I think one thing this misses is that each state has different laws around what data can be used in underwriting, as well as how it can inform pricing. Additionally, any insurer’s rates are publicly disclosed. This leads to a commoditization of how risk is priced.
That said, there is alpha in the fidelity of data collected and how it is analyzed. Telematics collection has been around for decades, but Root and Lemonade are better at it than Progressive due to their proprietary technology.
I’d highly recommend digging more into the loss adjustment expenses LMND. These are expenses spent to handle claims. The tech really shines here and provides significant operating efficiency in an industry that has tight margins.
Hey Antonio, thanks for sharing your thoughts. I wanted to drill into your comment about their culture - "Fundamentally, it seems to be a better organisation than I initially estimated." - would you mind sharing what made you think they look like a better organization? Is it based on their improving operating leverage?
I went through their Glassdoor reviews for a bit, and they are full of comments about mismanagement, high turnover, unrealistic application of metrics, and bureaucratic culture. None of these should happen for a successful tech company. Curious to hear what you think!
Tech companies operating with an extreme level of spend discipline typically have review pages that look like that due to the high bar that engineers must produce at to stay. Take a look at Tesla or SpaceX’s review board.
FWIW, I don’t think it’s much of a signal. Typically, those who write reviews are upset with the company.
Thank you, ray, for your thoughts. You're right in that many complaints are about work/life balance or unrealistic KPIs, which is a major theme in other great companies like Amazon, Meta, and Tesla. But good engineers are hard to find and attract, and a company needs one or more of 1. high compensation, 2. great culture, and 3. a mission-critical statement or fulfillment from work.
For example, Tesla/SpaceX would fall into the third bucket, and being honest, many engineers would die to work with Elon despite the grueling hours or crappy culture. Amazon/Meta are also known for stressful working hours, but they compensate their workers extremely well. Many engineers I know are proud of their work being used by users in the order of billions.
If Lemonade doesn't pay much and doesn't have great culture, they would have to rely on the third criterion to attract talent. It's not clear how many engineers would be excited by the prospect of disrupting the insurance industry. And this worries me about whether they can sustain their technological edge, if any, in the longer term.
I don’t really think that’s how engineering works. I’m not sure what numbers you’re citing with regard to salary but I don’t think Lemonade is low balling engineers. Additionally, Lemonade seems like they have a culture that prioritizes getting stuff done. That is more than enough to attract the right engineers
This is a good point. At the time of previous deep dive the company was under heavy pressure to steer quickly from growth path to achieving profitability faster. That was driven by rising interest rates (capital wasn’t cheap anymore) and inflation that made loss ratios jump. It’s understandable that in that situation the employees are also heavily stressed.
Now, the company has executed well last 7 quarters, path to profitability is clear, Car is growing and S&M spending has been accelerated. Also the vibe around the company is much more positive. So it’s not good if the employees are still feeling the same than 2,5 years ago.
Hi Antonio, course subscriber here. Can you give your thoughts on OKTA? I believe you've mentioned this company before and I've been tracking it closely. Looks like the firm is executing well with free cash flow per share continue to move higher. Thx
I think one thing this misses is that each state has different laws around what data can be used in underwriting, as well as how it can inform pricing. Additionally, any insurer’s rates are publicly disclosed. This leads to a commoditization of how risk is priced.
That said, there is alpha in the fidelity of data collected and how it is analyzed. Telematics collection has been around for decades, but Root and Lemonade are better at it than Progressive due to their proprietary technology.
I’d highly recommend digging more into the loss adjustment expenses LMND. These are expenses spent to handle claims. The tech really shines here and provides significant operating efficiency in an industry that has tight margins.
Hey Antonio, thanks for sharing your thoughts. I wanted to drill into your comment about their culture - "Fundamentally, it seems to be a better organisation than I initially estimated." - would you mind sharing what made you think they look like a better organization? Is it based on their improving operating leverage?
I went through their Glassdoor reviews for a bit, and they are full of comments about mismanagement, high turnover, unrealistic application of metrics, and bureaucratic culture. None of these should happen for a successful tech company. Curious to hear what you think!
Tech companies operating with an extreme level of spend discipline typically have review pages that look like that due to the high bar that engineers must produce at to stay. Take a look at Tesla or SpaceX’s review board.
FWIW, I don’t think it’s much of a signal. Typically, those who write reviews are upset with the company.
Thank you, ray, for your thoughts. You're right in that many complaints are about work/life balance or unrealistic KPIs, which is a major theme in other great companies like Amazon, Meta, and Tesla. But good engineers are hard to find and attract, and a company needs one or more of 1. high compensation, 2. great culture, and 3. a mission-critical statement or fulfillment from work.
For example, Tesla/SpaceX would fall into the third bucket, and being honest, many engineers would die to work with Elon despite the grueling hours or crappy culture. Amazon/Meta are also known for stressful working hours, but they compensate their workers extremely well. Many engineers I know are proud of their work being used by users in the order of billions.
If Lemonade doesn't pay much and doesn't have great culture, they would have to rely on the third criterion to attract talent. It's not clear how many engineers would be excited by the prospect of disrupting the insurance industry. And this worries me about whether they can sustain their technological edge, if any, in the longer term.
I don’t really think that’s how engineering works. I’m not sure what numbers you’re citing with regard to salary but I don’t think Lemonade is low balling engineers. Additionally, Lemonade seems like they have a culture that prioritizes getting stuff done. That is more than enough to attract the right engineers
This is a good point. At the time of previous deep dive the company was under heavy pressure to steer quickly from growth path to achieving profitability faster. That was driven by rising interest rates (capital wasn’t cheap anymore) and inflation that made loss ratios jump. It’s understandable that in that situation the employees are also heavily stressed.
Now, the company has executed well last 7 quarters, path to profitability is clear, Car is growing and S&M spending has been accelerated. Also the vibe around the company is much more positive. So it’s not good if the employees are still feeling the same than 2,5 years ago.
Hi Antonio, course subscriber here. Can you give your thoughts on OKTA? I believe you've mentioned this company before and I've been tracking it closely. Looks like the firm is executing well with free cash flow per share continue to move higher. Thx