Weekly reading – 27th May 2023


Apple dives into display-making to cut reliance on Samsung. Apple is a great example of companies that thrive by owning key capabilities and unlocking vertical integration. The challenge for Apple; however, is to retain key personnel across multiple functions and maintain the collaboration to leverage what is an increasingly complex system.

Brian Chesky: I want Airbnb to become a physical social network. I am not happy with the lack of focus from AirBnb on guests. The company seems to constantly talk about what they do for hosts. Hence, I was happy to see Brian Chesky mindful of how expensive his platform has become for guests, especially Gen Z. Plus, his comment on running a business the size of AirBnb as a public entity is very interesting.

Bank of America launches fintech accelerator program. Participants in this program don’t need to give the bank equity in exchange for support and mentorship. What does Bank of America (BofA) hope to gain? I believe that nurturing fintech startups can help improve the deposits now and the future. If your startup already parks money at one institution, you are unlikely to move cash somewhere. Furthermore, BofA can have visibility into what potential technology is on the market. Such insight enables the bank to either build its internal solution or acquire external capabilities.

($) How America’s Largest Restaurant Franchisee Decides When to Raise Prices. Flynn Restaurant Group employs a team of data scientists to maximize revenue by using internal and competitors’ data. ““We had local marketing teams that would go out and steal all the menus and enter them into an Excel file,” said Ron Bellamy, Flynn’s chief operating officer. Data scientists collected prices for individual items across Flynn’s restaurants, then layered on variables that could impact sales, such as bad weather or a change in restaurant hours. They began regularly monitoring prices for competitor restaurants within a three-mile radius of their stores.

How Bud Light Blew It. The urge to appeal to younger drinkers and stop the brand decline is understandable, but what Bud Light did is an own goal. The brewer could have attacked its marketing problem from different angles like other companies did. It did not need to risk angering a divisive society over a sensitive and polarizing issue. I applaud the marketing team at Budweiser for taking a stand. Had the tactic succeeded, the team would have won accolades. Unfortunately, failure means dismissal and that’s exactly what happened.

Dev Kantesaria – FICO: A High Score Business. This is one of my favorite Business Breakdowns episodes. I learned a great deal about Fair Isaac, the company that is more known for one of its products: FICO score. Sign up for a JoinColossus account to read the transcript if reading is your preferred learning method.

America’s Biggest Bank Is Everywhere—and It Isn’t Done Growing. Read this and the decks that JPMorgan Chase used on its Investor Day this week, to learn about how this monster of a bank is run.

Other stuff I find interesting

A traveler’s dream: Cash-free payment systems link up across Southeast Asia. “For the past several years, the central banks of these countries have been attempting to connect their systems, allowing their residents to use QR payments for cross-border transactions without any fees, generally at better conversion rates than those set by payment processors like Visa and American Express. After running a set of quiet pilot programs and sealing an official agreement in 2022, the system is beginning to catch on, anywhere from island party towns to high-end shops.

The U.S. Needs Minerals for Electric Cars. Everyone Else Wants Them Too. To avoid over-reliance on China for minerals, the US must work with other resource-rich countries. Africa is the most notable option. The wealthiest country has long neglected to be a key player in Africa. Such an oversight must change.

When digital nomads come to town. This article discusses the pros and cons of having digital nomads. Like they always say, nothing is perfect indeed.


There are almost 1.8 million apps on the App Store and 37 million registered Apple developers

38% of Americans struggle to make ends meet

6 out of 10 Americans heard of ChatGPT

23% of Gen Z and 24% of millennial respondents reported drinking non-alcoholic beer, wine or spirits often

Target earned $734 million in 2022 from its co-branded credit card issued by TD Bank

12% of all restaurants in the United States serve Asian food

Weekly reading – 20th May 2023

What I wrote last week

Three Good Books On Life

Concerns With PayPal’s New Plan – Unbranded Processing


Online-Only Startups Adopt a Bold New Strategy: Opening Actual Shops. What is old is now new. Online-only startups thought they could do away with physical stores, but now pivot to a hybrid model and establish physical presence. Online-only retailers realized there were two problems with their business model. The first is that it’s increasingly expensive to acquire customers online. Competition gets fiercer. Factors such as Apple’s changes are also a contributor. The second problem is consumer behavior. Folks want to shop in stores and it’s exceedingly difficult to change that. Digital-native retailers would rather change their philosophy than stick to their guns and go bankrupt.

