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What We Can Learn From Peloton, and the Newest Digital Currency

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What We Can Learn From Peloton, and the Newest Digital Currency

Welcome back for another episode of “Money Matters.” Today we are going to take a look at a company that got ahead of itself during the pandemic, Peloton, and some recent news that they announced. We are also going to look at a new digital currency in town. While most of our previous conversations about digital currency have revolved around Bitcoin, it’s exciting to talk about something new in the digital currency world. But first, let’s explore the changes to Peloton and see what can be learned from a small business perspective.

Do you own a Peloton or know what it is? If you’re not familiar with what this is, Peloton makes stationary bikes and offers a subscription for you to ride virtually with a trainer coaching you through your workout. It also allows you to compete interactively with other Peloton owners. During the early months of the pandemic, it was one of Wall-Street’s darlings, seeing its revenue and subscriptions go out the roof in 2020 and 2021. This past week it announced that it was replacing its chief executive, cutting 2800 jobs, and stopping its plans on its new manufacturing facility in Ohio. What happened? If demand was so strong, why are they cutting jobs and making changes in their leadership? Because the demand from the pandemic didn’t continue. According to the Wall Street Journal, that sagging demand is reflected in the market capitalization of Peloton going from $50 billion down to roughly $8 billion. Tuesday of last week they reported a second-quarter loss and lowered their revenue forecast by over 10%. Now before we give up Peloton for dead, there are several reported suitors, including Amazon, that might want to buy the fitness company. But I thought this was a fascinating case study from which we can take a few important truths and applications.

One truth we can take away is that surging revenue is never guaranteed. The pandemic has created certain winners whose streaks may not continue as people get back to “normal behavior.” In the words of its new CEO, Peloton “built out a cost structure as if Covid was the new normal”.  Never in the history of the world has all the productive output in the world been shut down in a somewhat coordinated fashion. We’ve seen wars that have redirected productive output – but we never have so many producers out of commission all at the same time. Having now lived through this unusual time, small business owners would do well not to assume that the pandemic purchasing behavior is going to continue. As a matter of fact, it is very possible that we begin to see consumer spending on goods gradually shift to services and experiences this year. Small business owners can get captivated by surging revenue and assume that is the new normal. But you would be wise to make budgeting assumptions based on more conservative revenue numbers that may look more like 2019 than they do to 2020 and 2021, particularly for those in the goods industry.

Speaking of revenue, the second truth and application that I’ll mention is that the top line is not the only metric that matters for a small business. It’s easy to see how much you made in sales and assume things are better because it was higher than last year. But if your costs have grown more than your revenue, which is quite possible in this inflationary environment, you could actually be worse off. Small business owners need to keep a close eye on the bottom line, or revenue minus expenses. More revenue does not always mean more income. Focus on costs just as much as revenue. Be more holistic in your assessment of the health of your company.

Lastly, remember that founders are not able to do everything. In the Peloton case, the current CEO is the Founder. He recognizes the need to step out of that position after 10 years, move into the role of Executive Chairman, and let someone else with a different set of expertise run the company. Businesses go through seasons. The start-up season has a very different set of demands than the teenage and middle-age season of a company. Different chapters require different gifts – so founders in particular need to have the humility to bring in the right talent for what is needed at that time. Time will tell whether this is a good move for Peloton, but there are a host of companies where the founder eventually makes room on his leadership team for someone else with the skills needed to carry that company into its next chapter.

I mentioned earlier that there is a new digital currency in town. While most of our previous podcasts dealing with cryptocurrency have focused on Bitcoin, there is another type of digital currency that is gaining traction – Stablecoin. One of the biggest criticism of Bitcoin is its volatility. Bitcoin has the potential to be a strong long-term store of value, but it has not been a stable short-term store of value with prices fluctuating dramatically in recent months in particular. Stablecoin is a class of digital currency that is backed by other assets that are more stable – particularly the U.S. dollar. A group of banks have formed a consortium called the USDF consortium to find a way to utilize blockchain in this way, in particular to facilitate faster payments in real-time. They want to remove friction within the financial system and utilize blockchain to transfer value in a stable manner. The founding banks of this consortium appear to be on the cutting edge of harnessing blockchain and digital currencies to help everyday people like you and me move our assets more efficiently. Keep an eye on this group and on their role in the future. Bitcoin isn’t the only cryptocurrency that could help shape the future of payments.

In 2022 change seems to be happening exponentially. Technology accelerates change, so having a trusted guide to navigate it all is more important than ever. That’s one of the unique value propositions we want to offer at MBC and Foundation Bank. We don’t just provide loans and checking accounts. We provide the objective guidance to harness these products. We call these financial solutions, and we’d love to provide a financial solution for you. Start your financial conversation with us today by exploring our website or contacting your local branch. If you’ve found this podcast helpful, we hope you will share it with your friends and family and subscribe on your favorite podcasting app, and until next time… God bless.

-President Chad P. Wilson, CFP


Today’s episode of “Money Matters” was written and recorded by President Chad P. Wilson of McKenzie Banking Company / Foundation Bank on February 15, 2022. This episode does not constitute financial advice. Please consult a financial professional to discuss your specific needs. MBC/Foundation Bank is an Equal Housing Lender, Member FDIC.

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