel more, they are encountering a hotel industry that has undergone dramatic transformations and might never return to its pre-pandemic business model.
But one thing that hotels across the board are considering is whether many of their customers are willing to accept fewer services than before, such as daily room cleanings and sizable breakfast spreads, analysts say, and that might mean a smaller hotel workforce in the years following the pandemic.
There’s a lot more here, specifically about what these changes mean to those who make their living working in hotels. For those of us looking to celebrate the end of the pandemic with a little cheap travel, the forecast isn’t good.
Hot Pants, Love Potions, and the Go-go Genesis of Southwest Airlines
The travel industry is constantly in flux, and the airline business is notoriously volatile. Throughout its 50 year history, Southwest has been on the cutting edge of the industry, and the company’s origin story is full of wild stories. Check out this lede:
Go-go boots clattered across the tarmac as a group of young women scrambled into place at Dallas’s Love Field airport. The boss wanted a photograph. “Okay, girls,” said Lamar Muse, the president of Southwest Airlines. “Y’all smile.”
It was 1971, and Southwest had recently put its first official flight into the air. Muse asked a group of “hostesses,” as the flight attendants were then called, to pose for a snapshot he planned to send to Harding Lawrence, the CEO of Dallas-based airline Braniff International.
Lawrence was a bitter rival. He’d spent the prior three years waging a legal war to prevent Southwest from ever getting off the ground. But the U.S. Supreme Court dismissed one final appeal by Braniff in December 1970, clearing the runway for Southwest.
“Get ready,” Muse said to his smiling hostesses, each of whom was clad in her in-flight uniform of tangerine knit top, slouchy white belt, white side-laced go-go boots, and fire-orange hot pants. “Now, everyone flip Mr. Lawrence the finger.”
Southwest wasn’t supposed to work. But the airline has an unparalleled track record of success:
Many observers figured Southwest might last six months competing against much bigger, much better-financed airlines. But as six months stretched into five decades, it outlasted most of its rivals. Braniff, along with dozens of other airlines, went broke and disappeared. Meanwhile, Southwest prospered, posting profits for 47 consecutive years—a streak broken only in 2020 by the COVID-19 pandemic. The company’s success spawned copycats and forced its competitors to change in hopes of keeping up. The whole world of passenger flight transformed as a result.
The piece goes on to explore how Southwest is dealing with the pandemic and what’s next for the industry. But, the best stuff is about the company’s early days.
It’s true enough that Southwest has overcome daunting challenges before. On the day in January 1971 when Lamar Muse became employee number one, Southwest had no real offices, no staff, no gates, and no planes. It owed about $100,000 to its attorney, Herb Kelleher, and it had a little more than $100 in the bank. But 143 days later, on June 18, 1971, Southwest Airlines somehow had $7 million in cash, three brand-new 737 jets, gates at three Texas airports, a staff of more than two hundred, and a maiden flight barreling down the runway at Love Field.
It’s a story that involves Mad Men and lawmen, rats and pigeons, love machines and love triangles, and, of course, hot pants.
Acquiring the fleet:
There was a recession in 1971, and three customers had just canceled orders for planes Boeing had already built. The aircraft were sitting on a tarmac, unpainted but ready to fly. So Muse strong-armed the Seattle plane maker, offering unprecedented terms while he was standing on their competitor’s turf. Boeing caved. It sold Southwest the three 737s for $4 million each, with no money down.
Today, Southwest is the biggest customer for 737s, and the airline’s success helped popularize that plane around the world.
Hiring flight attendants:
“We wanted a fun, casual attitude to be part of each flight,” Trapp recalls. “We were going to look for hostesses who were fun and outgoing. They had to have a sense of humor. They had to have an engaging personality.”
To fill out the first group of 38 flight attendants, Southwest ran its first-ever ad in May 1971. Written by Trapp’s team, it was a help-wanted missive titled “An Open Letter to Raquel Welch.” It read, in part, “Ms. Welch: You typify the girls we’re looking for: Warm, personable, and great-looking in hot pants. … If you know of any other girls like you (at least 20 years old, 20/50 vision, without glasses, between 5’2” and 5’7”, 100-135 pounds) … would you please ask them to send us a brief statement of qualifications and a recent photograph?”
In the context of the times—when selling the sex appeal of all-female crews of flight attendants was an industry norm—the ad might not have come off quite as sexist as it reads today. Regardless, it generated 1,200 applications. Dozens of hopefuls, among them models and beauty pageant winners, were selected for interviews. “We wanted to find out whether they could engage with the customers, ninety percent of whom we knew were going to be men,” Trapp says.
Speaking of flight attendants…
Show of the Week
I know I’m a little behind on this one, but I really enjoyed “The Flight Attendant” on HBO Max. It’s a funny murder mystery with lots of tension and twists and turns. There are some excellent performances too.
Correction: last week I promoted another HBO show, “Hacks.” I said it was eight episodes. I was wrong. It’s 10. The extra episodes were a pleasant surprise over the weekend. My apologies for the error.
Podcast Promotion of the Week
This week on Mind of Micah, we tell the story of an LA-based podcasting start-up. It involves international business dealings, scathing on-the-record quotes from former employees, and lots and lots of cocaine. It’s called THE PODCASTING HYPE HOUSE FROM HELL: How China’s biggest audio platform funded one man’s frat boy dreams. I would encourage you to click the link above to at least check out the truly unbelievable images associated with the piece. But don’t read it, listen to it on the podcast.
We’ll bring you the entire story on Mind of Micah this week. Episodes 1 & 2 are available now. Subscribe here and get new episodes as they are released.
Album of the Week
A Few Stars Apart by Lukas Nelson and Promise of the Real
![Lukas Nelson & Promise Of The Real Go The Distance On 'A Few Stars Apart' [Stream]](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F1a57e1ff-fe0c-440d-a25d-9d79c0a4f762_1200x630.jpeg "Lukas Nelson & Promise Of The Real Go The Distance On 'A Few Stars Apart' [Stream]")
It’s emotional, sweet, forward-thinking, ambitious, and rocking. I prefer it to Turn Off The News (Build A Garden), the group’s previous album that featured more of a pop sound. This is a band I can’t wait to see live again soon.
Enjoy.
Editor’s note: Recipe Corner returns next week.
Where else can I find Micah content?
Podcasts: Mind of Micah, Back Door Cover, Too Much Dip
Twitter: @micahwiener & @producermicah (Why two twitters? It’s a long story)
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