Peloton CEO quit after laying off 2,800. A lesson about how not to lead (2022)
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He knew the company was screwed, and it's entirely the fault of top leadership. they chose to make their own performance bonuses a priority over long-term business survival, by recklessly expanding during Covid; a strategy that literally everyone could have told them would not be sustainable.
Or go home with a big paycheck in this case
> they chose to make their own performance bonuses a priority over long-term business survival, by recklessly expanding during Covid
There was never going to be long term survival. Peloton was the latest 'as seen on TV' level of product, and once their 15 minutes of fame burns out, the name will be sold off to license cheap products.
Note, before the peloton I bought a Concept 2 rower. I used it routinely for a few months, then periodically, and then not at all. I still have it and going to try to use it again in conjunction with the peloton rowing classes now that they’re available in the app.
If usage of something new goes up, peaks, and then heads down to 1/2 or 1/4 of the previous peak, what would you call that?
It grew from nothing to be a super-popular recreational activity for a numbber of years, and now you rarely see someone on inline skates.
Doesn't mean it goes to 0, but it had a moment - and it is past.
I assume while frisbees are still around, they're also seemingly much less ubiquitous than they were.
In fairness, I'm not really sure frisbees are a fad. They've gone through peaks and valleys of popularity but they've generally stayed around in some form.
The executives made 100's of millions in profits off of a fad. They did an amazing job. Some of it's just dumb luck with the lockdowns, but either way, they made something out of nothing.
Despite some really bad decisions by the management team on letting expenses get out of control, it’s an absolutely incredible product.
Let me offer a counterpoint: I got one as a gift, used it a few times, realized I like biking outside way more, and it was an easy way to get out of the house, and found that paying a subscription for something I can do, for free, is absolutely silly.
It only makes sense if you're a FinanceBro trapped in your mid-town NYC appt and can't get out, etc. There are bike clubs near me for big group rides -- that cost me $0 -- and my local gym offers spin classes when it rains.
The privilege of this is ridiculous. Not everyone has a safe place they can ride around outside for free at. I live in a big city in California and wouldn’t be caught dead riding outside from the terrible air quality to the horrible drivers that could kill me at seconds notice because the bike infrastructure around here is terrible. And if I wanted to get somewhere in the city where it’s better I need to pay for transit or drive, so not free.
I’m a software engineer who loves using it to get a workout in during my day that would otherwise require me as you say travel 15 min each way to closest gym, pay for a gym membership that’s way more than 44 bucks and includes a shitty spin bike that isn’t maintained well unless it’s in a class that I have follow their schedule for. Then head back home 15 min. Yessss so much easer then picking a class to start when I want to and not wasting 30 min driving.
This is a bit of a limited take, I'm an avid mountain biker and hit the trails 2-3 times a week. But I also want to exercise for fitness every day. Doing a ride on a bike is a 2-3 hour process and is fairly weather dependent. Doing a Peloton Ride is 45-60 minutes.
I do the Peloton "Power Zone" workouts they're great, I get slammed burn around 800 calories, maintain 230 Watts for that time and I don't "cheat" because of the power meter. It's a very different thing from an outdoor ride on road or trail. I'm a stronger rider on my bike because of these rides done on the Peloton. Heck most high-level road riders still do indoor rides for this reason - it's why things like the Wahoo Kickr and other trainers and spin setups exist for road bikes.
Finally there also a lot of people who because of their current physical condition or body image or a myriad of other reasons aren’t comfortable getting on a bike or working out in a group. A Peloton at home is a fantastic way for these people to start a fitness regimen.
Everyone's tackles fitness differently and it's odd to see anyone be so dismissive of something that is working for someone else.
On is peloton a fad - it’s definitely not going to be what they thought it was. That was a lockdown induced hallucination. But it seems like with a steadier hand in management it’s a long term viable enterprise. But it won’t be replacing Apple or something like they probably thought they would.
It's okay to find something that works for you and not overcomplicate it, even if it's a cult token in the form of an overpriced exercise bike.
