Helena Luczywo and Wanda Rapaczynski, 54 and 52
Gazeta Wyborcza, Agora SA
Warsaw, Poland

How do you take a group of committed political activists who don't have a shred of interest or experience in building a business and create a thriving for-profit enterprise — without losing the values that brought everyone together in the first place? That was the high-stakes challenge that faced Helena Luczywo, a onetime Polish dissident turned multimedia mogul, when, in 1989, Poland became a free country and began its transition to a market economy. Luczywo, now 54, has spent the past 11 years responding to that challenge — and building one of the most successful companies in post-communist Europe.

Until 1989, Luczywo had spent more than a decade dodging government authorities and avoiding arrest while she edited Poland's most important underground newspaper. But when the communist government agreed to hold elections and to allow the opposition to have its own newspaper, Luczywo suddenly found herself running Gazeta Wyborcza (Election Gazette), the first legal, independent newspaper in the former Soviet bloc. She immediately faced a whole new set of struggles — from how to define the paper's editorial mission in a free society to how to drum up money to pay for much-needed new printing presses. Her goal: to turn a beleaguered opposition newspaper into a European media giant, making it a forum for objective news and democratic ideals. But how?

Cut to Wanda Rapaczynski, Luczywo's childhood pal. Rapaczynski had emigrated to the United States in 1968, earning a master's degree in management at Yale and then becoming a top executive at Citibank in New York. The two women had seen each other only twice in nearly 22 years, when, in January 1990, Rapaczynski came to Warsaw on a business trip and looked up her old friend. After only a few minutes together, Rapaczynski, now 52, volunteered to help with the paper. "I felt that I owed a debt," she says. "These people were here during martial law and communist rule. I wasn't."

For nearly two years, Rapaczynski worked as a pro bono consultant from New York, spending her vacations at the paper and dispensing advice by phone until the pressure of working two jobs finally got to her. In 1992, she quit her Citibank job, moved to Warsaw, and joined the paper full time. Together, Luczywo and Rapaczynski have spun the small underground newspaper into a Polish media giant, Agora SA, making it one of post-communist Europe's most remarkable success stories. Rapaczynski is president and CEO of Agora's management board. Luczywo, who has never cared much for titles, calls herself simply a "member of the management board," but she functions as the editorial director.

Agora, a publicly traded company with a market value of more than $1 billion, has holdings in newspaper, radio, and cable television. And it's rapidly expanding onto the Internet. Agora's flagship property, Gazeta Wyborcza , is by far Poland's most popular and most profitable paper, with ad sales of $123 million in 1999 and an average daily circulation of 560,000. While the company's 5-year-old radio division is small by comparison, it has grown quickly, with 13 local radio stations, one national radio station, and advertising revenues of $7 million in 1999, up from $2.7 million in 1998.

Agora's track record is so firmly established that when the company went public last year on the London and Warsaw Stock Exchanges, the IPO was oversubscribed by a factor of 10 — causing one American advertising executive based in Warsaw to quip, "It's Poland's Dell, the stock everyone wants to buy and get rich from."

Many people have. More than half of Agora's 3,000 employees are sitting on a pile of cash, thanks to a generous stock plan created by Luczywo, Rapaczynski, and Agora's third management-board member, Piotr Niemczycki, 41, head of the company's printing operations. Prior to the IPO, more than 1,500 staffers were given the right to buy shares of stock (based on their years of service) for one zloty each (about 24 cents). Last July, Agora sold 2.2 million shares to institutional investors at 104 zlotys per share, representing a huge windfall for the company's employees. The average Gazeta Wyborcza reporter earns $13,000 a year, but more than a few staffers are now millionaires.

No other company in post-communist Poland is believed to have shared so much stock with so many employees. But the company is sharing the wealth with the rest of Poland too. When Luczwyo, Niemczycki, and Rapaczynski restructured Agora in preparation for its IPO, they set up a charitable trust, holding 7.5% of the issued shares. When the trust matures, the company is obligated to distribute the proceeds — now valued at about $150 million — to charities in Poland. "This isn't just a business for us," says Rapaczynski. "Part of being a free media, untainted by political interests, is being willing to play a role in the country's democracy. And part of that belief is being committed to broad ownership of this company and giving back to our country."

Gazeta Wyborcza is a tabloid that uses USA Today - style color photos but that takes an intellectual approach to news, running long, thoughtful editorials and essays by philosophers and historians — the types of pieces that you might find in the New York Review of Books. That editorial thrust has been a joint effort by Luczywo and Adam Michnik, the legendary Polish dissident, historian, and author, who for years was a thorn in the side of the communist regime. Michnik, who holds the title of editor in chief, is the public face of the paper, while Luczywo has been the behind-the-scenes power, managing the paper's day-to-day affairs. (She recently took charge of Agora's Internet division.)

"I've been fighting for freedom of expression for many years," says Luczywo. "I believe that our newspaper should stand for important things and should not avoid difficult topics. It should tell the truth, even when the truth goes against the popular grain, the government, or advertisers. Our newspaper should have a reputation for integrity and should keep those standards." Adds Michnik: "We aren't liked by everybody. Some say that we impose a liberal standard for political debate. I don't think that's wrong. We take seriously our role in this country as an institution of democracy."

Meanwhile, under Rapaczynski's strategic guidance, Agora also has managed a series of shrewd business moves, transforming itself into what is considered to be one of the best-run media companies in Europe. In the early days of the company, when it desperately needed investors in order to acquire printing facilities, it turned down several suitors because it was determined to find one that would offer a sizable cash investment with no strings attached. "We had a very long list of people we didn't want as investors," says Rapaczynski. "We didn't want a media shark who eats up companies. What we wanted was someone who would make a sizable investment, without having any editorial say. We wanted what every company founder wants — which is, essentially, a free lunch."

Agora got just that in 1993. In a very sweet deal, Cox Enterprises Inc., a family-owned media chain based in Atlanta, bought a 12.5% stake in Agora and agreed not to meddle in its editorial affairs. Since then, Cox has taken stakes in Agora's radio and cable-TV businesses and has become a valuable friend to the company, providing the staff with management training, consultants, and a lot of free advice. The result: Agora has increased its profits every year. This year, its net income for the first five months alone was $17 million, up 60% from the same period last year.

Luczywo and Rapaczynski, meanwhile, are now bona fide moguls, each holding shares worth more than $30 million. (Michnik declined to take any stock, saying that, as editor, he needed to be removed from business interests.) Luczywo and Rapaczynski don't apologize for their wealth. They argue that money buys power and independence. If they wanted to live by their values, they had no choice but to create real economic value. "One of the greatest fears among the people at Agora has been, 'How are we going to keep our independence? How are we going to keep from being taken over?' " says Rapaczynski. "I've always believed that there is only one protection: You have to make sure you're financially independent. I remember telling people, 'The best way to keep the devil at the door is to be rich.' If you want to do good, you have to do well."

Declarations of Independence

To understand Agora's thirst for independence, you first need to appreciate the personal stories of both Luczywo and Rapaczynski. Like most Poles, their personal histories are wrapped up in Poland's traumatic political history. Luczywo's parents, both Jews, fled during World War II to what was then the Soviet Union, escaping the fate of roughly 3 million Polish Jews who were murdered in Nazi death camps. While in the Soviet Union, the Luczywos became friends with Rapaczynski's parents (her father was a Polish Jew; her mother was a Polish Catholic).

After the war, both couples returned to Warsaw, had children, and met every Sunday in the park. Raised as "Poles," even celebrating Catholic holidays, Luczywo and Rapacyznski both insist that they didn't think much about politics until 1968, when the Polish government launched a vicious anti-Semitic campaign against "rootless cosmopolitans" and "Zionist lackeys." Along with many other Polish Jews, Rapaczynski's parents were fired from their jobs. Meanwhile, much of Warsaw University was shut down, forcing out many students, including Luczywo and Rapaczynski. (Michnik, who was also Jewish and who was an outspoken student activist, was arrested several times during that period and spent some time in prison.)

It was in 1968 that Rapaczynski and her family emigrated — as did most of the remaining Jews in Poland. Luczywo, however, stayed. "I didn't want to be expelled from my country," she says, pausing to take a deep puff from her cigarette. "Maybe I was young and naive, but it seemed to be mostly verbal abuse from the communist propaganda machine. Lots of my friends were Polish, and none of them started treating me differently."

At that point, Lucwzyo's and Rapaczynski's lives took dramatically different turns. Rapaczynski moved to New York, where she married her Polish émigré boyfriend, had a child, and began building her career. She earned a doctorate in psychology from City University of New York and then worked as a researcher and a project director at Yale University's Family Television Research and Consultation Center.