Google staffers praise engineers for I/O, poke fun at execs because they ‘just kept saying A.I.’ While it’s not easy to manage a company like Google, Sundar Pichai, as CEO of Google, has not delivered a stellar performance in my opinion. He did appoint Kurian as Google Cloud CEO, which adds much needed capabilities and leadership. Besides that, there is not much else that gives me the same confidence as what Satya Nadella or Tim Cook has done. Mr Pichai’s employees don’t seem happy with him. He doesn’t show leadership by example when he had a raise after dismissing thousands of employees. As a company supposed to be the leader in AI, Google let ChatGPT and Microsoft take the lead and had an embarrassing launch of Bard, its high-profile rival of ChatGPT. All under Pichai’s watch.

Fast, the easy checkout startup, shuts down after burning through investors’ money. I wonder how much due diligence investors did when they poured $120 million into a startup that generated $600,000 in annual revenue. The cheap money led to recklessness and so did the arrogance.

Amazon Overhauls Delivery Network to Dispatch Packages Faster. Amazon used to ship items across the country to the hands of shoppers. they replaced that model with one that enabled shipping by region. The end results are lower costs, shorter delivery times and higher customer satisfaction. This is an advantage that is difficult and expensive for rivals to copy. In other words, a real competitive advantage.

Marie Schulte-Bockum – FC Bayern Munich: The Best Run Club in Football. I am no fan of Bayern Munich, but it’s admittedly a very well-run club. This Business Breakdown episode discusses how the club makes money and what it does right to be in a position of strength every year.

Target wants shoppers to think of it for groceries as retailer braces for leaner spending. Costco and Walmart are the leaders in low-cost everything. Aldi and Lidl have the lowest prices in groceries. Trader Joe’s brings quirkiness, uniqueness in inventory and a cult. What does Target have that can compete in the grocery world? What draws consumers to Target are several chic-styled goods and convenience. But the retail chain needs to deliver to consumers a reason why they should shop groceries at its stores. Especially when the freshness is disappointing, the uniqueness is lacking and prices are higher than rivals’.

Other stuff I find interesting

How to Become a Morning Exercise Person. “Despite the challenge of waking up early enough for a workout, Dr. Friel said, mornings are better for most people because they have more control over their time before the commitments of the day kick in. In one study, Dr. Youngstedt and his team instructed 101 adults to do an hour of moderate exercise at eight different times for three days. As expected, those who hit the treadmills in the morning shifted their circadian cycles forward, meaning their bodies were ready to sleep and wake up earlier.

($) The Surprisingly Effective Strategy for Buying on eBay. A study that investigated more than 25 million eBay transactions revealed that offering round percentages in discount resulted in higher conversion rates. That makes sense to me from a psychological perspective. Consumers don’t like to do mental maths when shopping. Anything that can make them arrive at the conclusion faster will aid the conversion.

Vicious Traps. “Or curiosity and boldness. They are wonderful on their own, but combined can easily create impulsiveness. How about humility and ambition? Excellent traits, but together they can create successfully disguised arrogance.”

Japan’s sleepy tech scene is ready for a comeback. Bullish signs for Japan’s economy and human capital.

Russia Has a Vodka Addiction. So Does Vladimir Putin – But Not the Same Way. A fascinating tale on how Putin consolidated the vodka production in Russia


More than 81% of Nevada’s state land belongs to the state and the federal government

Americans are keeping cars longer. The average age of passenger cars reached 13.6

App Store stopped more than $2 billion in fraudulent transactions in 2022

Netflix’s ads-supported plan has five million monthly active users

US Podcast Advertising Revenue reached $1.8 billion in 2022

Concerns Over PayPal’s New Plan – Unbranded Processing

In Q1 FY2022, there were 3 mentions of Braintree and none of “Unbranded”. One year later, “Unbranded” was uttered 38 times.

 Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022Q1 2023
Mention of Braintree2003315112111
Mention of “Unbranded”02000241038

PayPal’s executives tried their hardest to push a narrative around unbranded processing. Here is what the soon-to-retire CEO, Dan Schulman, had to say:

First, unbranded processing is a strategic imperative for us. Enabling our merchants with our unbranded service helps ensure that we have a deep relationship with our most important merchants. It enables us to bring our latest and most technologically sophisticated checkout integration across PayPal and Venmo and our Buy Now, Pay Later service to our merchant base. Going forward, we will primarily focus on enabling unbranded processing and our latest branded checkout experiences through Braintree and PayPal Complete Payments.

Second, we will continue to invest to help ensure our unbranded platforms are best-in-class, enabling our merchants to reduce fraud and increase their sales conversion rates. We will do this while providing a comprehensive orchestration layer that enables our merchants to have a single point of contact and integration in a multi-PSP environment.

Third, we are focused on substantially improving the margin structure of our unbranded business. Our PayPal Complete Payments platform opens a new $750 billion TAM in the small and midsized business market, with a significantly enhanced margin structure compared with our largest enterprise customers.

Finally, enabling merchants with our unbranded services will provide a constant stream of incremental data to feed our AI engines and fuel our next-generation checkout platform. We believe no other company will be able to replicate the unique nature and scale of our data set. And in the future, our AI engines will use that data to drive differentiated capabilities to improve the entire checkout experience for our merchants.

On the surface, what Dan said makes sense. Digging a bit deeper, I had a few problems with such a narrative.

First, PayPal acquired Braintree ten long years ago. Hence, I found it strange and concerning that the company’s executives seemed to only recognize this asset just recently. Unbranded received little attention prior to the last eighteen months, yet suddenly became a “strategic imperative”. Confidence in a management team’s ability to create a vision and execute is critical to investors. How can we be confident in this new plan when it should have been thought of and executed a long time ago?

Second, will this newly found focus on unbranded last? With the retirement of Dan Schulman, PayPal is going to have a new CEO next year. When appointed, the new CFO will be the company’s third in the last two years. The turnover in the leadership ranks is troubling, but not as much as the change in strategy. During Covid, being a Super App was the dominant theme backed by a host of new products and numerous incentive-driven campaigns The explosion in online shopping, driven by Covid, inflated PayPal’s growths and led its executives to make wildly ambitious projections. Targets shared on Investor Day 2021 were soon embarrassingly abandoned. Only then did the management team pivot and try selling investors on cost savings and now the power of unbranded solutions. It’s entirely possible that there will be another strategy 12 months from now. And when a company changes strategy that often, investors have the right to question its growth and competitive advantages.

Third, PayPal claimed that data from unbranded processing would help improve its branded checkout solutions. I don’t doubt the basis of the claim. I question the extent to which it is true. Gains from machine learning are not linear. Applying twice the amount of data to a model will not guarantee the outcome will be twice as good. Braintree already powers some high-volume merchants. How much could additional data from unbranded enhance its sibling branded checkout? Yes, there will be improvements, but the connection between branded and unbranded is not as strong as PayPal makes it out to be.

Fourth, there is a significant threat to the company’s branded checkout. The future of payments lies on the phone. The likes of Apple and Google have a sizable advantage of preinstalled their wallet apps on devices. PayPal must convince users to download its app. The task involves only a few clicks, but it’s a daunting challenge to overcome. The plan is to use unbranded processing as a growth catalyst for branded solutions which, in turn, will help generate margin. But if that margin engine were under threat, where would profitability come from for PayPal?

Last but not least, what’s the time horizon on this plan? Three biggest contributors to PayPal’s Total Payment Volume are branded checkout (30%), Braintree (30%) and Person-to-Person (P2P) (28%). The new service, PayPal Commerce Platform (PPCP), is slated to improve the company’s margin and drive growth. In the next two years, what I expect from the management team is plenty of meaningless word salad touting impressive growth and no concrete figures. That’s because PPCP will start from a tiny base and as a result, it won’t move a needle much.

On the flip side, we can’t completely discount the possibility that PayPal will make good on their word this time and their plan will actually work. The thesis is 1/ use Braintree to drive volume growth as it works with biggest merchants; 2/ improve margin with PPCP and value-added services; 3/ increase efficiency by overhauling the infrastructure; 4/ continue to push branded checkouts which keep consumers in the ecosystem and bring the highest margin among services. Could it work? Entirely possible.