Personally, I think the cost of the bike + the subscription is untenable, but I understand how it could benefit people who want that experience.
This is the going rate for most climbing/bouldering gyms with full freeweight sets, treadmills, spin bikes, showers, saunas, etc.
I personally value cross-training and weightlifting because those are the ways to see real long-term benefits to your health. Bone density, testosterone, flexibility, good posture, will all pay dividends down the line. You can get cardio any number of ways, including commuting and running groceries by bike.
You were motivated, perhaps, because you spent an ungodly amount of money on a run of the mill exercise bike.
Sure, we could all do fit without any trainers, groups, studios, videos or even any equipment – why maintain a bike when you can just run or walk quickly? – but for mysterious reasons, that's just not how all people and their motivation work.
(Sidenote, from what I gleaned lately, and while I would never use this reasoning to claim a Peloton is remotely cheap, it does not even seem laughably expensive next to bikes in a comparable percentile).
I don't think I'm alone in finding the task of designing workout plans challenging, and often demotivating. Obviously it's not the same as paying for coaching or personal training, but being able to open up the app and just have a workout ready to go is valuable to me. I understand some being miffed that the subscription cost is higher for those who own Peloton hardware, but the price point is still much lower than what I would be paying (and was paying) for local classes.
I don't know if this is valuable enough to sustain the business, but I hope it is.
I understand where you are from, and there is definitely a segment of people whose access to gym is hindered by other factors (convenience, time spent on transportation etc) and Peloton is a better solution for them, but I doubt that is representative of the general Peloton users. And even for that segment, there are alternatives that work well enough -- just get a bike trainer, and there are so many options to choose from. (I don't see myself ever getting a Peloton when I already have a bike)
Not to mention that Peloton does not replace gym. For working out/losing weight etc sure, but you get a lot more different equipment and programs from a "real" gym.
Spending over $3,000 over 3 years for what you can do in under three months is an example of American nutritional education.
Would you say a similar thing about a high quality bike?
But the monthly subscription fee is way too high considering the price of the bike.
If you can get a good gym membership in your area for ~$50/mo then I can see how the product is not cheap at all.
(I use my Concept 2 off and on. I've gotten pretty good value from it over the years but I'm not paying $49/mo for the periods when it's gathering dust.)
I have no doubt many people like their Peleton though and find the subscription a reasonable value. That said, the company was pretty much pre-ordained to crater post-pandemic relative to during unless you believe that a lot of gym going people were going to decide this gym thing is for the birds relative to my Peleton at home.
You get access to the entire library of content even if you just use the bike. It's not a huge value add for a people but it is something.
Exercise bikes have been overpriced for a long while, and Peloton moved that price point to the moon when they first came out. Around $2k depending on how early and what model you bought one. That's more than a riding lawn mower. You're trying to tell me that the material costs and complexity and warranty work on a Peloton costs more than a riding lawn mower? Come on.
Pelotons now are about $1500 and the membership is $50 a month. After a calendar year, that's $2100 total spent. At the spin studio here (in a relatively LCOL area), the classes are $22 each with their best deal being unlimited rides at $195/month for a six month contract. Two of those contracts is $2,340 in a calendar year. After the first year, it's more cost effective to have a Peloton and the membership
Value is in the eye of the consumer for sure. It's true that all of this likely overpriced but that's the market
Peloton would likely be out of business by the time my gym costs would pay off the initial price but given the subscription, it never would.
A more apt comp is a Peloton compared to a Spinning Studio. Most Spinning studios (Soulcycle seems to be the most popular) charges not by membership but per class. Soulcycle is $30 per class - the biggest competitor (Cyclebar) I think gets down near to $20 per class depending on how many you buy. Compare that to Peloton's monthly fee and the fact that you can get the same workout at home and Peloton's monthly subscription is peanuts.
Some gym memberships also include spinning - Equinox is one but you get a limited line up of classes.
I saw an article about a $16,000 bicycle and I'm positive the only value it has is being a money-spending signal.
Peloton at least has a service around it.