In 1982, Rapaczynski quit academia to earn her management degree at Yale. She then spent eight years at Citibank, working her way up to a vice-president position and head of product development. "Doing academic research, I had no impact on real life," explains Rapaczynski, sitting in her small, cramped Agora office, which is decorated with snapshots of her daughter and a large photo of her other family — the Agora staff. "It didn't seem to make any difference to anybody what I was doing. I decided that there was a lot of practical work that I could be doing that would be important."

While Rapaczynski was gaining the business knowledge that would prove so valuable to Agora, Luczywo was gaining editorial experience — albeit the hard way. At first, Luczywo tried to live a quiet, normal life. She married, had a child, and began working as an English interpreter and translator. But in 1976, an opposition leader asked her to translate for a Swedish TV crew that was interviewing workers who were being persecuted by the Polish communist government. It took her three days to make the decision that would change her life. "I decided that what was important in life was that you be able to look in the mirror and see someone you approve of," she says.

A year later, when she and a small group of friends were publishing an underground paper, Robotnik (The Worker), Luczywo learned her first lesson as an editor: Push the limits, and always aim for independence. Named after a pre-World War I newspaper that was edited by a Polish independence hero, Robotnik advocated Poland's independence in its first issue — a bold stance at a time when the Iron Curtain seemed permanent. The writers also signed their real names to every article.

"We never thought that independence was a possibility," says Luczywo. "We were still living in a dictatorship, and we wanted to fight for free-trade unions. But our philosophy was to create and expand the islands of freedom. If you don't want to be a slave, you must do something. If you act as though you are free, you will feel free."

The police beat people up and made some arrests, but they overlooked Luczywo, perhaps finding it hard to believe that such a petite young mother was vital to the movement. When Lech Walesa's Solidarity coalition began its labor strikes, and Polish General Wojciech Jaruzelski declared a "state of war" and began ordering mass arrests in December 1981, Luczywo went into hiding. Sending her daughter to live with her parents, she spent more than a year moving around and using phony identification cards.

While in hiding, she and her friends began a new underground paper, Tygodnik Mazowsze (Mazovia Weekly), which carried the coalition's red logo on its banner. While they produced some 80,000 copies of each issue, Luczywo remembers feeling tired and dispirited during much of that period, worried that she was missing out on many things in life and wondering whether it was worthwhile to devote her whole life to the cause.

In 1986, she found her answer. She secured an exit visa to spend a few months as a fellow at Radcliffe's Bunting Institute, a sort of think tank for women. Nearly a decade earlier, she had spent a summer vacation traveling around the United States in a Greyhound bus. But this time, after spending months devouring the magazines and newspapers in Harvard's library, she came to appreciate the power of a free media — and the power of a free society. That appreciation deepened her commitment to both. "For the first time in my life, I lived in a free country, and I saw that whatever America's faults might be, it was so lively, so interesting, so unrestrained," she says.

In 1989, Jaruzelski began his famous Solidarity roundtables, during which he agreed to hold partly free elections and to allow the opposition to have its own newspaper for the election campaign. Walesa offered Michnik the editorship. Michnik, in turn, asked Luczwyo to run the paper. Temporarily taking up shop in an empty nursery school, Luczywo brought her crew from Tygodnik Mazowsze to put out what became the first legally independent newspaper in the Soviet bloc: Gazeta Wyborcza . Michnik set up his "office" in a bathroom; reporters worked on computers at knee-high tables and chairs. On warm days, they held meetings outside in the sandbox.

The debut issue consisted of eight pages, mostly filled with glowing profiles of the Solidarity candidates. The Solidarity logo was featured on the front page, along with the slogan "There's no liberty without Solidarity." All 150,000 copies of the first issue sold out, and Solidarity candidates won every contested seat in the June 1989 election.

Gazeta Wyborcza established itself as a political force almost immediately after the June 1989 election. But soon after, the newspaper declared its own independence from the Solidarity coalition. The party had begun to split into different factions, and the paper had taken sides, endorsing Walesa's opponent, Tadeusz Mazowiecki, in the 1990 presidential election. (Mazowiecki lost; Michnik ran and won a seat in the country's first noncommunist parliament, which he kept from 1989 to 1991.) Walesa was furious and demanded that the Solidarity logo be removed from the paper. He also pushed to get Michnik fired. The logo was removed, and Michnik offered to resign. But Luczywo, among others at the paper, wouldn't hear of it.

"Even before we had published our first issue, we wanted to be an independent newspaper," Luczywo says. "We created a parent company as owner of the newspaper and called it Agora because in Polish, 'agora' means 'a place to exchange views freely.' Walesa thought that Solidarity should own the paper. He just didn't understand the concept of free media. We were lucky to be free from him."

Cautiously Bold, Boldly Cautious

Just as Poland was struggling to reinvent itself during that new period, so too was Gazeta Wyborcza . For years, Polish newspapers had been political platforms. Now Gazeta Wyborcza had to find a way to make itself relevant in a new, capitalist society. "Before was a time of rebellion and revolution," says Luczywo. "Now we were in a market economy and had to find constructive ways to help people live in this new society. Everything that was happening in western societies was happening here: globalization, technology, civil rights. But we also had a totally new system that people had to find their place in." Thus, Gazeta Wyborcza was thrust into a classic strategic dilemma: How do you create a new purpose for your enterprise when the market — and the world around you — is changing?

Luczywo began working on the answer to that question. Dressed in a black T-shirt and pants, wearing no makeup, and scribbling notes to herself on an empty cigarette box and on the palm of her hand, Luczywo hardly seems like a business dynamo. But everyone agrees: While Michnik, a brilliant writer and a deep thinker, set the paper's political persona, it was mostly Luczywo — the organizer, the editor — who figured out how to reach the new Polish mass market. "In Poland, there weren't any models for independent newspapers," says Luczywo. "We had to be good about asking people abroad for advice. We had to be willing to learn from other people about how to do what we wanted to do."

In fact, one of Luczywo's earliest guiding principles — that a newspaper should strive to serve the needs of every reader — was inspired by a media conference that she attended in Prague in 1990. New York Times publisher Arthur Sulzberger Jr. "spoke about how a free media needs to meet as many of its readers' needs as possible," Luczywo recalls. "That may sound banal, but it is a really big thought for a newspaper. It is not an easy thing for a newspaper to do. And I thought, That's exactly what we are going to do."

Luczywo was among those people who pushed for the paper to start regional editions, and she was an early supporter of its supplements. Today, the paper has 20 regional editions and 11 themed sections, dubbed "day bombs" — supplements that explode with ads and practical information about such specialized topics as cars, employment, travel, and real estate. The paper also regularly runs consumer-oriented articles, such as a recent series that exposed poor conditions in Poland's maternity wards. The supplements and regional editions have been key to the paper's success, helping Gazeta Wyborcza establish itself as the must-read paper. Its Monday employment supplement — which now runs more than 100 pages and bulges with ads — carried the first serious job listings in Poland. Its glossy Saturday women's magazine, High Heels, which launched in April 1999, helped boost Saturday sales 8% (to 474,000) in its first year.

"We set up offices all around the country, with sales and editorial people in each one," says Luczywo, nibbling at a bowl of raspberries on her desk. "At the time, many people thought that the supplements and regional editions were a crazy thing to do because nobody here had done that before. But Poles needed consumer news to help them make their way in this new world. And our forecast for the future was that if you don't have a local presence in advertising and in news, you can't become a national newspaper." The strategy paid off: Gazeta Wyborcza captured 23% of local advertising and 62% of the national advertising in 1999, far more than any of its competitors.

But if Luczywo was able to steer Gazeta Wyborcza 's editorial direction smoothly, she also knew her limitations well enough to understand that she was at a loss when it came to the newspaper's business affairs. So, back in 1990, when her old friend, Rapaczynski, showed up in Warsaw, Luczywo immediately began lobbying her to join the paper. "We needed her," she says. "At the time, we were looking for people who knew how to do things, and Wanda knew how a company should be run. That was a skill we needed."

In fact today, Agora is known for being a well-organized and tightly run business — one that provides analysts with clear, detailed reports and that has well-informed, knowledgeable executives. That reputation, in large part, was earned by the work of Rapaczynski. Dressed in an elegant linen pantsuit, looking every bit the American executive, Rapaczynski recalls how she found Agora in disarray when she joined the company full time in 1992. Working closely with Piotr Niemczycki, the two worked to change the culture. "There was this horrible inheritance from communism, a certain passivity, where people would think, Why get active? " she says. "In the communist system, there was no reward for getting things done. There was no reward for competency, so people weren't motivated."

It was Rapaczynski who helped lure Cox in as an investor in 1993, and that relationship has proved immensely valuable to Agora. Cox agreed to be a passive investor and gave Agora the cash that it needed to buy its first printing presses. In 1995, when Agora decided to expand its media empire into radio, Rapaczynski was able to turn to Cox as a partner. Cox, which owns several local radio stations in the United States, helped draw up a business plan, sent over some of its radio consultants, and became a minority investor. After conducting market research in Poland, among other countries, Agora ended up following Cox's strategy — investing almost exclusively in local radio and creating heavily formatted stations.

