The economics of iPhone cases

I tried, and failed, to get a photo of this issue.

For Christmas my youngest daughter got an iPhone. It was BOGO when you add a line, so I got a new iPhone too. For simplicity sake I ordered us Apple cases with the phones. And my case sucks. The silicon marigold iPhone 13 case is the worst I’ve ever owned.

But why?

Apple products are good. The computer I’m typing this on is an Apple product. If it’s read on a phone odds are one-in-three it’s an iPhone. Apple is one of the most valuable companies in the world – and has been for many years. What’s going on?

Well first, value is relative. If something is bad, it’s bad relative to what? My previous Smartish and Speck ($12 & $8 respectively) cases were more durable and provided prolonged protection on earlier inferior designed products. I think Apple cases are bad because they lack competition.

Apple, like Aldi, competes in a special way. Both are A+ companies and both compete outside the store. The goal is to get people inside, and if customers come in, they’ve got them. So Apple doesn’t convince me to buy the silicon marigold case rather than the leather case. No, Apple just wants me to buy Apple.

Aldi cereal is a visual example of this model, the boxes are bland (here in B&W) because they don’t have to grab the customer’s attention in the store. Contrast this with Walmart or Amazon where the competition is both inside and outside.

Smartish or Speck compete in the bedlam of Amazon. These cases have to throw sharp elbows in the arena of good, fast, and cheap. I found the Smartish case via a Wirecutter review, so it has to stand out as well. Ditto for Speck.

That said, I don’t know if the Apple case should even be good. Apple’s advantage is packaged hardware and software, not being best in class on accessories. Apple doesn’t sell a great phone case, instead the JTBD is ease and brand.

KISS the Afterpay business model

Many actions are taken because they are easy. What did you last eat for lunch? How did you drive to where you are? What browser tabs are open? And ease is context-dependent. What is easy for one person may not be easy for another. 

Ease is a tool. Make it easier and people will do more of it. 

And it doesn’t have to be that easy: Framing makes comparisons better. Any fast associations will do.

The ‘buy now pay later’ company Afterpay succeeded for many reasons, one was a focus on ease. 

Easy for the consumers. Pay one-fourth now, then one-fourth every two weeks. That’s easy. There’s no consideration of credit card balances or APR. 

The terms also make it easy for the consumer to legitimize. If the offer was too good to be true consumers would sniff it out and balk at the purchase. 

Easy for the merchants. Say you own a store. You hear about Afterpay. Wait! They charge, 4% of the transaction!?!?! Your store can’t afford that. 

So how did Afterpay make it easy? 

Merchants don’t have to handle the transaction costs (~1-2% anyway) or the chargebacks. They don’t have to worry about bounced checks or building out their own software. Afterpay increases total order size and serves as a marketplace. The deal was so good it was irresponsible not to be a customer

Easy for regulators. Every business exists within a system of rules. One of the largest agents in the system is the government. Relative to credit card companies, Afterpay has a consumer-friendly profile and consumers love it. 

BONUS: Easy for Afterpay. Yep. Afterpay made it easy on themselves too. Co-Founder Nick Molnar told people his ideal customer was someone buying a purple polka dot dress. This customer was fixed on the fashion and unlikely to miss a payment. 

Fashion customers also skew younger, are more open to options, and want creative financing. While Amazon is convenience shopping, Afterpay became experience shopping. 

Afterpay found an opportunity by reshuffling the costs of doing business. Merchants do pay more per transaction but have more and higher transactions. Effectively Afterpay took money from the marketing and rent buckets and moved it to (their!) processing bucket. 

Within Afterpay, it is CAC reshuffling. If Afterpay is more lenient in approving customers, they have more loss. But they get more customers. Longtime users use Afterpay 29 times each year! While the fraud and loss figures increase the other forms of CAC do not. 

Pirate Booty JTBD

My eleven-year-old daughter requested “Pirate Booty” after having it at school. Those bright buccaneers put the JTBD right on the box. Parents buy these “lunch bags” to pack for their children. You’re not buying a snack. You’re buying being the parent who packs their kid’s lunch.

Pirate Booty also commandeered a clever CAC. They earn “bulk pricing” from the school pay and “retail pricing” when eleven-year-old daughters return home. If this is negative CAC, it joins Freight Waves, who use content subscriptions to sell data and American Pickers who also use content to sell t-shirts.

The Birthday Cake Diet

This post is part of the made up startup series.