However the above is enough to support a small company with about a dozen full-time staff who are doing well for themselves, and a few part time staff. That is one CEO who also does basic HR and a few other tasks, 2 IT support people, 6 personal trainers (some who always work nights/weekends), a few other staff because other functions are needed, and part time is seniors at the local college who are getting a relevant degree. Once in a while they will need to outsource design of a new bike as parts on the old model go obsolete, or some new software feature (every two years at most - partially so they still remember how to get this done). Nobody will get rich doing this, but all will have a nice middle class life. And of course all the venture capitalists who funded the wild ride up will be disappointed.
For city people living in HCOL areas, Peloton is a steal compared to gym membership/class rates if you like spinning. Similar for some of the other workout-from-home services that expanded rapidly during COVID.
The problem is, the TAM for that is not 330M Americans / 1B people worldwide. It's more like ~20M Americans / 50M worldwide, best case.
I think its one of those NYC/SF bubble creature mind traps that actually - gyms don't cost $350/mo everywhere. My parents pay $99/year to use a gym and they share a membership, lol. So for a small subset of people $40/mo from home is a steal. For a lot of people it looks like a luxury.
The COVID bump was always going to be temporary, but the genre in general makes some sense for WFH white collar people who don't want to get a HCOL area gym membership.
Yes. It’s an tablet on a bike connected to a VOD workout service. Apple was always just about to eat their lunch. The day they announced Fitness+ was probably the day everyone in the C-Suite started looking for the exit.
"It is not easy to say goodbye to valued colleagues and friends, each of whom have made important contributions to helping build Peloton into the company it is today. Decisions like these were not taken lightly, and we will work hard to assist impacted teammates with their transitions."
It was probably a lot easier than their valued golden parachute.
These aren't leaders. These are toddlers in authority positions.
I have also met terrible terrible leaders and managers. All of those respected (their bonus) money way way above anything else.
It's easy to hate on management, but the business doesn't make sense and management can't fix that. Peleton was going to crash from the covid-fueled mania, and it was going to crash hard. Inevitable.
With a monthly Apple Fitness subscription or equivalent.
“You’re not taking responsibility!”
[CEO lays people off and does resign]
“You’re shirking responsibility in order to get your bonus!”
Leading based on other people’s complaint’s doesn’t work for anyone because people always have complaints no matter what.
I guess that means that the behavior of CEOs is beyond criticism, then. Convenient!
If the board doesn’t like the CEO (taking into account whatever criticism they think is fair), they fire him.
The CEO running constant opinion polls? Not helpful.
And the reply was similar.
My comments seem entirely appropriate in the context - which is none of this makes any difference to any CEO that is doing their job.
Someone responded basically saying that the CEO would be criticized whatever he did. That may be true, but it obviously doesn’t entail that all such criticism is invalid. For example, Joe Biden will be criticized by someone whatever he does, but that doesn’t mean that all criticisms of Joe Biden are equally valid or that no-one should criticize him.
I’m not saying the criticism is invalid. Rather, pointless without action/traction.
But we all have to let the hot air out somehow eh?
‘Boo, CEO laid off 2500 people, that’s terrible’ is pretty useless without looking at the companies TAM, market penetration, margins, etc. because laying off 2500 people may literally be less layoffs than they might need to be doing based on those factors. A company is, generally, a machine for making money as efficiently as possible, and ignoring all those factors before deciding if a decision was valid or not means someone is just complaining/blowing hot air. No one is being hired (almost anywhere I can think of) that could have a reasonable belief of keeping a job that isn’t needed, or doesn’t make sense to the company.
Which is valid. Just not necessarily useful for anyone.
If someone joins a fishing crew and then when the seasonal catch is bad complains that the captain is terrible because they got laid off/kicked off, all they’re doing is venting. Not providing anything anyone should take seriously, IMO.
Why would you make fun of an honest hardworking member of society?
It’s really the fundamental issue - a captain who takes direction from his crew (instead of looking at what is happening and forming their own opinions, and leading from there) is not only not a captain, but dangerous to himself and the crew.