It was a radical move in Poland, where, at the time, most radio stations were national and all stations were a mix of news and music. But after studying other markets and learning about Polish tastes, Rapaczynski decided to specialize in so-called oldies music — music from the 1960s through the 1990s — so that the stations could target Polish listeners between the ages of 25 and 45, the most demographically desirable group to advertisers. Also, that focus enabled Agora to leverage its strength in local markets. The strategy was classic Agora: First see what works abroad, then adapt it to Polish tastes. Call it the "fast follower principle." "I had a boss at Citibank who used to say, 'I never want to be the first. I just want to be the best,' " Rapaczynski says. "And I agree with that. When I go on a path, I don't want to be the one with the machete clearing the way. If you go in too early, you just burn money. If you go in too late, you have too much competition. We're not afraid to be innovators. But we believe that you should study what others have done and then benefit from their experience."

Wise to the Web

Agora's 1999 IPO was successful beyond its leaders' wildest dreams. It raised $93 million, which the company is using to construct a campus-style office complex and new printing facilities, and it has made many people at Gazeta Wyborcza rich — which makes Luczywo and Rapaczynski quite proud. "Isn't it great poetic justice that the people who lived for years on their ideals now have money?" says Rapaczynski.

But she admits that becoming a publicly traded company has also brought new scrutiny and pressures, making her relationship with Lucyzwo more tense. "You can say that you aren't going to worry about what the press and the analysts say, but you do so at your own peril," says Rapaczynski.

A case in point: In January, when Agora announced that it was going to spend $10 million over the next three years developing an Internet portal, its stock tripled. Like most of eastern Europe, Poland has no real Internet economy (no one even bothers keeping track of Internet-advertising expenditures in Poland), but suddenly, the country was experiencing its own dotcom fever. Then, when the U.S. market crashed, taming the exuberance for all things dotcom, Poland's market had a minicrash of its own, and analysts became skeptical. Suddenly, Agora — whose stock at the time was a healthy 104 zlotys per share — was one of those companies facing questions. Was $10 million really enough to build an Internet portal? (Luczywo now estimates that the investment may be as much as $30 million, not including advertising or promotion.) What was taking Agora so long to launch, anyway?

Luczywo, who says that the portal will launch by the end of this year, acknowledges that Agora, like many old-media companies, was a bit slow to embrace the Internet. But she argues that Agora's plans are so big and so creative that the company will quickly make up for lost time. "We're going to turn a brick-and-mortar company into a new-media company," she declares. "We're going to be as big on the Internet as we've been in print."

Still, Rapaczynski admits that the outside criticism has created friction. "We have a million disagreements every day," she says. "I get anxieties. I say to Helena, 'When are you going to launch?' I know she would just like to go into skunk works and emerge when it's done. But you can't do that as a public company. I spend a lot of time forcing people to document their progress, the milestones that they've reached. Unless investors and analysts can see and touch what you've done, they're turned off."

Meanwhile, Agora's CFO, Jerzy Thieme, resigned abruptly in June after only six months on the job. In a press statement, he said that he was resigning for "personal" reasons, but some people saw his departure as a sign of Agora's cultural resistance to outsiders. Rapaczynski denies that, but admits that the company — which has always insisted on control and independence, and has been very choosy about its partners — is wrestling with the reality that alliances are a necessary fact of life on the Internet.

Many, though, are betting on Agora, noting that the company has become such a respected brand that it has the power to create the kinds of deals that it wants to do. "Everyone wants to do business with Agora," says Joe Senfft, a Warsaw-based advertising consultant. "Its value proposition is quality." Indeed, Gazeta Wyborcza 's 3-year-old Web site recently became Poland's third most popular site, despite the little attention that the company has paid to it.

Sitting in her office one afternoon, Luczywo looks tired as she rattles off the Internet issues that she is trying to sort out. "It's all terribly boring but important," she says. Has she ever considered retiring, doing something else, now that she is very wealthy? "Why would I do that?" she asks. "There is too much that we need to do here." Later, when asked the same question, Rapaczynski offers much the same answer: "Now we have to make Agora a global company."

Pamela Kruger (pkruger@fastcompany.com), a Fast Company contributing editor, is based in Millburn, New Jersey. Contact Wanda Rapaczynski (w.rapaczynski@gazeta.pl) by email, or visit Agora SA on the Web (www.agora.pl).

Sidebar: What's Fast

The leaders of Agora, Helena Luczywo and Wanda Rapaczynski, have learned a lot about building a company under extreme conditions and against long odds. In just 11 years, they have transformed a small underground newspaper in Poland into what is widely considered the best-run and most profitable media company in post-communist Europe. Here are their strategies.

If you want to live by your values, create value.

From the outset, Luczywo and Rapaczynski were determined that Agora would remain an independent agent of democracy. And the way to guarantee that course, they concluded, was to become extremely profitable, so that the company would never be vulnerable to outside economic pressure. "If you want to be independent, then you must be financially independent," says Luczywo.

Don't do everything on your own.

One factor behind Agora's success has been its partnership with Cox Enterprises Inc., a family-owned media company based in Atlanta. Cox has provided Agora not only with cash but also with management training, consultants, and strategic advice. "The investment was not a strictly monetary one for Cox," says Luczywo. "They just liked us — what we stood for and what we were trying to do. And they became very helpful friends to us."

Treat investors with respect.

Rapaczynski is the first to criticize the investment community as being fickle, even irrational. "If you went by what the analysts say, you could have serious bipolar disorder," she says. "They change their minds minute by minute. You can't live by what they say."

But, she also cautions, "You ignore them at your own peril." As a result, Rapaczynski has made sure to provide the investment community with lots of clear, detailed reports on Agora's strategies and progress, going far beyond what companies are legally required to disclose in Poland.

Finish second — and smarter.

It sounds counterintuitive in the age of Internet time, when everyone's mantra is speed over accuracy. But Agora has always operated on the strategic principle that it's better to take the time to study the market, the competition, and their mistakes before committing big resources to new initiatives. This go-slow approach has attracted some criticism from analysts who believe in first-mover advantages, but Rapaczynski says that caution is one of Agora's strengths: "If you go in too early, you may go in when the market is still asleep, burn a lot of cash, and never see revenues. If you go in later, you have more competitors — but we've never been afraid of competition."

A version of this article appeared in the November 2000 issue of Fast Company magazine.

Amazon announced last week that it’s testing out a 30-hour workweek for "a few dozen" employees on some of its technical teams. Those employees, the Washington Post reports, will keep all the same benefits as full-time staff but earn 75% of the pay (Amazon already employs part-time workers with full benefits). Every member on those teams, including managers, will work 10 a.m. to 2 p.m. Monday through Thursday, with the remaining time on the clock made up of flex hours, and they’ll have the option to become full-time if they wish.

According to the Post (which is owned by Amazon's CEO Jeff Bezos), Amazon sees the move as a response to rising demand for more flexible hours. Arrangements like this one come with a mix of pros and cons—not just for the organization—but for workers, too.

What Amazon Gets

Like the smattering of tech companies expanding their benefits lately, Amazon is in a tight race for top-shelf talent. So it didn't help when a New York Times report in August 2015 slammed Amazon’s culture as a sort of office-bound Hunger Games.

The company sharply rejected that characterization, and three months later it unveiled a more generous parental leave policy, putting it in league with Netflix, Adobe, and others that have recently done the same. Its 30-hour workweek program could help keep Amazon appealing to the most in-demand job candidates.

The Post reports that "team members will be hired from inside and outside the company," but it's unclear whether that means a net increase to Amazon's headcount in order to make up any shortfall in overall productivity.

While the initiative may be part of Amazon’s continuing reputation rehab as an employer, it’s also a recognition that recruiting is still a local game, says Upwork CEO Stephane Kasriel. "Seattle has become a new epicenter for the talent wars (like Silicon Valley before it), with Facebook and other companies opening up big offices that compete there for talent against Microsoft, Amazon, and other Seattle incumbents," he tells Fast Company. "This, in turn, puts more pressure on these incumbents to come up with creative ways to retain and motivate top talent."

The rise of remote work tools and platforms theoretically lets companies hire people based anywhere, but according to Kasriel, geography still matters. "There might be millions of relevant professionals in the world, but restricting to local commute radiuses and to people available for 40-plus–hour-a-week, in-person roles narrows the available pool down drastically," he says. Amazon’s new initiative may help counterbalance that.

What Workers Get

Tech companies aren’t just competing with each other, though—they’re also competing with freelancing. Intuit has estimated that 40% of the U.S. workforce will be made up of freelancers by 2020, and the top five industries for freelancers that FlexJobs recently ranked are all areas crucial to Amazon's business:

1. Computer and IT
2. Administrative
3. Accounting and finance
4. Customer service
5. Software development

Kasriel points to a survey Upwork undertook last year with the Freelancers Union, where 75% of full-time and 68% of part-time independent workers said they chose to freelance because of the scheduling flexibility it allowed them. And according to the latest data from the Bureau of Labor Statistics, out of the more than 151 million Americans who were employed in August 2016, over 20.5 million (or 13.5%) were working part-time jobs "for noneconomic reasons."