In short, I am NOT saying that PayPal is a doomed company. It still has a trusted and popular brand, along millions of active users. The problem stems from the turbulence in the leadership ranks, competitive threats on every front and recent track record. The new narrative has me at 70% bearish and 30% bullish. I’d be more confident had the company announced the new leadership. In the past, I used to buy in what the management sold. I was wrong. I’d wait for at least 1-2 more quarters and especially the upcoming in-person Investor Day before I make any decision. The time to be disciplined and ruthlessly execute for PayPal is now.

Three Good Books On Life

Three Good Books On Life

Excellent Advice for Living: Wisdom I Wish I’d Known Earlier

Kevin Kelly is the founding editor of Wired magazine. On his 68th birthday, Mr Kelly started to compile things he had learned about life for his adult children. Things that he wished he had known sooner himself. The final result is this short book filled with nuggets of wisdom and I really enjoyed this page-turner. Below is a glimpse of what you can expect:

“Don’t take it personally when someone turns you down. Assume they are like you: busy, occupied, distracted. Try again later. It’s amazing how often a second try works.”

“Following your bliss is a recipe for paralysis if you don’t know what you are passionate about. A better path for most youth is “master something.” Through mastery of one thing you’ll command a viewpoint to steadily find where your bliss is.”

“The consistency of your endeavors (exercise, companionship, work) is more important than the quantity. Nothing beats small things done every day which is way more important than what you do occasionally.”

“The real test of your character is not how you deal with adversity— although that will teach you much. The real test is how you deal with power.
The only cure for power is humility and the admission that your power comes from luck. The small person believes they are superior; the superior person knows they are lucky.”

Those Bastards: 69 essays on life, creativity, & meaning

A writer, blogger and investor, Jared Dillian is the author of Street Freak: Money and Madness at Lehman Brothers. As the title indicates, “Those Bastards” is a collection of 69 short essays, each of which draws heavily from the author’s personal experience and carries valuable insights on an aspect of life. Some chapters are lighter and funnier than others, but overall, I enjoyed the honest storytelling, brutally honest if I may add, and wittiness that Mr Dillian brought to the pages.

I say that worrying is praying for a bad outcome. And like I said, all fear is about the future—and why are we living in the future? We should be living in the present, in the moment, right now. And in the present, everything is fine. If there is something that will happen a month from now that you are worried about, are you going to make yourself miserable for an entire month until it happens? That doesn’t make any sense. I frequently tell myself: “I don’t have to decide this today.” I wait until the last possible minute to make decisions, which eliminates fear and anxiety.

Everything is going to be okay. And even if it’s not okay, it’s still going to be okay. I don’t stress about much. And the reason is that I only stress about things that are within my control, and when you think about it, there is very little that is within your control. It cracks me up that people stress about politics. I know some people who get consumed by politics, and pour out their rage on social media. They are profoundly unhappy about things that are completely out of their control.

You do the work, you put on the trade, and the result is not up to you. You have to get out of the results business. Instead, focus on the process. If the process is good, and repeatable, everything will work out in the long run. And if it doesn’t? That’s fine, too!

Get Smarter: Life and Business Lessons

Born in 1940, Seymour Schulich is a successful businessman, investor, philanthropist and author. He co-founded and led Euro-Nevada and Franco-Nevada, two of the largest royalty resource companies in the world. In 2007, he published Get Smarter to educate aspiring young Canadians. The book contains conventional wisdom that’s often talked about in other self-help books. There is no ground-breaking insight, but the content is a valuable reminder for those well-versed with the genre and a great introduction for newcomers. The straightforwardness and brevity that Mr Schulich brings to the pages are refreshing. No long winded back stories. Just straight to the point that he wants to make.

Weekly reading – 13th May 2023


The best wit and wisdom from Warren Buffett and Charlie Munger at Berkshire Hathaway’s annual meeting. If you read enough about Charlie and Warren, you won’t be surprised by these nuggets of wisdom. The point, though, is that they are as true as they ever were and it’s always good to be reminded

Many Strategies Fail Because They’re Not Actually Strategies. In my personal experience, folks use the “strategy” very loosely. Everything that resembles even a plan or an order of action can be called a strategy. Worse, strategies don’t often get enough time to show whether they bear fruits or not. There is often an intervention from the top. A whimsical decision made by someone in power that derails the current strategy or consumes valuable resources. And I rarely ever hear about what NOT to do. That part is as important as what to do.

