JFK and WWII, Predicting Bitcoin prices, and Men's grooming
|Sep 9||Public post|
It’s an overcast night in Chicago and I’m enjoying being curled up inside after a long summer. I wrapped up my internship at SpotHero this week (more on than below) so I’m taking this weekend to recharge before gearing up for my last year at Northwestern.
This week, I want to talk about:
JFK and World War II
Predicting Bitcoin prices using machine learning algorithms
Men’s grooming and DTC companies
Large, cheap meals in Lincoln Park
Book of the week
This is my third week of dissecting An Unfinished Life: John F. Kennedy by Robert Dallek. This week, I read about his time in the navy as a captain on PT (patrol torpedo) boats. There are two themes I noticed:
“In human affairs, the public must be offered a drama.” – FDR
JFK was involved in an accident in the Pacific theatre of World War 2 where he had to rescue himself and his crew members. This heroic act received a lot of press back in the US. It was the perfect story of egalitarianism – a member of a prominent family risking his life alongside everyone else in service of his country. It was undoubtedly a coup for his later political life. The story is similar to Churchill’s escape from the Boers in South Africa.
Developing empathy with his countrymen
In the last couple of weeks, I’ve written about how JFK had an incredibly privileged upbringing. Being on deployment was his first taste of the real world. The huge human cost of the war was not lost on him. In a letter to his parents during that time, he wrote:
All the talk about “billions of dollars and millions of soldiers” made “thousands of dead” sound “like drops in the bucket. But if those thousands want to live as much as the ten I saw on my boat – they should measure their words with great, great care.
The war was certainly extremely influential in forming Kennedy’s perspective on conflict. This averse to unnecessary human loss became critical when he was the linchpin in hair trigger situations like the Cuban Missile Crisis.
Long read of the week
Short answer – not really. There are three reasons why:
Lots of noise: The reason why this is a difficult problem to solve for is the average standard deviation of closing prices is larger than $3000. That’s a lot of noise in the dataset to train a specific algorithm.
Lack of data: There’s also not that much data to behind with. If we start from 2009, it gives us 10 years times 365 days or 3650 data points. That might sound like a lot, but it’s not enough for a predictive model, especially one with so much volatility.
Usefulness of the signal: Add to this the fact that for most of it’s history prices were much lower than the last 3 years, you get rid of the most meaningful signals.
Data and fancy techniques can only do so much.
Personal update of the week
I wrapped up my internship at SpotHero this week. It was amazing experience. As a Business Intelligence Intern, I was able to get exposure to multiple teams across the company and learn a lot from them. More specific lessons I learned from my summer to come soon. Here’s a photo from my last day with my boss, Kate:
Business move of the week
The thesis behind this NYT piece is that Men’s grooming is due for disruption by direct-to-customer (DTC) companies. I worked at a startup in this space last year and I’ve talked to several people who are starting companies serving this customer.
Here are my thoughts on the space:
Product categories and go-to-market strategy: If you look at industry reports on this space, two product categories stand out – deodorant and razors. Deodorant by itself is almost as big a category as the rest of men’s skincare combined. Effective go-to-market strategies start with one “hero” product that the company becomes known for, then drives incremental revenue through other products. Ex: Harry’s (razors first, now skincare), Native (deodorant first, now skincare), Hims (ED medicine first, now skincare). This is because of the customer behavior – it’s extremely difficult to get the CVS shopper who buys Irish Spring in bulk to try skincare products. You’ll end up emptying your bank account on over-priced keywords and Facebook or Instagram ads. Much better to give them a better version of something they already use over a sustained period of time (possibly with tight margins), develop a brand relationship through email marketing, then up-sell with higher margins items like face wash, etc.
Untouched segment: An interesting customer segment that is extremely underserved is 30-45 year olds. While the customer segment of the rich, young adult on the coast does exist, most 20-30 year old men simply don’t think about skincare – it’s an afterthought. However, once you hit 30, you start to see the first signs of aging – hangovers last longer, maybe a few silver hairs, etc. It’s also when a lot of people become more conscious about their age. Their default choice right now is Kiehl’s. I think there is an opportunity here.
The 800-pound gorilla and logistics: One part of the space that founders don’t pay a lot of attention to is logistics. The average order value for skincare products is around $20-30. Customers expect (expectations are shaped by Amazon) that they will get free, 2-day shipping. That’s incredibly expensive and cuts into 20-30% of the typical 50-70% margins. This is why I’m so excited about Shopify’s fulfillment project – I wrote about it back in June. It levels the playing field for new companies without the expertise to build a 2-day fulfillment network. It’s tempting to sell through Amazon to solve this problem, but for a DTC company in this space, Amazon is like an anaconda that will slowly squeeze your breath (margins) out.
As for the Men’s grooming space, I think it’s an attractive space but it needs exceptional execution to be successful. The margins of error are small. Let me know if you disagree by replying to this email. I’d love to learn about your perspective.
Meal of the week
Do you like a lot of food for not a lot of money? Me too. If so, Pasta Bowl in Lincoln Park is must late-night spot. Their bruschetta was delicious and the huge portion of their pasta ensured that I got 3 meals for the price of one.
That wraps up this week’s Sunday Snapshots. If you want to discuss any of the ideas mentioned above or have any books/papers/links you think would be interesting to share on a future edition of Sunday Snapshots, please reach out to me by replying to this email or sending me a direct message on Twitter at @sidharthajha.
Until next Sunday,