Some in the tech world, including Kasriel, believe the knowledge economy is well on its way to becoming gig-ified, and that this can be a net gain for workers. After all, many have already expressed a desire (both in surveys and by voting with their feet) for more control over their work, even if that means more tenuous, temporary, or nonexistent relationships with traditional employers.

Although plenty of tech workers may jump at the chance to replace a chunk of their full-time jobs with their own side gigs, Amazon's offer may not be the ideal solution. Douglas Rushkoff, author of Throwing Rocks at the Google Bus, sees it as a form of "disenfranchisement of the labor force." The 30-hour workweek pilot, in his view, is "exactly one-half of the necessary move. Yes, reduce the workweek, but you don't have to reduce the pay proportionately, or at all."

Amazon isn’t reducing 30-hour-a-week workers’ benefits, so it isn’t exactly saving money on them. If anything, those workers will be slightly pricier—just as long as they aren’t expected to be any more productive, on average, than full-time staff.

This is where Rushkoff is skeptical. Cutting back time on the clock, he believes, makes the most sense as an incentive for greater efficiency. That’s largely been the rationale behind some six-hour workday experiments in recent years, where reduced hours are meant to incentivize efficiency.

"The employee who gets five days of work done in four days shouldn't be punished for this, but rewarded," Rushkoff argues. "But that only works if management sees its employees as part of its company . . . You don’t have to take the money away from them and deliver it to the shareholders," he says.

In other words, Rushkoff's view is that any company that offers a scaled-back schedule in exchange for proportionately less pay is effectively asking its most productive employees to purchase that freedom, then to make up the income shortfall on their own. To some workers, that opportunity is a perk in its own right, one they've been clamoring for, and that Amazon is finally delivering. To others, it may be a ticket for more career self-determination, sold at too high a price.

It's a crisp late-summer day in Tacoma, Washington, and Maya Makino has just started her sophomore year at the University of Puget Sound. She's 19, which puts her at the upper end of generation Z, whose members currently range in age from 5 to 20. Like many of her peers, she doesn't think of college as a relaxing period for self-discovery and navel gazing. She was 10 years old when the recession hit—just old enough to be aware of what was going on—and that has shaped her feelings about higher education.

"There's a lot of stress about finding a job after college and being able to support yourself," Makino says. "My friends and I are really focused on finishing up in four years and having a good career path. There's less time for reflection because there's that worry about whether you're going to be able to survive in the economy if you're not really directed."

For the past several years, the media has been obsessed with millennials, the most studied group ever. But as Makino's generation grows up and gets ready to enter the workforce, corporations are paying more attention to this crop of young people born between 1996 and 2011. At 60 million strong in the United States, they outnumber millennials by 1 million. It would be easy to assume that they are just an exaggerated version of the generation that came before them, spending even more of their lives on social media, doing even more of their shopping online, and demonstrating an ever greater collaborative nicer nature. But generation Z grew up in a starkly different historical context than millennials, which has given them a distinct outlook on the world.

Millennials were internet pioneers. They invented Facebook, shopped from their smartphones, and smoothly transitioned from satellite TV to Hulu and Netflix. Generation Z, meanwhile, doesn't remember life without these basics of 21st century life. Millennials helped elect a black president and legalize gay marriage; many generation Zers see these milestones as the norm. Millennials came of age during a time of economic expansion and were shocked to find a diminished, unwelcoming job market after college; generation Z has been shaped by the recession and is prepared to fight hard to create a stable future for themselves.

Makino is fairly typical in this regard. She grew up in a solidly middle-class family in Arcata, California, with a professor father and an artist mother. At 19, she is responsible, mature, and financially savvy; she's taken on a work-study job at her college alumni magazine to help pay the bills and is always mindful of the cost of her education. "I was thinking about taking a gap semester to have a life outside of being a good student," she says. "But if you step off the treadmill for even a minute, you start accruing [interest] on your student loans. So I decided against it."

Since many members of gen Z have not even entered elementary school yet, it's impossible to draw definitive conclusions about what their habits, lifestyles, and world views will be. But as the oldest among them flood into colleges and start their careers, we're beginning to see trends emerge. Here's what we know.

The Occupy Movement And The Rejection Of Big Brands

Marketers have been carefully studying generation Z for many years now, observing their preferences as children and teenagers, and finding that they have a very different relationship with companies than their elders. "Compared to any generation that has come before, they are less trusting of brands," says Emerson Spartz, CEO of the digital media company Dose. "They have the strongest bullshit filter because they've grown up in an era where information was available at all times."

For decades, brands communicated through advertisements, so corporations with the biggest budgets could make the biggest impact on billboards, magazine spreads, TV, and radio ads. But with the internet, now people can dig into what brands really stand for, beyond the heavily photoshopped visions they try to project. Online reviews have made shoddy products easy to spot. Consumers immediately find out when a company has lied to them, such as when Volkswagen installed software that cheated on emissions tests or when the Honest Company included chemicals in its laundry detergent that it had previously denied using. Blogs regularly dissect—and skewer—companies with ugly corporate culture or poor working conditions.

Spartz believes that because generation Z grew up amid the Occupy Wall Street movement, which portrayed big banking and corporate greed as public enemy No. 1, this has further aggravated their distrust of the behemoths. "Some of the anti-establishment sentiment has penetrated this generation," he says. "Big brands are the establishment and having a recognizable animal on the top right-hand corner of your shirt signals that you are part of the establishment."

There was a time when young people aspired to wear flashy labels conspicuously: Think the enormous polo player logo on Ralph Lauren shirts or the prominent label on Calvin Klein jeans. Millennials flocked to Hollister and Abercrombie and Fitch. But kids are now showing some resistance to serving as walking advertisements, and as a result, many of the major apparel companies are faring poorly. "They're less brand-conscious and they are not spending as much as millennials do," says Kyle Andrew, chief marketing officer of American Eagle Outfitters, another brand that targets teens. (Unlike some of its competitors, American Eagle has seen sales and profits rise.)

According to Makino, this label-wariness is a part of everyday life on campus. "People here mostly dress in ill-fitting thrift store clothes," she says. "Even the few people who wear really nice clothes don't wear big logos plastered across the front."

Still, gen Z is hardly a lost cause for major companies. Spartz says that brands that are able to communicate with customers in an open, unfiltered way tend to do better with young people. Everlane and Cuyana, for instance, proactively offer insight into how products are made, and Warby Parker and Tom's make a point of explaining how they are trying to promote social good. "Authenticity and transparency are two ideals that they value highly," he says.

Gen-Zers also tend to trust individuals more than big institutions. As a result, many brands focused on them are partnering with social media influencers in an effort to appear more relatable. Companies might collaborate with an Instagram user who has a massive following, like Kaitlin Keegan or Susie Lau, paying them to feature a product or outfit on their account. "Generation Z is more willing to hear a brand's story when it is part of a narrative their peer is already telling," says Steven Lammertink, the founder and CEO of the Cirqle, a platform that connects brands with influencers. "This approach is not obtrusive."

Today's teens and young adults are not naive: Many are aware that Instagram, Snapchat, and YouTube stars are paid to endorse products. (In fact, the FTC now requires influencers to disclose when they have been paid to endorse a product.) By and large, they trust that the people they follow on social media and respect are making a conscious decision about the brands they will work with. Lammertink says that he built his company so that influencers had to opt in to work with a brand, choosing to work only with brands they like. "We try and safeguard that authenticity," he says. "This is very different than the traditional method of brands reaching out to models or spokespeople and negotiating rates before agreeing to do a campaign."

Careful Spenders

Generation Z doesn't just stand out in terms of how they relate to brands; they're also spending their money differently. Today's teens and college students grew up hearing horror stories about how many millennials ended up living at home after college, sitting on a mountain of debt. So they tend to be financially cautious.

A survey by Lincoln Financial Group of 400 members of generation Z aged 15 to 19 found that they are saving far earlier than than older generations: 60% of them already have savings accounts and 71% say they are focused on saving for the future. Their top three priorities are getting a job, finishing college, and safeguarding money for the years to come. They rate these goals above spending time with friends and family, working out, or traveling. Jamie Ohl, president of retirement plan services at Lincoln Financial, says that we're seeing similarities between this young generation and the one that emerged in the years following the Great Depression. "When I think about the 'greatest generation' having gone through the Depression and how they taught their children, the boomers, to save, that's what this generation of parents is teaching generation Z," she says.

But while generation Z is realistic about the challenges ahead, 89% of them remain optimistic about their futures, which is higher than any other generation on record. "Part of this has to do with the natural optimism of youth," Ohl says. "But I also think it is important that they watched their parents come through the most recent financial crisis."