It doesn’t mean they don’t listen! Listening is important.
But they have to act on their own judgement, or everyone is screwed.
And then they take the pros and cons after that, including whatever hate or adoration or whatever results.
What people are looking for is "CEO lays people off and does resign without a golden parachute for fucking up". Maybe even a clawback for past years' bonuses if stuff like accounting shenanigans were used to earn them.
He returned and continued doing exactly what he had done before. Investing tons of resources into new products that have cutting edge features bundled into an aesthetic package.
There was absolutely nothing godlike about Steve Jobs and I really wonder where this sort of weird worship originates.
Partly.
Instinctive hero worship tendencies in people?
A little.
I know plenty of stories about Jobs that put him in a very negative light no matter what the financial outcome.
I don't know the story of Jobs well enough to pinpoint what had changed over the intervening years, but something clearly did change. He had and maintained the confidence of the company. He was able to restore confidence of the consumer. There was a clear succession plan when he passed away, avoiding the turmoil that Apple saw after his ousting in the 1980's. This was not the same man, even if he maintained his abrasive edge.
In the early 2000s, developers were building for the Internet and there were only two options for hosting: Windows NT and Solaris. The licensing for both was prohibitive (and just annoying) and so Linux/FreeBSD started getting traction on the server side. FreeBSD didn't have the hardware adoption so faded (but is still loved). Linux had enough hardware support to run serious servers but the desktop never was usable (the year of the Linux desktop!).
Having OS X being a UNIX-variant was 'close enough' to develop on Mac (a very usable desktop) and deploy on Linux.
Then, Windows released Vista which was so broken that developers simply had to move to Mac in order to be able to function.
That progression is why Mac went from almost dying to being the most valuable company on Earth.
Why do people still continue to spread this misconception?
Edit: Just to add, like many professional developers at the time, we were driven from Windows just as much as we were pulled in by OS X.
Six months later the execs got bonuses for successful cost-cutting. Those bonuses were roughly equal to the amount the two-week furloughs saved across the company.
Citation needed
Context matters though: Peloton is going to save $800m/yr in expenses by laying off 20% of its workforce. It is a viable bet to take in this case.
https://www.hollywoodreporter.com/lifestyle/arts/nintendo-ce...
People actually liked that and respect them a lot more. Is it symbolic? Given their wealth, yeah.
But the problem is the golden parachute, a slap on the wrist and lots of money to leave.
Those Nintendo execs did the right thing so, I almost dare call it honorable.
Seems to be a lot of that, going around.
That taught me some serious personal accountability.
Can you tell us more about it? Perhaps give some examples?
I'm wondering how this situation would've played out under Japanese Corporate Personal Accountability culture.
Their basic philosophy is “QCD,” which stands for “Quality, Cost, Delivery.”
I think it actually was popularized by W. Edwards Deming, but it is likely older. Much of the stuff he introduced was regurgitated older techniques.
“Quality” isn’t just about “is it good?”.
It’s about how is the result measured? What are the measurement points? What are the units? What is the required bar? Etc.
“Cost” is not just dollars (or Yen). It’s also man-hours, resources required, impact on/coordination with other projects, legal liability, risk assessment, etc.
“Delivery” is what is to be delivered, and when? Accepting the delivery requires that it conform to the goals in “Quality.”
Every action item has a person assigned, and they always need to be able to do a QCD report of their charge, at any time.
They leave you alone, but the flip side of that, is that you are expected to be self-sufficient, and personally invested in/accountable for the task. If you drop the ball, you will be replaced.
Frankly, it’s a pain in the ass, but stuff doesn’t fall through the cracks.
https://www.businessinsider.com/slides-major-peloton-investo...
Edit: link to original slide deck from Blackwell Capital if you want to skip the BI article - https://www.blackwellscap.com/wp-content/uploads/2022/02/BW_...
Charging a lot (and not making a lot) for something people probably won’t use for long isn’t a winning bet IMO.
https://www.baen.com/Chapters/9781625791108/9781625791108___...
