David Rosenthal: uncertainty

Transcript context

…As much as 20 years later they had to sell it all off, or in some cases I imagine they didn’t get a return. They just had to close up shop. It does lead them to this insight, which is we’ve been building these disneylands out in the potato fields—I’ve a few people refer to the potato fields and I read it in a few places—and then everything springs up around. We should probably benefit from the fact that everyone is springing up around it to try to take advantage of the fact that people are driving out for their day at IKEA. Tthey want to be everyone’s landlords who are drafting off the success of IKEA, creating a whole bunch of traffic to this area. I think it’s a pretty major strategy of theirs now whenever they open a new store to own as much real estate as possible around it and help develop it. Yup. Gosh, I think about here in the Bay Area, the Emeryville store across the Bay and the East Bay. I don’t know how much of the Emeryville complex they own, but there is so much retail all around that. Yes, it would be genius for IKEA to participate in it. Another thing that happens around this era—it’s the mid- to late-90s—is they really codify these principles with what they call democratic design. They had always believed in optimizing form and function, like they wanted things to have beauty but also incredible purpose. But they added three more pillars. They now have these five pillars. You’ve got form, function, quality, sustainability, and low price. We’ve talked about the quality. We’ve talked about again, quality is not maximum quality, it’s appropriate amount of quality for the object. Low price. We’ve talked a lot about sustainability. They weren’t extremely early. This is before anybody’s mentioning ESG. Most people are mentioning climate. They are making heavy investments. Even in the late 90s when it was viewed as heretical. They probably wouldn’t have been able to do it if they were a public company, but starting to invest in renewable energy and other things. Now this is huge. If you go to ikea.com, it gets a lot of real estate and everything they do is their sustainability efforts. But their goal is to optimize across these five vectors and weigh the trade-off in between them. Their idea of democratic design is that everyone, regardless of their income, can access well-designed products to improve everyday life. Every time they iterate on a product every year, they should be further optimizing some set of the products in the range to get a little cheaper, or find a little better way to manufacture it, or develop some way to serve more customers with the same product to get a little bit better scale economies, or to do something in a slightly greener way. You could imagine a five point diagram where they have a score on each of these five. They want the total area to be as high as possible for everything they do across those five vectors.…

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