Companies have also noticed that young adults put a premium on getting good value for their money. Spirit Airlines, for instance, is preparing for gen Z to become the dominant group of travelers by rebranding itself as an ultra-low-cost carrier. The airline offers rock-bottom fares: It can cost as little as $151 to travel from New York to San Francisco, one way. But the ride comes with zero frills—no free checked bags or complimentary beverages on board. Spirit has found that this generation of college students, who are beginning to buy their own tickets for the very first time, is comfortable paying only for what they are using. "We're finding that generation Z is much more pragmatic around thinking about value," says Rana Ghosh, a revenue executive at Spirit. "It's not so much that they are price-conscious; it's about what they are getting for the money they are spending. As an airline, the draw is to get them from point A to point B safely and on time, so providing the same service for a fraction of the price appeals to them."

Cheryl Rosner, the CEO of Stayful, an app that helps people get competitive rates on boutique hotels by booking close to travel dates, has made similar observations. Rosner points out that younger consumers want to know what they are getting for the price, so they pay close attention to reviews of other people's experience and the extent of the discount. "You've got a group of people who have completely grown up on technology from the day they were born," she says. "They are very comfortable doing their research and finding things out for themselves, so if you're going to sell them on value, you really need to have your shit together. You can't just say that this hotel has the best prices, because that is not what value means."

And when it comes to technology, gen Z tends to be savvy about their approach to consuming electronics, resisting the allure of snatching up the latest, priciest products when there is a constant stream of new, inexpensive options. "Technological innovation is no longer an exciting, celebrated thing, as much as it is an expectation," says Sam Paschel, chief commercial officer of the headphone brand Skullcandy, which targets younger consumers. "Generation Z relates to technology as a tool, as opposed to an obsession." To keep up with the demands of today's teens, the company has invested heavily in scientists and researchers who work to improve the quality of sound. Skullcandy also just launched a line of wireless headphones to pre-empt the demise of the headphone jack in phones. At the same time, Skullcandy has avoided trotting these new products in an elaborate dog and pony show or even charging a premium for them. It strives for a subtler messaging that will speak to young consumers.

Ultra-Competitive, But Very Accepting

Given their focus on financial security, it's not surprising that generation Z is poised to be cutthroat when it comes to getting jobs and establishing careers. Jonah Stillman, a 17-year old from Minneapolis who, with his father David, wrote GenZ@Work, a book (due in March) about how his generation will fare as members of the workforce. The pair conducted two national studies of 4,000 teens about workplace attitudes and preferences. They've discovered that these young people are in "survival mode" and believe they will have to fight for what they want. They would feel lucky to get a job, which contrasts with the common perception of millennials as feeling entitled to a job. Sixty-six percent of gen-Zers say their number one concern is drowning in college debt, and 75% say there are ways of getting a good education besides going to college.

"Millennials are the most collaborative generation, launching applications like Facebook and sharing everything with everybody," Stillman says. "But gen Z is completely different: They are a very independent and competitive generation, having been taught by our parents that there are definitely winners and losers at life. Millennials, on the other hand, were told that if you work together, everybody can be a winner."

But even though they see the workplace as a battlefield, they are inclusive and tolerant of difference. They grew up with a black man as the leader of the free world, with women in positions of power in the workplace, and with openly gay celebrities like Ellen DeGeneres, Anderson Cooper, and Neil Patrick Harris. "As a whole, gen Z is a very accepting generation," Stillman says.

American Eagle Outfitters drew the same conclusion from in-depth market research of preteens and teenagers. "I felt really excited when we got some of this most recent data back," says Kyle Andrew, the CMO. "Honestly, they seem to be a lot nicer than other generations: They are not judgmental, they don't put people in boxes, and they don't seem to care as much about what you do, who you love, or what you look like. At least that is what they're telling us." As a result, the company has tried to incorporate these ideals into its marketing, with an e-commerce website and ad campaigns that are diverse, featuring models from a wide range of ethnicities, with a variety of hair textures and body types. "Generation Z seems to really care about engaging with brands that have values that align with their own," Andrew says. "You can't just make stuff: You have to stand for something. As a brand, we want to support and enable the freedom to be yourself."

Which, she acknowledges, is not easy when teens no longer rely so heavily on mass-market brands to help them express their identity to the world. In the past, kids wore labels that channelled that they were preppy or rebellious or sporty. But the internet has multiplied the number of clothing companies they can choose from, which has had a part in making them less brand-loyal; social media also offers them another platform to craft a public persona. "They are creating their own personal brand," Andrew says.

Volcom, an apparel company associated with the skater and surfer kids of the 1990s and early 2000s, says that it has to evolve to keep up with generation Z. "When Volcom was founded in 1991, there was more of a united counterculture," says Ryan Immegart, the company's marketing VP. "Punk and action sports was a really cool movement, and people felt that our brand was a way for them to be part of that. Our brand represented rebellion and nonconformity from what was happening around young people at the time."

But today's teens no longer need a company to create a community. On the internet, they can befriend like-minded people and join social movements. "There are so many different countercultures today," Immegart says. "For us, we have to grow and figure out the next chapter in our story." What that looks like, he's not ready to say.

Volcom isn't the only brand with millennial appeal that's now rethinking its strategies. Two years ago, for instance, Skullcandy launched a line of headphones that came in a range of "feminine" colors and were specifically designed to accommodate the physiological differences in women's ears. They were a hit among millennials who felt that the consumer electronic industry tended to focus on men's needs, but the response from teens was lukewarm. "Generation Z is much more gender-neutral when it comes to everything—clothing, style, conversation, bathroom choice," says Sam Paschel, the company's chief commercial officer. "Launching gender-specific products in the face of a generation that is thinking more gender-neutral is fascinating to observe."

It's one of the many ways companies are trying to keep up with the demands of generation Z. "The rate of change in society is increasing exponentially," Spartz says. "The world is changing more in 10 years now than it used to change in 100 years. So that means that the difference between someone who is born 20 years after someone else is going to seem like oceans of separation when it comes to shared experiences."

Good thing there's the internet to help bridge the gulf.

Related Stories

• What Is Generation Z, And What Does It Want?
• How The Generation Born Today Will Shape The Future Of Work
• Why Everything Brands Say About Gen Z Is Wrong
• 5 Ways The Workplace Needs To Change To Get The Most Out Of Generation Z

Larry Page, CEO of Alphabet, has a quirky way of deciding which companies he likes. It’s called the "toothbrush test." According to the New York Times, when Page looks at a potential company to acquire, he wants to know if the product is, like a toothbrush, "something you will use once or twice a day."

Page clearly understands habits. Frequently used products form "sticky" customer habits. But what if your product doesn’t pass Page’s toothbrush test? Perhaps you’d like people to use your product or service frequently, but it just doesn’t make sense for them to do so. Is your business dead in the water?

How Often Do You Buy A House?

A few months ago, I was hired to present at a gathering of 700 real estate agents. The master of ceremonies made a gracious introduction, saying, "Now we’ll hear from Nir Eyal, an expert on consumer habits. Nir is going to teach us how to make home buying and selling into a habit!"

The breath went out of me like I’d been punched in the solar plexus.

I trudged on stage and gripped the podium. "I’m sorry," I said. "There must have been some misunderstanding." I paused to catch my breath. "There is no way I am going to teach you how to make home buying and selling into a habit, because it has no chance of ever becoming a habit."

I glanced over my shoulder, trying to find the woman who’d introduced me, hoping she’d save me, but she was already slinking off the stage. I was stuck. I hadn’t prepared another talk, so I gave the planned presentation, based on my book.

I explained that home buying and selling doesn’t occur nearly often enough to become a habit. Furthermore, the very definition of a habit—a behavior done with little or no conscious thought—is the antithesis of the kind of overthinking that real estate transactions inspire.

As I finished my talk, I expected crickets. Instead, I received a generous round of applause, and a small mob of real estate agents gathered around me as I got off the stage. As the lights came up and the convention adjourned for a break, the agents peppered me with questions. They all had ideas to share.

"I know home buying and selling can’t be a habit," one woman spoke up. "That’s fine. But what if I make a habit of doing something else related to home buying and selling?"

I was intrigued.

Soon, other agents chimed in and built upon each other’s ideas, coming up with all sorts of ways to keep potential customers engaged. Their ideas helped me realize that even rarely used products and services can keep customers hooked.

There are at least two ways to build a habit around an infrequently used product: content and community. But there's an important caveat to make: Not every business needs to be habit forming. There are lots of ways to bring customers back, and many companies succeed without relying on customers’ habits. They buy advertising, spend money on search engine optimization, or open a storefront to capture customers’ attention as they walk by.

But traditional methods of keeping customers engaged force businesses to rent space on someone else’s website, search engine, or street corner. By contrast, owning a customer’s habit is an asset that pays you. Here's a look at two companies that have figured this out, through two different yet effective means.