Health is a good proxy, like with finance and fitness, for understanding systems because it involves personal choice, design, social factors, marketing, culture, and so on.

Part of the reasons diets, like the diet formerly known as Weight Watchers, work is design. One design is zero point foods, like bananas. Zero points isn’t zero calories but it is zero thought. The primal diets do the same thing. Carbs bad, meat good. Fasting also succeeds due to good design. Vegetarian too. The best diets combine easy rules and identity.

Here’s the pitch: the birthday cake diet or BCD.

The first product would be a book. Or, better, a self-help book! It would outline all the advantages of better eating, all the research of behavioral scientists, and all the philosophy around intentionality and purpose. Tolle meets Tversky to defeat Tollhouse. The pitch is: the only junk food you would ever eat would be birthday cakes.

People could just decide to only eat birthday cakes. But then again there’s a fasting app that’s essentially just a timer — and it’s a great idea! The BCD frames inaction (not eating) as action (waiting for a birthday cake). Annie Duke I know would approve.

‘Okay’ you’re thinking, ‘it’s not just birthday cake that’s bad for you.’ True. So after the first book about the why, comes the second book with the how. Taking a page from WW, the second book used slices of cake as the metric. One cookie? One slice of cake. Chips? One slice. A granola bar? Half a slice. Pizza? Half a slice. Bananas? Free! It’s not as clean as the points system, but framing things as a slice of cake definitely will change some consumption patterns.

The books will kickstart the funding needed for recurring revenue. Birthday cake as a service anyone? BCAAS! The BCD wouldn’t even need to create products. This business white labels ones from the big bakers or leverages the identity and design ease to create Keto ones or whatever. Plus birthdays are regular events. The Total Addressable Market is everyone every year.

The BCD is super social media friendly. Like cheat day posts on Instagram, the BCD sells the experience of blowing out the birthday. You haven’t had cake all year, how about one that’s five feet across? The BCD is shareable. Imagine the local, regional, and national news. This is so influencer friendly. Is a low CAC tastier than birthday cake? We will find out.

So email me to sign up and join the next great eating revolution: the birthday cake diet.

This posts are too much fun. Somehow this is the second Birthday themed post, here is the birthday bet. In college a friend framed regular beer as having a ham sandwich and light beer as not. I still think of that when I see a can of Budweiser.

Customer Acquisition Cost Communication (CACC)

One way to change the CAC is to change the communication. When an organization communicates well it clearly frames the exchange which helps people ‘get it’.

It happens in politics. It happens in emergencies. It happens in sports and in investing too. When asked why he didn’t bring part of his business to a new venture, Bill Miller replied, “We are only interested in having clients that understand you’re going to get volatility. We try to monetize the volatility.“

The simplest form of this is the dating advice: be yourself.

Who is the message for and how would they like to hear it? At Duolingo the how is short.

“Any page on Duolingo has the minimum amount of text, the minimum amount of instructions and an intuitive simple interface. That’s in contrast to how language is traditionally learned, which is in a textbook, which usually begins with a conjugation table. What works better is to let the user jump into the exercise, get some hints, answer questions, and then we unlock new concepts.” – Cem Kansu, The Science of Change, October 2021

In sports the idea was unlocked with images (like heat maps). In investing the idea was unlocked with shareholder letters. It’s the same thing over and over – it’s just finding a fit. Kansu said they’ve run hundreds of experiments, on probably every part of their service. Part of those are how to find a good way to communicate well.


My own version of this is the sixty-two ideas drip. Like this post, it’s a short daily email about an idea. Communicating well is one. It’s five bucks.

Covid and breakfast cereal

cereal selfie

Me, a box of cereal from Aldi, and our kitten. When I bought this cereal the checkout process was 40% faster than rival stores. Plus the cost savings! Sure I had to collect my cart – with the quarter deposit in hand – and also return the cart, but often I meet someone half way and we do the Aldi parking lot exchange of quarter for cart and some goodwill good-to-see-yas.

This Aldi aesthetic is intentional. The cart, the product, the extra long barcodes for the extra fast cashiers are all tactics that support a strategy. I’d heard tactics are not strategy but it’s through the Aldi aisles and Marc Lipsitch’s interviews that the idea becomes as clear and legible as that bar code.

One of the lessons from Covid is how much conditions matter. We’ve learned that individual treatments are dependent on disease stage. We’ve also learned that societal actions are dependent on infection stage. The travel ban, Lipsitch said in May 2020, “was a tactic not a strategy, it was an attempt to show we were doing something rather than a piece of a strategy to make us safe from this virus.”