Marvel’s ‘Guardians of the Galaxy Vol. 3’ is the key to DC Studios’ future, oddly enough. The recent box office numbers seem to suggest that the superhero genre is saturated. I mean, it may well be true, but as the article suggests, we have been here before. Iron Man 3 and the second Thor movie netted disappointing returns, compared to the high standard that Marvel set for themselves. But the studio went on to create massive successes with several hits that took the top spots of the highest grossing ranking chart. Nobody knows for sure what will happen in the entertainment industry. Perhaps, this is the beginning of a struggle for Marvel. Or maybe the return of Bob Iger and his preference for quality to quantity will turn the tide for his studio. Who knows? Regardless, it’s an interesting space to watch

Want your hotel room cleaned every day? Hotel housekeepers hope you say yes. I get why housekeepers want to minimize the damage by cleaning the rooms everyday. It’s especially tough to clean up a big mess with only 3-4 hours before another check-in. However, as a traveler, I prefer cleaning at most every other day. And property operators will prioritize guest preferences.

Fairfax Financial: No Clues from the Past. An informative writeup on Fairfax

Other stuff I find interesting

Being socially disconnected is as harmful to our well-beings as smoking 15 cigarettes a day and even worse than obesity. Go out there and make connections. Seek help

($) Pop-Up Grand Prix: The Formula 1 Race Fans Don’t Get to See. F1 is known for its glamor and being the pinnacle of motor sports. The drivers are celebrities. As they should be. It takes special talent, training and luck to be among the only 20 individuals on Earth that can drive those cars. However, they are not the only heroes. They may not be the biggest heroes even. F1 takes an immeasurable work to put together a weekend. The logistics is hell. The ever increasing number of races across the globe doesn’t make it easy. This article sheds light on what a grueling task it is to make sure that things are where they should be and when they should. Because on Sunday, the green light goes, no matter what.

It’s the Guns. There are numerous examples, studies and statistics that support gun control, especially restrictions on assault rifles. Nobody is asking for taking all the guns away permanently and violating citizens’ freedom to carry. That’s not what is being asked for here. To be honest, gun control, REAL gun control may not work in America. But the point is that we never get to experiment and try to find out an answer definitively. There is always power in this country that prevents us from even testing gun control.

In Norway, the Electric Vehicle Future Has Already Arrived. Norway has stimulated the adoption of EVs better than many other countries , but there are still challenges. The government is concerned about the number of vehicles in circulation. Plus, EVs are not entirely harmless to the environment. EVs require rare minerals in their battery and their weight causes more asphalt and tire abrasion which leads to more unhealthy particles in the air.


Apple Card Savings received almost $1 billion in deposits in the first four days

Amazon’s ads reach totals an average monthly US audience of 155+ million

Non-compete clauses cost Americans $300 billion a year

Safari gained share in the desktop browser market in the US. Source

Weekly reading – 6th May 2023

What I wrote last week

The future of payments lies on the phone

Book Review: Quench Your Own Thirst


($) The Subtle Strategy Behind Elon Musk’s Price Cuts at Tesla. The EV war is so fascinating. Manufacturers like Ford and GM are raising prices to maintain profitability and appease investors. Musk, on the other hand, chooses a different path. He is lowering prices to put more Teslas on the streets and hoping that consumers will pay for a subscription to download latest software. To support the bet, he sanctioned an expansion of Tesla factories. The committed capital can make or break his company’s fortune. If it works, other car manufacturers will lose market share to Musk and will have to lower prices. Otherwise, let’s just say GM got into so much trouble that they required a government bailout because of the same tactic.

The underbelly of electric vehicles. Electric vehicles have their strengths, but it’s inaccurate to say that they are entirely harmless to our nature and environment. It’s because an EV requires a lot of minerals whose extraction and processing can take a toll on Mother Nature. This article offers a good rundown on aspect.

Google Cloud boss Kurian’s rocky path to profit: ‘We were not in a very good situation’. The hiring of Kurian looked masterful. He added the leadership and experience in enterprise sales to a company that is not historically strong in that area.

.James Corden Bows Out. It’s not surprising to read that The Late Late Show is wildly unprofitable, but it’s bizarre to hear that the show runners still wanted to keep James Corden around for 2-3 more years. Regardless, it’s a good read on the late night television space and how it has evolved in the past few decades.