Y Combinator's Content Habit

"Every time someone in my neighborhood has personal finance questions, I want them to come to me," one real estate agent told me after my talk. Her plan was to create a site and app full of articles, videos, and financial calculators to form a content habit with potential home buyers and sellers. "What if I write new articles or post the ones I find online about topics I know people have on their minds?" she asked.

I nodded in agreement. If she could build potential customers’ habits of consulting her site, she could increase the odds of them doing business with her when it finally did come time to buy or sell their homes. She'd stumbled upon a tactic used by the renowned startup accelerator Y Combinator. Though it's sealed its reputation at the top of its industry, Y Combinator was once a newcomer competing for attention with traditional venture capital funds and angel investors. Even today, its success depends on finding the best founders, which means staying top of mind. But founders don’t apply to Y Combinator frequently enough for it to be a habit.

How does the startup accelerator stay connected to the tech community? The answer is content. Hacker News, a content aggregation site owned by Y Combinator, was visited 18.6 million times in July 2016. Hacker News went online in 2007, less than two years after Y Combinator’s founding, and has been a fixture of the Silicon Valley tech scene ever since. Though it’s not Y Combinator’s core business, Hacker News has successfully drawn attention to the accelerator by forming a content-consumption habit.

The constantly changing list of posts has all the elements of a habit-forming product. Users check the site daily—between coding sessions or during coffee breaks—to find the latest industry news and happenings. As they browse, users accrue a reputation score for their contributions to the site.

Though Hacker News is an "autonomous unit," according to the company, it’s clear the site is still an arm of Y Combinator. The top left corner of Hacker News features the Y Combinator logo as the home button, and a link at the bottom of the page invites visitors to "Apply to YC." But the hooks in Hacker News go even deeper. As TechCrunch reported, "Hacker News has a strong affiliation with Y Combinator . . . Founders usually all create a Hacker News account when they apply, and that user name is the founder’s identity at Y Combinator." Recently, Y Combinator doubled down on its content strategy. In November, the accelerator launched The Macro, a content site featuring original writing by members of the Y Combinator team.

It's clear Y Combinator has profited from the popularity of Hacker News. Despite the fact that it isn't the primary way Y Combinator makes money, the content-consumption habit fills the funnel with potential applicants and has become a valuable asset in its own right.

Hallmark's Homegrown Community

Another way infrequently used products form a habit is by building a community. Let’s say you’ve got a product people tend to buy just once a year—like Christmas ornaments. One might assume interest in such a product is nil for 11 months out of the year.

But for members of Hallmark’s Keepsake Ornament Club (or "KOC" to members), engagement with (and revenue from) the seasonal product goes strong year-round. Though the group is mostly unknown to outsiders, the KOC boasts more than 400 local chapters across the country. A recent look at the club’s official Facebook page showed photos of members queuing in long lines for a chance to meet with the artists behind some of their favorite ornaments. The people in the photos aren’t wearing heavy coats to protect them from the December snow; they’re wearing shorts—the Christmas-themed event took place in the middle of August.

Hallmark has cultivated a thriving community around its seasonal products, but the secret of the club’s success is about more than the ornaments. Local chapters of the KOC are organized by neighborhood Hallmark stores as well as the national organization. Similar to a civic group, many of the local affiliates hold frequent gatherings and social events.

Linda, an employee of a Hallmark store in Pleasanton, California, who preferred I didn’t use her last name, told me her store’s club has 25 members and is considered small. (Some clubs have hundreds of devotees.) Still, Linda’s group meets regularly and members trade ornaments, as well as banter, via email. A privilege available exclusively to club members, Linda told me, was the chance to package new ornaments as they arrive at the store. Some might consider the job manual labor, but to club members, it’s a treat.

Collecting is a major draw for KOC members, and there’s actually a special psychology associated with collectibles that isn't easily replicated in other industries. However, the product facilitates something else club members really want—social interaction.

Likewise, after my talk to the real estate agents, a gentleman told me about an idea he had for using community to build a habit for his business. "What if I start an email list or website for people who live in my neighborhood?" he proposed. "Every couple days I’ll let people know what’s going on in their area—local happenings, high school sports, things like that."

"Sure!" I told him. He went on, "Then, if they want to go to games together, they’ll coordinate through the online group." I loved the idea and suggested that if people depended on him as the hub to connect his community, his real estate business may be in great shape.

It's All About Engagement

When it comes to designing products people love, far too many entrepreneurs focus on getting customers to check out instead of getting them to check in. There’s no doubt that a frequently used product like Facebook, Slack, or Snapchat has an easier time of changing consumer habits. However, habits can still help companies that might make a sale to consumers every few months or years.

Companies looking to build consumer habits should remember that monetization is a result of engagement—not necessarily the other way around. For a financial services firm, a real estate agent, or a seasonal business, buying the product or service might not be a habit. But creating related habits around content and community can pay off in reputation, satisfaction, and—ultimately—sales.

---

Nir Eval is the author of Hooked: How to Build Habit-Forming Products and blogs about the psychology of products at NirAndFar.com. Follow Nir on Twitter at @nireyal.

Last week, while I got ready to attend Apple's product launch extravaganza in San Francisco, I started asking myself big-picture questions which I hoped the event would answer. Now that the event is over, would you indulge me as I go over the questions I asked and ponder whether Tim Cook, Phil Schiller, and the other Apple execs who presented onstage addressed them?

1. Can Apple Make The Lack Of A Headphone Jack A Selling Point?

Onstage, when Phil Schiller addressed Apple's decision to ditch the headphone jack, he boiled it down to one word: "Courage." Apple has a long history of being willing to eradicate old technologies in the interest of pushing its devices into the future, or just making them thinner and lighter. Almost always, its willingness to do so riles people up. And almost always, the company's thinking makes sense in the fullness of time.

I don't get the sense that everybody who was skeptical about the death of the headphone jack before the event was immediately swayed by Schiller's pitch:

Still, as someone who was guardedly concerned about the move when I first heard about it, I find it easier to understand when I think about its impact on the iPhone 8, 9, 10, and beyond. Just as Apple removing the floppy drive from the original 1998 Mac helped propel the entire industry forward into an era when files would be shared over the internet—or at least via far higher-capacity storage media than a floppy disk—the deletion of the headphone jack is less about this year's iPhone than it is about an era to come in which cables of all sorts start to look like antiques. Or so I hope.

2. Are The Little iPhone And The Big iPhone Diverging?

The iPhone 6s and 6s Plus (and 6 and 6 Plus before them) feel almost like the same camera in two screen sizes. With all the scuttlebutt about the iPhone 7 Plus's two-lens camera, I wondered if the big iPhone would feel like the flagship of the new line, or if it might differ from its smaller cousin in other respects.

After having attended the event, I think the difference between the two models is a tad less pronounced than I thought it might be. Yes, the 10X zoom and depth-of-field effects made possible by the dual-lens camera are cool, and might be a tipping point that leads some people to opt for the 7 Plus. But the smaller iPhone 7 also got a major overhaul to its camera. The distinction between the two models seems to be contingent on what Apple can cram into their cases, not a particular desire to aim the two iPhones at different audiences.

3. Just How Good Can iPhone Photography Get?

Well, the sample photos Apple showed looked spectacular, of course—they always do. The company didn't declare that the iPhone 7 Plus's camera had reached SLR quality, but it did quote a professional photographer saying he expected the iPhone to become a standard piece of equipment for serious shutterbugs' toolkits.

Me, I mostly shoot photos with my iPhone (or sometimes an Android phone such as the Honor 8). But when I'm shooting images I really care about, I still bring my trusty, bulky, pricey FujiFilm X100S. If either of the new iPhones leaves me seeing no reason to bother with the FujiFilm—even at family events I'm documenting for posterity, not Instagram—it will be a personal sea change.

4. What’s The Trajectory Of Apple Watch Hardware Upgrades?

This one seems pretty clear. Except for the nifty new ceramic case option, the Apple Watch Series 2's major changes—GPS and a swim-proof case design—are all about making it a better companion for people who are serious about fitness. In 2014 and 2015, it felt like the fashion angle was as important as any other aspect of this watch, but now it's taken a sharp turn toward health-related features.

5. Are There Any New Killer Apple Watch Apps?

Well, for some people, Pokémon Go surely counts, and it's coming to the watch. We also got a sneak peek at ViewRanger, a hiking app that leverages the new built-in GPS. Beyond that, the new watchOS 3 should let new developers build significantly more sophisticated apps, and it shouldn't be too long before some of them pop up in the App Store.

6. Where Is The iPad Headed?

Sorry, there was no significant iPad news at this event except for a more collaboration-savvy version of the iWork productivity suite. See you in 2017, iPad.

7. What’s The Short-Term Apple TV Strategy?

Was the Apple TV even mentioned onstage today?