Strategy is important because our resources are limited. Sure, I’d love to invest in the cryptocurrency of the moment as a lottery ticket but there’s no extra dollars in our investing budget to allocate to a different strategy.

“In the beginning of the intense phase, New York City was working very very hard to do contact tracing at a time when they knew they had lots of cases and didn’t know about most of them. That’s exactly the setting where contact tracing can’t work. No matter how hard you fight the 10% you know about, you’re not doing anything about the rest.” – Marc Lipsitch, May 2020

When tactics fit together like puzzle pieces it creates a beautiful strategic picture. Aldi’s boxes are optimized for speed rather than customer acquisition. Classic cereals use bright colors and cartoons to scream pick me! The cereal aisle is the competition. It’s Cap’n Crunch vs Cinnamon Toast Crunch. Aldi’s products are private labels, so the competition is between big box stores not boxes in stores. The Aldi CAC is speedy checkouts, self-service, and quality goods.

A good strategy has a collection of homeotelic responses. Aldi is one example, but they’ve had almost eighty years to figure it out. Covid is a non-example, but we’ve learned some good lessons and it probably won’t happen again.


There’s a certain amount of what economists call ‘transaction utility’ at Aldi too, we like finding deals. Also, Lipsitch is such a balanced voice on Covid or any field with some uncertainty in the future.

Fifty cent students

CAC is the most interesting problem in business because a low CAC makes for interesting unit economics. And, CACs can have unconventional solutions.

“For kids that have taken the SAT, schools can buy their names for fifty cents a name from the College Board, which oversees the test. Schools get the name and address of a kid who went to the trouble to take the college entrance exam which is a good sign of a prospective applicant and someone where it would make sense to mail a shiny catalog, postcard, or other marketing material.” – Sally Herships, September 2021

Some colleges buy sixty-thousand names! Buying names is a customer acquisition cost. The thinking being that kids who take tests to get into college will be good customer of college. It’s not the best CAC attack we’ve looked at, but here’s a list for you to see for yourself.

In 1912, Leon Leonwood Bean got a list of out of state hunters who might need his duck boots. In 1918 each American G.I. got a Gillette shaving kit. In 1959 Warren Buffett wrote a letter to his shareholders. In 1975 Michael Dell thought the best families to sell newspaper subscriptions to were new families, sourced from the newlyweds section of the paper.

The ’80s Tupperware inspired the ’90s Hotmail signature. In 1999 Zappos paid $18,500 per customer for one advertising campaign. In 2004 Zillow launched with the Zestimate. It was Bill Gurley who told the founders they better think of a way to generate attention (and customers!) because buying ads to sell ads wasn’t a good business. In 2011 antiques attention sold shirts.

So, there’s a lot of ways to test for good customers.


This blog post? A CAC for my Gumroad store, a collection of non-fiction short stories.

“Going for the no”

Mike Maples Jr. worked for a software company that enabled telecom companies to offer broadband service. Mike’s job was sales.For many telcos it wasn’t even a buy or build? question because they were in the hardware business: driving tucks, laying cable, and climbing telephone poles.

But not every company was a potential client. “I started” each pitch, Maples said, “by saying, ‘This many not be a good use of your time.'”

“I would start to make body language like I was going to leave because my goal was to have them reach out, pull me back, and go, ‘No, I’m screwed I’ve got to have three million subscribers in the next eighteen months, my CEO just committed to that on their last Wall Street call.” – Mike Maples Jr., Founder’s Field Guide August 2021

It wasn’t just customers Maples wanted, but the right customers. In high-cadence systems, the wrong customers slow a business’s innovation cycle. “They’re going to ask me for requirements that don’t matter for building a different future” Maples said, “because they’re conventional thinkers who live in the present.”

Traditionally we think of CAC as customers per dollar spent, but customers are heterogeneous, that’s a two-dollar word we learned during Covid. Maples is a venture capitalist so he wants to invest in things that are small now but will be huge later. In the current circumstances that means technology. So Maples restricted his customers because the product he sold (or, wanted to sell in the future) was very specific.

The opposite case can work too: expanding a customer base by offering a more generic product. This is the American Picker case. People browsed the antiques but bought the t-shirts.

A business model is not static. It’s more like a philosophy combined with a Bayesian formula. It has to change with the conditions, but that starts with an awareness of one’s system.


Systems and CAC are two of my favorite ideas. Read them all in a daily email drip on Gumroad. Find it on Amazon too.