What went wrong with Shopify’s quest to build a logistics business. “In a fulfillment relationship, you only have — let’s call it — $2 to spend on the fulfillment fees. Those $2 go a lot further with one partner than they do when you’re splitting them between a middle management layer, i.e. Shopify, and the fulfillment partner itself. It’s harder to find the right third-party logistics provider for smaller merchants, because most good 3PLs are looking for volume customers. And as Shopify started its business, most of its customers were smaller customers. So there is a legitimate problem that they saw. But it’s more they made a big mistake with how they wanted to solve the problem. What I found in my own experience, is that the approach of an asset light network makes it very difficult to make consistent quality of logistics delivery across an effort, because of having different partners with different processes and things like that.

Other stuff I find interesting

Inside the fortified rooms securing U.S. secrets. An interesting article on SCIF (pronounced “Skiff”), a room where the US government stores the most sensitive and confidential information.

What the U.S.-China chip war means for India. “The investment in design, through the design-linked incentives, is from the perspective of building on our strengths. Government wants to support 100 local firms working on integrated circuit and chipset designs. The other focus is on the outsourced semiconductor assembly and test, where India has a comparative advantage given that we have low-cost labor. Design and testing are two places where we actually have advantages. I don’t think we need to invest in display fabs, because if Chinese companies don’t provide them, we can buy them from Japan or South Korea. It’s a huge cost we are putting up for this display fab. We have a lot of scope and talent. In some estimates, we have 20% of the total design workforce in the world. The India Electronics and Semiconductor Association claims that around nine out of 10 chips that go into the market will have some Indian design center work behind them. So there is capability, but now that needs to be translated into intellectual property and new products that are made from India.

How Roy Wood Jr. crushed the toughest room in comedy. I am not a comedian and I was not familiar with Roy Wood Jr’s profile. Hence, it’s good to learn a little bit about comedy and his story. Fascinating.

Waymo One doubles service area in Phoenix and continues growing in San Francisco. Amazing progress by Waymo and Google. It must have taken immeasurable working hours of a lot of people to get to this point. I am excited about what to come next. With that being said, I remain optimistically cautious that it will still take a lot for us to operationalize self-driving cars as a society.


Only 1 out of 9 US adults are current smokers

20% of vehicle sales in 2023 globally are electric

There are more than 66,000 rules governing search engines in China

Nearly 3 in 5 (57%) U.S. teen girls felt persistently sad or hopeless in 2021. Source: CDC

Book Review: Quench Your Own Thirst

Book Review: Quench Your Own Thirst

Written by Jim Koch, the founder of the Boston Beer Company, “Quench Your Own Thirst” is a good book about beer brewing and business.

Charles James Koch, also known as Jim Koch, was born in Cincinnati in 1949 to German descendants and a family with a long history in beer brewing. Jim attended Harvard University and worked as a consultant at Boston Consulting Group. In 1984, using his great-great grandfather’s recipe, Jim sourced funding from friends and family to found the Boston Beer Company. Shortly after that, he created the famous Samuel Adams beer; which was the soul of the company in the early days. In 1995, he took the company public as Chairman of the Board and CEO. He retained the double duty till 2018, when he gave up the CEO seat to David Burwick. In 2022, The Boston Beer Company’s revenue crossed the $2 billion, making it one of the largest brewers in the US. That’s a long way from its humble beginning 40 years ago in Boston.

The book chronicled the journey of Jim Koch and the Boston Beer Company from the start. I don’t know much about the beer business, so I am happy to learn a bit more about it through Jim’s stories. I love that he broke the content into short chapters, each of which is dedicated to a certain topic. Jim discussed not only his successes, but also his failures candidly. In such reflection, he shared excellent nuggets of wisdom about life and business. No beating around the bush, no long winded stories, no bullshit. And I love that. The bonus point is that because I want to find “hidden gems”, books that don’t garner as much publicity as some others by celebrities, “Quench your own thirst” seems to fit the bill.

All in all, I like the book. If you want something refreshing and easy to read, this will be a good choice.