8. Did Apple Forget To Mention Anything At WWDC?

I don't think the company willfully held back cool stuff back in June so it could unveil it today. But we did learn about some software features that are tied to new hardware, such as the iPhone 7 Plus's depth-of-field portrait mode, which is due to arrive as a software upgrade later this year.

In retrospect, Apple mostly used the event to deal with the task at hand: explaining to people why they might want to buy a new iPhone or Apple Watch. That mission crowded out almost everything else, such as news relating to products that didn't get an upgrade, like the Apple TV and iPad (and Mac).

That doesn't mean that Apple isn't thinking about such matters, just that it it's doing far too much to cram all of it into a two-hour presentation. And there's every reason to think that the company will only get busier in the years to come—which might mean that no future Apple event will feel anywhere near as comprehensive.

More From The Apple Event

Apple Watch Nike+ May Be Nike's Reward For Letting FuelBand Die
• iPhone 7: To Upgrade Or Not? It's A Harder Question Than We Thought
• Apple Kills Off The Gold Apple Watch
• Apple AirPods: Hands-On Demo, And The Pros And Cons

For a startup founder, Charlie Sweat carries a particularly heavy burden. In 2006, he was CEO of Earthbound Farm, the California-based farm and factory that produces the majority of the country’s packaged organic salads, when an E. coli outbreak struck the company’s spinach. Three people died, and 200 more were sickened. The source, investigators later surmised, was likely at the source of the spinach: an Angus cattle ranch that had leased land to a spinach grower.

The experience left Sweat unnerved, but it gave him an idea, too. Preventing outbreaks was a matter of knowing where the tainted food came from. But for legacy food companies, supply chain transparency is a daunting task, complicated by a vast number of suppliers, plants, distributors, and products. Different producers use different tagging systems and different sensors to track different things. Piecing together the details of what comes from where and goes where from seed to table had never really been done successfully before. If it could be, the implications for both public health, corporate transparency, and anti-counterfeiting efforts would be huge: Between food and pharmaceuticals, the market for tracking technologies is expected to grow to an expected revenue of $14.1 billion by 2020, according to a report by Allied Market Research in 2014.

That year, Sweat stepped down from Earthbound, capping a 16-year stint at the company, but he took his idea with him. A few months later, with money from the owners of Earthbound, friends and family and investors, he founded Frequentz, a Palo Alto-based startup that touts a comprehensive "track-and-trace" system for food safety—like FedEx tracking, but for each piece of the food supply chain, from seed to table.

Sweat says that by uploading and integrating any kind of data collected from any kind of tag or sensor, the system can discover the source of a food-borne pathogen, be it a contaminated farm or a broken refrigeration unit. The data could not only help companies identify inefficiencies on their supply chain, but also meet a rising crop of food safety regulations, and help satisfy our growing hunger for more transparency about the foods we eat. Named for the frequency of updates required for a transparent food supply chain, Frequentz aims to slash the number of food-borne illness outbreaks—and make a killing among efficiency- and transparency-conscious food companies.

"Since it is possible now to know everything about your product, the stakes are much higher if you haven’t done everything you can to validate what you sell," says Sweat.

The food safety problem alone is immense and costly. Last year, Food Safety magazine counted 622 food safety recalls globally due to contamination, with each recall estimated to mean losses on average of $10 million. Food-borne pathogens affect as many as 48 million Americans a year, and according to research by Robert Scharff, an associate professor at Ohio State University, the annual cost of medical treatment, lost productivity, and illness-related mortality is $55.5 billion.

There's also the threat of illegal practices like unregulated fishing or adulteration, in which suppliers might add something to food to lower their costs. Said to be most prevalent in liquids such as olive oil and in powders such as spices, this form of fraud is estimated to cost the industry $10 billion to $15 billion a year. In one example last year, ground cumin had been covertly mixed with peanut protein, prompting about 20 recalls and leading the U.S. Food and Drug Administration to issue a consumer warning.

The Frequentz software, custom-designed for each client, depends in part on a growing transportation "internet of things," including sensors on food crates, in trucks, and on packages. It's built to accept mobile data from sensors measuring the condition of produce, such as freshness and temperature, as well as scanners picking up packing label data and geographic coordinates. Unlike its handful of competitors, including HarvestMark and FoodLogiQ, Sweat says Frequentz has been designed to combine any data collected from any sensor.

Data from even the smallest farms and fishing vessels can be uploaded on the fly. Eventually, says Sweat, consumers at supermarkets will be able to access that data on their smartphones, including whether a product is fair trade, was harvested or made by workers earning living wages, or contains GMOs or gluten.

The Food Crisis That Changed Everything

The concept of "track and trace" for food is still a relatively new one for the legacy supply chains that bring the world its food. So far, the cost of such systems has been prohibitive for the food industry, which, despite trillion-dollar revenues in the U.S. alone, faces persistently thin margins. That hesitation can be seen in Frequentz's business: In its first year, 2014, sales totaled $3 million; last year’s inched up to $4.5 million.

That calculus began to change last year, after an estimated 500 people fell ill after eating at Chipotle outlets in several states, most from norovirus. At least 60 suffered salmonella poisoning and more than 50 ate E. coli-contaminated food. (E. coli and salmonella bacteria tend to originate in feces and usually reach humans through raw or undercooked meat and other foods.) According to Chipotle, sales at locations that have been open for more than a year were down 23.6% for the quarter ending July 2016. Profits fell to $25.6 million from $140.2 million the year before.

Investors weren’t kind either: After shutting down all of its stores for safety training and giving away 6 million free burritos to generate a bit of positive PR, the restaurant chain lost nearly half its market capitalization from its pre-crisis high, or close to $11 billion. Chipotle executives have said they believe it could take 18 months for the stock price to recover. In a report, Deutsche Bank analyst Brett Levy noted Chipotle's willingness to take drastic action, "but we also question whether [Chipotle] will ever regain its lost luster."

Chipotle’s failure to promptly resolve and explain the outbreaks—and to offer more transparency to its customers—caused other companies to take notice, says Sweat. Now, Frequentz’s customers include food-based subsidiaries of the $65-billion German retail giant Metro AG, and he has projects in development at Costco and the Campbell Soup Co.

"If you can respond proactively in real time and explain to consumers what happened during an outbreak and how you are going to keep it from happening again, you can retain that consumer," says Sweat. "Chipotle’s revenues are still down. Consumers vote with their wallets."

Frequentz is also spreading out to the pharmaceutical industry, and expects cosmetics and personal products to soon embrace ingredient tracking as well. The company has received a total of $20 million in equity investment as well as investments from insiders and owners, with Sweat the largest individual investor. This month, Sweat says Frequentz will complete a Series C financing round led by investment firm Capricorn Healthcare & Special Opportunities, which also provided seed financing.

For its part, Chipotle recently launched its own track-and-trace program with one of Frequentz’s competitors, Durham, North Carolina-based FoodLogiQ. Chipotle had previously relied on its own tracking system, but last year's outbreak exposed a critical lapse: Once ingredients got to stores, all tracking stopped. Tomatoes, for instance, from any number of sources, were mixed together during food prep.

That's why, even after an extensive investigation by the Centers for Disease Control, the exact source of the two Chipotle outbreaks was never found. In February, the CDC concluded its investigation without tracking down exactly which food or ingredient was responsible, citing the problem of ingredients mixed at stores. Chipotle welcomed the decision.

Chris Arnold, a Chipotle representative, said the company now knows which supplier sent which item to which restaurant using package bar codes, "in much the same way overnight delivery services track package shipments around the world," with the aim of tracking food "from seed to stomach." With FoodLogiQ, they now track every ingredient all the way through food preparation. If you get sick at Chipotle and you know where you ate and what time, the company can more readily nail the source of the contamination.

Track-and-trace companies like Frequentz, FoodLogiQ, and HarvestMark specialize in gathering and analyzing data around the movement of food, but actually detecting viruses and bacteria on site is a different challenge. Other startups like Clear Labs, Ancera, and SnapDNA are racing to market with faster, cheaper, more reliable mobile pathogen tests, aimed at identifying the pathogens responsible for an outbreak in just hours and accelerating a process that typically takes weeks.

Working together, tracking and testing technology companies could make future food-borne pathogen outbreaks inexcusable. After a recent E. coli outbreak in flour sickened hundreds, the maker of the flour, General Mills, recalled 45 million pounds of it, about 2% of its annual output, and issued a set of recommendations to the Food and Drug Administration, including that it convene experts focused on identifying long-term solutions, like whole genome sequencing.

Still, supply chain transparency remains a venture fund backwater, with few new companies entering the space. Investments are relatively small—a few million dollars each. Tracking ingredients is a time-consuming slough that technology makes possible, but not easy. Most food companies are waiting for costs to come down, says Melissa Tilney, cofounder of AgFunder, a company that tracks investments in agriculture and food technology. "This is not considered the land of technology unicorns."

