Elnora H. and William B. Quarton Professor of Business Administration and Economics, Coe College, Iowa
Brian Chesky and Airbnb, 5/7/2023
Brian Chesky is a phenomenal CEO. He recently published a list of improvement suggestions he received from Airbnb users on Twitter. He stated he is "working on all of this. More upgrades coming this summer." Elon Musk even praised the efforts in the same thread. Chesky is capable and admirable, but I don't want to hold Airbnb stocks.
As a growth stock investor, I look at three characteristics of a stock: (1) growth potential, (2) moats, and (3) competent executives. I was an early follower of Y Combinator, so I am familiar with Chesky's story. I have closely followed his actions since Airbnb went public. All admirable, but he could not overcome the first two problems: Airbnb is not in a growing industry, and the competition is intense.
Even if Airbnb replaces all hotels in the world, the industry itself barely surpasses the overall economy's growth rate. And it can't replace all hotels. I don't know how well Vrbo is doing, but clearly, there's no entry barrier.
I do have an idea for Brian Chesky, but before I offer my two cents, I want to quote Steve Jobs. Author Walter Isaacson interviewed both Bill Gates and Steve Jobs on Apple's integrated approach. Gates thought it could work, but only "when Steve is at the helm." Jobs didn't believe that. He said, "Anyone could make better products that way, not just me." But when Isaacson pushed Jobs to "name another company that made great products by insisting on end-to-end integration," Jobs couldn't come up with any, except maybe "the car companies. Or at least they used to."
Jobs was a phophet! From this exchange, I confirm my belief that Elon Musk is doing to Tesla what Steve Jobs did to Apple. They both care deeply about creating a great product with end-to-end integration. What is missing in this simple connection is that both Apple and Tesla operate in booming markets. The age of the personal computer and its subsequent iterations began with Apple. The age of electric vehicles began with Tesla. These are enormous markets.
I am certain that Chesky is a genius in the same league as Jobs or Musk. But his target market is too small. His Airbnb will never reach the same altitude as Apple or Tesla. So my suggestion is for Chesky to use Airbnb as a vehicle. He should embark on an acquisition journey and use his talent on a product that can rival personal computers or electric vehicles.
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