Where they struggle is growth. They are seen as a premium product. They're expensive. That's why they have tried creating new tiers, new products that aren't just the bike, and ways to get a subscription from just a streaming device.
IMO they would have done better to stay a slower growing, niche, premium product but focusing on quality and profitability instead of growth. The price elasticity in the premium user base is pretty high, they probably would have paid more / bought other products. Then they can keep their cool, and create more organic demand, but not obsess over always filling that demand. Scarcity is a good thing for a premium product.
I think, however, now they are stuck. They need growth.
As n=1, I'm a long term peloton subscriber, and find it a really invaluable way to exercise. Not for everyone, but I get a lot out of it.
I cannot blame those who were able to cash out.
I started out with a different bike but eventually bought a peloton because the community and integration was so much better than bike + tablet.
Plus I love stretching, yoga, pilates, meditation.
During cancer I couldn’t ride. But those chair and standing yoga classes made an enormous difference in my state of mind and health.
I wish it wasn’t so hard for a few folks here to see that passion and emotion for a brand has value.
That said, there are enormous opportunities in front of Peloton. It’s time to get some Silicon Valley leadership in there to apply product led growth initiatives.
I don't know if that is a good credential honestly, given how much money Spotify poured into podcasting with not that much return.
This is about the old CEO though, the article is from 2022
He quit. That's accountable.
> Sure, every business starts with an idea, but a business is a product, and manufacturing, and supply chains, and financial reports, and customer service.
> Once you involve other stakeholders, you become accountable. You become accountable to your customers, shareholders, and employees. That's a difficult thing for a founder who is used to exerting complete control over the thing they're building.
I tried to get a bit more equity before I signed [1], explaining that it seemed like I would be doing the lion's share of the work, so I felt I deserved at least 10-15% equity. The "founder" then told me that they deserve most of the equity because they had the "idea" for this startup, and I told them that everyone has ideas! Ideas are useful and necessary but also extremely cheap and unspectacular. No one gives a shit about your "idea", at least not until you've actually done some actual work to objectively prove that the idea is good.
[1] I was still somewhat young in my career and the red flags that I have now had not been fully developed.
Also, why are stakeholders being infantalized like they're some completely naive and innocent bystanders? Customers presumably are not forced to buy what you're selling, shareholders know their capital is at risk, and employees get paid every month. Are we supposed to be everyone's psychologist and finance advisor as well? Everyone's making their own decisions.
It's been like a race to light capital on fire across every industry up to now
Even if the capital is given to/spent by a failing company, that money is at least still mostly spent on either materials or labor, which means it ends up back in the economy but somewhere else.
Obviously not the most efficient use of that capital if its being invested in poor companies, but it's not vanishing into thin air.
It cites a layoff, a change in the stock price, and a few assumptions about how Foley generally isn't good at their business operations. Then it goes into vague platitudes about how a business is more than an idea. It doesn't mention anything of substance.
Works for the clickbait though.
If such a person chooses the "golden parachute", the "golden rocket" he had to commit on hiring was maybe unachievable in first place...
Even if you're the best for the job, if you don't have the backing of the board you won't get anything drastic done.
Whether those who have the support of the board are really the best ones for the job, that's another question...
From my experience the additional aspect is also that shareholders and/or the management board often have unrealistic expectations on what the company is capable of, and are unhappy when facing reality.
So such a parachute can also be useful to force the company to work through tough decisions, because firing the person who insists on them will not be cheap either.
When choosing a company you are defacto making a heavy bet on the CEO whether you like it or not. Especially in a Down economy.
The only way to really understand this is to try to start your own company. It’ll be come instantly clear to you.
Cost: zero.
Fitness outcome: tons better than you.
I mean.
anyways is this a new round of layoff for them. I know they’ve done a few I’m the past
How is that possible?
You get money, you work, that's the end of it. If someone was ever offered 2x their salary elsewhere, 99% of people would change jobs immediately.
Businesses exist to make money and employees go to work to get a bit of that money. What's up with any other delusions?