The Subtle Art of Letting it Go

I'm sorry to do this, because I know it's a polarizing topic... but we need to talk about Frozen.

Yes, the animated Disney movie. Trust me, it will make sense. And Frozen is epic. Want to hear some fun facts?

1. Worldwide revenues for Frozen (2013) were $1.3B, and Frozen 2 (2019) hit $1.5B (more than Barbie...).

2. It's the first Disney animated film directed by a woman (Jennifer Lee).

3. I haven't seen it.

Yes, it's true. I haven't seen one of the formative movies of the last decade. But that's not even the crazy part. The crazy part is... the "Let it Go" song from the movie's soundtrack has been stuck in my head for years. Not any of the verses, because I don't know those, but the chorus. It comes to me all the time. Maybe because of the mindfulness and meditation craze in the US, maybe because of a faulty wire in my brain…

Whatever the reason, the song came to me this week when trying to think of an effective hook for this article. And I think it's good advice for the tech industry.

Let it go.

Seeing What Sticks

When you're leading a growing company -- you're typically trying many things and quickly (albeit painfully) finding out what works. Some things are magical and seem obvious in hindsight. Other things are hellish and backfire, or fizzle meekly away (cough, Google Glass). In a Darwin-eque way, the things that work well survive, and the things that are magical don't just survive... they thrive. AWS – Amazon’s cloud unit (and my employer who I do not speak for!) started as an internal infrastructure project, and in 2022 it generated $80B in revenue. That was 15.5% of Amazon’s total revenue that year!

Ok... we get it, sometimes experiments blow up (in a good way). So what?

Right. The point is that it can become really difficult for founders and innovation-loving CEOs to choose a favorite product, so they end up not choosing, and instead keep both. And that's especially tempting when we are in a period of relative regulatory weakness. To put it bluntly, regulators are struggling to breakup big tech companies, as I've written about extensively, including in Regulation and the Revolving Door and FTC 101.

So what happens to this growing product family over time?

The family grows and stagnates. The fast growing, magical products subsidize the slower growing, stable products. As a leadership team, rather than focusing on the leading product and maximizing the value and output of that product, you have to start to make tradeoffs. If we were sitting in on corporate strategy meetings, we might hear things like "we can't invest 100% of R&D into product 2, because we still have product 1 to worry about." Or "I wish these firedrills with product 1 would just go away... product 2 is so much easier to manage". Your dollars and your attention are split. It's hard to strike the right balance.

But there's an alternative to that. Let it go.

Why “Letting It Go” Works

Even if we ignore the benefit of preventing regulatory backlash, there are several things that make this a good idea:

1. Investors like succinct stories.

Imagine you were considering investing... in an ice cream cone from a new place nearby. First, they tell you "our ice-cream is among the best in the world, and we make it from scratch every day". Ok great. Then they add "we're also world famous for our chocolate". Ok sweet (pun intended). "Our ramen is also world famous". Hmm... alright I guess. "We have also patented a new method for making homemade soaps". Ice cream, chocolate, ramen, and a patent for soap-making?... I'm not sure I want ice cream from here after all. As dumb as it sounds, having a succinct story about what business you're in, what you're best at, and why investors should choose you -- that matters. Here's a quote from XPO Executive Chairman Brad Jacobs, so you don't have to take my word for it:

When you can tell a clean story about the value of each piece on its own, the collective value of those pieces goes up.

2. Employees want to be an only child.

For hard-charging employees trying to have a massive impact, they are also fully aware when they aren't at the center of the action. This can be a drain on morale. You'll go to meetings seeking investment for your stable but smaller growing business unit, only to be turned away because all the dollars are flowing into anything with an AI label on it. Even if your unit is theoretically a drain on the crazy growth rate of stable + magical combo, your stable unit not getting attention can stunt its individual growth too!

3. Letting it go means more experiments.

If you are constantly experimenting, adding new huge revenue pieces, and never shedding them, then the problems I mentioned above compound over time. But if you are pruning and splitting things over time, maximizing the potential of those things, then you get an added benefit... you have time to run more experiments and launch new things! And those experiments can be closer to the mission of the unit in question. So if you're back there standing in front of that ice cream case again, they can tell you about a patent on chocolate-making, instead of soap-making...

Wrapping up

I've been thinking about this dynamic all week, and now I can't stop seeing examples – past and present – of this happening. Ebay spun-out Paypal in 2015. Yesterday, Open Text divested a major business unit. And just a few weeks ago, SpaceX announced they were considering spinning off Starlink as soon as 2024.

Given that we’re in a peak period of big tech, with behemoths not doing much splitting off, I think we're overdue. And I think it's a good idea for everyone involved. Belt out that Frozen song. Let it go.

Bonus Bullets

Quote of the Week:

— John Oliver

Quick News Reactions:

• Spotify Wrapped – maybe it’s just a timing coincidence, but Wikipedia’s pleas for donations arriving at the same time as Spotify Wrapped’s yearend summary feature has me worried about my favorite streaming music service again. That said, it’s an iconic annual marketing event, and a sharp reminder of the time I’ve wasted spent listening.

• AI for Good (Again) – Google’s DeepMind research team used AI to discover millions of new synthetic substances, including some with important implications for batteries, sensors, and other crucial tech. And they are apparently giving many of these substance designs away for free, in a shocking contradiction to the OpenAI/Microsoft monetization of ChatGPT. Interesting.

• Apple is the new Walmart – I saw these articles documenting how Apple negotiated an exceptionally ruthless deal with Arm (their chip partner on iPhones for many years) despite only representing a small portion of Arms total sales volume. And I’m wondering how people are surprised by this? Arm having Apple as a customer is really good for Arm, even if only as a branding exercise. And Apple is ruthless with all suppliers (hence the reputation for supply chain excellence and efficiency).

Tech Jobs Update:

Here are a few things I’m paying attention to this week:

• Big Tech Job Posts: LinkedIn has 7,690 (+8.4% WoW) US-based jobs for a group of 20 large firms (the ones I typically write about — Google, Apple, Netflix, etc.).

• Graph: Layoffs since covid (Source: Layoffs.FYI). Note that this is showing in-progress Q4 numbers.