Hiring stakeholders

Every business has stakeholders. Each entity in “the supply chain” is a stakeholder. There are supplier stakeholders: credit card companies deciding who or not to service. There are customer stakeholders: voting with their feet. There are government stakeholders: adjusting the dials of the economic system as if it were an aquarium.

There are also employees as stakeholders.

“I think of Masterclass, I think of Coda. I think of a company that we just invested in. They’re very clear and upfront about their culture and the process. And I think that A, attracts people who are excited about that type of culture and B, by the time that somebody has actually gone through the process, it’s very clear to them what working in the company is like.” – Roseanne Wincek, Invest Like the Best, August 2021

The LTV/CAC idea applies to all stakeholders. There are many ways to lower the CAC, and it’s one of the more interesting business questions because the lower the CAC the better the business model.

But even a CAC of one doesn’t work if the LTV is zero. The most important part then is getting the right stakeholders, and the best way to do this is clarity. We are the kind of people who do this sort of work.

This isn’t easy. It’s not like a business can say: this is our business model, because alpha erodes. And, it’s not just competitor stakeholders that affect how an organization runs. Any stakeholder can change the rules. Landlords raise rents. Suppliers vertically integrate. Life changes!

Zappos once ran a campaign with a CAC of $18,500. That was inefficient. But a company who does more convincing that clarifying will have the same results: a lot invested and little to show. For instance, Ottawa Canada is a phenomenally good place to built a software company?

“If I hire someone through this very intricate hiring process that we have, there’s an understanding the chance of us still working together in ten years is really high. It’s a commitment from both sides. The company needs to be worth working for in ten years, but because of that, we can have a very different relationship than in a place where the expected tenure is eighteen months.” Tobi Lütke, The Tim Ferriss podcast, June 2020

Shopify filters employees through an “intricate hiring process.” Investment managers filter limited partners through ominous letters. Brands filter customers through advertising.

Maybe flexibility is the best way to think about stakeholders. How much do your stakeholder restrict your range of motion, and is there a way to increase ones flexibility?


Erik Jorgenson calls analogies our mental ‘sporks’. Brilliant!. The credit card companies were top of mind because the OnlyFan payment situation was news around the same time as the episode. Visa and MasterCard have stakeholders too. Sometimes it’s situations like this that provide opportunity for a business. If someone won’t “do X”, that’s a smaller market and more of a chance to avoid alpha erosion. Lastly; CAC, alpha erosion, and stakeholders are all on the list of my favorite ideas.

Selling shirts, planning planes

We’ve looked at a few different customer acquisition cost strategies : F1 racing, Zappos’s mistake, and P.S. I love you, from Hotmail.

The CAC ideal is to acquire the best customers for free. That’s ideal. L.L. Bean started when Leon Bean mailed his catalog to out-of-state hunters. Michael Dell sold newspaper subscriptions, but sourced his leads from the “Just Married” records. Both men found pretty-good customers for a pretty-good price.

Customer acquisition might be the most interesting puzzle in business because the lower the CAC the more flexible the business model. Today we’ll add two more.

About Mike Wolfe, of American Pickers:

“He would go from barn to barn and buy some cheap stuff, something sold in the store for fifty bucks. We would buy something like an old motorcycle that was art which we could sell for twenty grand. And each day all these people, from all over the country, would come into the store and we would probably sell five-thousand-dollars worth of items and probably thirty-thousand-dollars worth of t-shirts.” – Sam Parr, My First Million, August 2021

The American Pickers television show is the customer acquisition vehicle for selling merchandise. Brilliant right? Okay, the second one.

“Growing a financial services company is so brutally difficult, and the growth is so restrained by customer acquisition costs that it is literally worth it to start flying people around the country. That is the most cost effective way to sign people up for credit cards, and the credit card business is so lucrative it is actually worth it.” – Byrne Hobart, World of DaaS August 2021

The business model of airlines is to operate a hub location that allows for network effects and to maximize the capacity of each plane because each additional customer costs, per Hobart, a drop of fuel and bag of nuts. Hobart’s whole interview is wonderful.

Finding customers has evolved over time. When customers were rural, catalogs ruled the day. As customers moved to cities, it was the department store. Then customers got cars, and the mall and big box retail came to be. The most recent step then is to the internet. It’s the same question Bean bandied in 1912: where the customers for what I am selling?


bonus: look for ‘lost’ monetization opportunities, like Matt Levine’s Money Stuff Bloomberg email.