Etsy: Can Ideals Survive an IPO?


The NewCo Daily: Today’s Top Stories

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Etsy was the poster-child for proving that “a socially minded company can thrive in the public markets” — until it wasn’t (Bloomberg). The platform marketplace for sellers of handcrafted goods tried hard to square ethics and sustainability with hypergrowth and an IPO. For a while, it even seemed to be working.

Etsy was certified as a B Corporation, which meant that it passed a series of tests designed to insure that it balanced profit-seeking with protecting the environment and other public goods. The company was also moving toward reincorporation as a public benefit corporation, which would add legal teeth to the voluntary affirmations of the B-Corp process.

But since Etsy stock went public two years ago, its share price has languished. Recently, so-called activist investors — funds that buy up a small slice of a company and then agitate for management shakeups and other changes — began hovering over Etsy. They complained about what they saw as sluggish growth, fat budgets, and extravagant employee benefits.

Mostly, they seemed to be saying: “Screw all this ethics stuff! Can we please get serious about making money?” Earlier this month, Etsy’s board agreed — it fired CEO Chad Dickerson, who had led the company since 2011, and announced layoffs of 80 employees. Now it’s up to new CEO Josh Silverman to figure out how to meet investors’ demands without sacrificing the very qualities that made Etsy something more unusual and valuable than just a Brooklyn-hipster version of Ebay.

It’s easy to frame the Etsy saga as “Reality finally caught up with those dreamers.” But that view preemptively concedes the impossibility of anyone ever pulling off the balancing act Etsy attempted. If you were inclined to root for Etsy’s experiment, you’ll instead want to learn from the company’s mistakes. (Full disclosure: Dickerson is a friend and former colleague of this newsletter’s author.)

What Went Down In the WannaCry Attack

The WannaCry ransomware attack that hobbled thousands of other organizations around the world a week ago wasn’t simply an instance of outlaw hackers exploiting a bug in Microsoft Windows. It was the first major attack to deploy the digital break-in tools that a group called the Shadow Brokers stole from the National Security Agency several years ago and released into the wild. It will almost certainly not be the last, writes Quinn Norton, in a smart narrative that lays out exactly what happened during the WannaCry attack and why (The Atlantic).

The flaw WannaCry relies on lies in a little chunk of networking code called SMB1 that newer systems long ago abandoned. But older systems still use it — and newer systems keep incorporating it, too, so they can talk to older systems. “ In a strange twist of irony,” Norton writes, “interconnectedness can make it difficult to change anything at all. This is why so many systems remain insecure for years: global banking systems, and Spanish telecoms, and German trains, and the National Health Service of the United Kingdom.”

If the NSA had alerted Microsoft to the problem several years ago, when the agency found it, the security hole could have been patched well in advance of any attack. But the NSA likes to hang onto this kind of information so it can use it for its own purposes. In this case, it apparently used the same technique that WannaCry exploited to break into the Swift inter-bank system and monitor transactions across the Middle East for years.

Last week’s attack, Norton writes, represents “a cautionary tale of what can happen when spy agencies collide with technical debt and computer illiteracy.” Since none of these is going away any time soon, the best we can do is stay smart, stay alert — and, yes, keep our systems up to date.

The Rise and Fall of Consumer Society

“Less is more” makes a great slogan for minimalist art and sober personal virtue, but “more is more” has long been the engine that drives our economy. How did human society become so voracious about consuming things — and so good at it? Frank Trentmann’s new book, Empire of Things, offers some answers (as does Deborah Cohen’s summary review in The New York Review of Books).

We tend to locate the concept of a consumer society in an idyllic technicolor-drenched 1950s, but it was born long before that. In Europe, at least, the rise of mass consumption predated the Industrial Revolution. A particular enthusiasm for acquisition and novelty took hold in England and the Netherlands in the 17th and 18th centuries. Industrialization brought urbanization, and city life drove fashion cycles and encouraged displays of prosperity.

Consumption of goods would rise in parallel with consumption of energy, water, and other resources. Only in the last century did critics formulate the negative view of consumer culture — that it is wasteful, superficial, and corrupting.

Trentmann argues that consumer spending works best, and grows fastest, when it is broad-based — which generally happens when government programs build infrastructure and spread prosperity. Government has played a deeper role in the shaping of consumer demand than most economists have understood. And it will need to play just as big a part in helping wean our societies off the most wasteful and profligate forms of consumer behavior as we aim to dodge a climate catastrophe.

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