After using Frequentz for a year and a half, Andres Cuka, chief operating officer at Marbelize, a giant Ecuador-based tuna processor, estimates it may be another three years before the Frequentz system pays for itself. That estimate is based not just on improved efficiencies, but on the assumption that increased transparency will allow him to raise prices and convince consumers to buy more Marbelize tuna.

Still, Sweat believes the food industry is at a tipping point, as consumers start to demand more transparent labeling. A law passed in May 2014 in Vermont pushed Congress to create a more comprehensive national food labeling law requiring GMO disclosure, which President Obama signed into law last month.

"This is going to drive more communication between consumers and food producers," Sweat says. "It is a communication Frequentz facilitates."

That level of transparency is valuable for small vendors as well, says Rob Trice, a partner in Better Food Ventures, a two-year-old seed stage food-tech investment fund. He’s invested in eHarvestHub, a startup providing mobile tagging and tracking to small family farms, enabling them to work efficiently with larger distributors and retailers. "Investors are fuming about Chipotle," says Trice. "Starting now, companies are expected to have this technology in place."

Knowing And Showing Your Supply Chain

Marbelize, which moves 4,000 tons of fish a month sold under 950 different labels around the world, turned to Frequentz a year ago when it wanted to distance itself from the proliferation of illegal fishing operations.

The system is designed to log events as simple as when a box of canned tuna moves from a truck to a processing plant or as complex as turning that tuna into a frozen entree. "We verify every time there is a chain of custody event or transformative event of the product," Sweat says.

"If we could identify ourselves as having met all of the certifications—we are ‘dolphin safe’—it increases our marketability," says Cuka, of Marbelize. "Consumers want to know where their tuna comes from, how it is caught. We want to show them everything about our tuna."

Today, when a Marbelize boat hauls in a catch, the captain stands on deck with a computer tablet in hand taking photos that show the species, the dimensions of individual fish, and the abundance of the catch. The photos record the geolocation of the fishing boat, proving the catch was in legal waters. "We can see all of this in real time long before the boat comes in," says Cuka. Formerly hidden operating inefficiencies, he adds, are now becoming obvious.

This year, Sweat has also signed up the Honduran Ministry of Fisheries, representing 2,400 fishing companies, and is negotiating with Myanmar’s wild shrimp industry, which has as many as 20,000 fishing vessels. "They have to have electronic solutions that validate their seafood was caught legally and sustainably" to comply with international fishing regulations, he says.

To Cuka, the dream is that consumers at the grocery store will someday be able to scan a QR code on a tuna can and see the photos of the fish at the moment of capture.

Millennials in particular want to know what they are putting in their bodies, says Eve Turow Paul, author of A Taste of Generation Yum, who consults with food companies about how to reach this target market. The trick to a premium price can be as simple as wrapping food in clear plastic, as Kind does with its bars.

"[Millennials] are anxious about an uncertain world and lack trust in the big companies that dominate it," Paul says. Often the only thing they feel they can control is what they eat, or don’t eat. Thanks largely to millennial consumers, transparency now "is not negotiable," Campbell’s senior manager for corporate social responsibility Niki King told a gathering of food and agriculture company executives this month during a webinar sponsored by the Center for Food Integrity, a food industry advocacy group. With no clear definition for "ethical," "sustainable," or even "healthy," complete transparency is becoming the universal standard for a company’s trustworthiness with consumers.

After Chipotle, track-and-trace technologies are simply "a cost of being in the food business," says Charlie Piper, who recently stepped down as the CEO of HarvestMark. Still, he warns, the technologies alone are only as effective at monitoring the supply chain as the human beings who manage it. "The client has to be focused on continued improvement," he says.

Chipotle's new track-and-trace system, FoodLogiQ, is the most established of the new track-and-trace service companies. Eight years ago, after a mad cow disease outbreak in Canada, FoodLogiQ’s parent company Clarkston Consulting was hired to create a birth-to-slaughter tracing system for beef. In 2013, operating as a wholly owned subsidiary, FoodLogiQ was hired to design the track-and-trace system for Wholefoods’ "Responsibly Grown" program, which ranks produce suppliers on environmental sustainability.

FoodLogiQ’s business took off last fall when it was able to move its clients from paper spreadsheets to a cloud-based software service that could be accessed anywhere via smartphones.

"Our clients don’t need their own servers now. They don’t need an IT department," says Dean Wiltse, FoodLogiQ's CEO, echoing a mantra now heard throughout the growing cloud services industry. Revenues at the privately held company are expected to triple this year, he says. "Brands need to get their supply chain in order. They are being called to task."

He echoes Sweat, underscoring that supply chain transparency will eventually sweep through all food-related supply chains for the cost savings alone.

"We cut the time spent dealing with suppliers in half," he says. He tells customers to expect $1 savings for every 25 cents they invest in track-and-trace services.

Sweat's chief selling point is regulatory compliance, but he closes deals by talking about saving money, through efficiencies and lower insurance rates. At Earthbound, he says, "we were able to show our insurance carriers that we reduced product recalls and reduced the cost of goods. So they reduced our insurance premiums."

How The Berry Gets Made

None of this was obvious until recently. Five years ago, HarvestMark, another seed-to-table service inspired by the Earthbound E. coli outbreak, partnered with the Cincinnati, Ohio-based grocery chain Kroger to provide detailed supply chain information on food products in a few of its stores.

"Kroger stopped it after one year," says HarvestMark founder Elliott Grant, who cited the cost—two cents per SKU, or individual inventory item—as impossible to justify.

There was another lesson too: People buying fish didn’t necessarily want to see their future dinner on the hook.

"We learned consumers don’t really care that much. They want to trust that the store where they shop has done this work. They don’t want to do it themselves." In 2011, Grant sold HarvestMark for an undisclosed amount to ag-tech giant Trimble Navigation, which posted sales of $2.5 billion in 2015.

Today, HarvestMark, which unlike Frequentz relies on proprietary QR-code labels, counts among its clients Sam’s Club, Woolworth’s of Australia, and Driscoll’s, the Watsonville, California, fresh berry company.

Driscoll’s packs berries in the field into the individual plastic clamshells that shoppers pick up in the grocery store. The fruit is never washed. No one touches the berries after the picker closes the clamshell. Driscoll’s has long coded each case of clamshells and tracked them to store shelves, allowing fast, easy trace-back in cases of contamination.

Five years ago, the company hired HarvestMark to help it create a system to add their QR codes to each individual berry clamshell package they sell. Consumers could then use their smartphones to scan the code on the package they bought into the company’s website and tell Driscoll’s exactly what they thought about the berries they had just eaten. Using that QR code, the company could trace those berries back through every inch of the distribution trail, from the customer on their website to the field where they could identify the picker by name.

It turns out people are passionate about their berries. The flood of detailed and actionable data direct from consumers—the condition of the berries, the condition of the store where they were purchased—made expensive focus group market research obsolete. Soon, kinks in the supply chain became more apparent. Rather than blaming the farmers for less than perfect berries, Driscoll’s knew which drivers turned off their truck refrigeration to save gas, and which stores' refrigeration was broken.

Driscoll’s system has greatly advanced the market for berries, says Soren Bjorn, Driscoll’s executive vice president for the Americas. As quality improved and became more consistent, demand grew. This occasional luxury became a must-have fruit. "It was an a-ha moment for us," he says.

"It has taken a lot of the tension out of our relationships with growers," says Bjorn. The system quickly paid for itself. "There is less waste, improved sales, increased consumer loyalty. Overall berry quality has increased, which allows us to charge a premium price. We sell a billion clamshells of berries a year. If we could grow more berries, we could sell them."

A transparent connection with growers can present challenges. Veteran farm workers—some of whom hail from indigenous communities from Oaxaca, Mexico, and who are often paid by the weight of their haul—are fighting for fairer pay and working conditions. Workers at Washington state’s family-owned berry farm and packaging plant Sakuma Brothers have called for a national boycott of Driscoll’s berries—the primary purchaser of Sakuma blueberries and blackberries—hoping to enlist the brand’s customers in their cause.

Dan Sun, the Trimble executive responsible for bringing HarvestMark into the company and its new CEO, says food safety and regulatory requirements are the initial draw for clients. Perhaps, 15% of the companies that purchase HarvestMark services pursue supply chain transparency strictly to satisfy consumer demand. Overall, cost savings are now the stronger incentive.

Internal studies show clients experience a 20% to 30% reduction in product waste, he says. For a large food company, that can translate into billions of dollars in savings. "We make sure the supply chain is tight enough that the food reaches the grocery store shelf without waste," says Sun. "The food and agriculture industry is very conservative, but when they see the savings, they change. I’m surprised there aren’t more players offering track-and-trace."

These are early days for this technology, says Sweat. Prospective clients want the results. Overhauling their systems, however, is daunting. "Big changes like this take time."