“To many, “decoction mash” might sound like an unpleasant form of surgery or maybe a dance you’d do at a heavy metal concert. Let me break it down for you: The first step of brewing is to take barley that has been germinated and dried (called “malt”), grind it up, and put it in a big vessel with warm water to create mash. We do this because the hot water in the mash triggers enzymes in the malt to break the grain’s complex starches down into simpler sugars. These sugars then become food for the yeast to work on during fermentation”

“To obtain a richer, sweeter, fuller-bodied beer like Americans drank in the nineteenth century, you want more sugars to stay in the beer to provide body rather than getting eaten up by the yeast. The sugar molecules have to be small and simple enough for our taste buds to perceive them as sweet, but large and complex enough that the yeast has trouble digesting them. Then you can add the hops and balance out the sweetness with bitterness.”

“I looked at this student and said, “I’ll tell you the difference. The difference between marketing and sales is the difference between masturbation and sex.” I think I heard a couple of gasps. Good! I wanted people’s attention. So I kept going: “One you can do all by yourself in a dark room and fool yourself into thinking you’re accomplishing something. The other requires real human skills and all the fury and muck and mire of real human-to-human contact.”

Entrepreneurs need to focus on what’s real. You shouldn’t worry so much about the image or hype that exists around the product or service. You should focus on the product, and on selling it. A great sales force can’t sell without a great product—it’s like a race car running off crappy gasoline. Great salespeople are only effective when they know they’re selling something worth buying.”

“He asked if I would give him seventy-five cents a case off that price if he ordered fifty cases.”

“I then asked him why the seventy-five cents a case was so important, especially since he was selling a case for an eight-dollar profit. He smiled, as if he had been waiting for that question. “You don’t understand my business. I have the best prices and expensive rent, but I still make more money than my competition. Young man, I don’t make my money when I sell the goods, I make my profit when I buy the goods. That seventy-five cents is my profit.”

“I decided to look at every place we spent money. I found money everywhere! It was like opening all the drawers in your house and finding a pile of cash in every one. Occasionally, it was as simple as asking for a lower price. Usually, it required that I be a better customer. For example, I had sixty-day terms with our contract brewery because I needed the extra time to pay, but once we were profitable, I asked for and got a 5 percent lower price by paying in five days. I found a way to use lighter-weight bottles of equal strength, and that saved 15 percent on bottles. We got our wholesalers to contribute twenty-five cents a case to help support the salespeople we put in their market.”

“If you want to run a successful business, you have to stay connected with people even as the business grows.”

“One day, I was talking to a guy who was a die-hard Heineken drinker. I was trying to get him to drink Samuel Adams and he wasn’t having it. “How can your beer be any good?” he asked. “It’s American. Everything in America is mass-produced by robots.”

“When he heard the words, “the beer is handcrafted in small batches,” he was persuaded. He now understood why Samuel Adams stood apart from the imports and the mass-produced American beers. An American beer that was handcrafted in small batches just felt good, evoking honest labor and a craftsperson who put his heart into the beer. “Sounds like it’s almost handmade,” he said. And he ordered a Sam Adams.”

“In 1986, two years after starting up, we changed our table tents to read “handcrafted in small batches,” putting that phrase both on our labels and on materials delivered at the point-of-sale. It was the first time the term “craft” had been applied to what was then called “microbrewing.” Eventually, we would become known as a leader of the “craft beer movement.” All from listening to a guy in a bar.”

“I tolerated the giant turds, the near disasters, and the unsteady sales because I had committed myself wholeheartedly to my new venture. I advise that you do the same. Don’t second-guess yourself. Don’t panic. Just stay the course.

In rock climbing, when you start out on a certain route, you say that you’re “committed.” You’re far enough off the ground that it’s easier to keep climbing up than to try to climb back down. All that matters is what’s ahead of you, so you don’t worry, and you don’t look down. Nothing good happens from looking down. Look up and find the next handhold and the next foothold and the one after that. You keep going. You trust yourself, even when you can’t see the whole path in front of you. If I could survive my own embarrassing screw-ups and keep going, then you can, too.”

“All of this might sound mundane, maybe even a little too high-minded, but every small thing that leaders do sets the tone and increases team members’ commitment to the common cause. People are always sensitive to hypocrisy or compromises from managers, and the behavior of senior leaders is scrutinized, magnified, and commented on by everyone. Leadership is a privilege, but in the immortal words of Spider-Man, “With great power comes great responsibility”—the responsibility to be a good role model and to practice what you preach.”

“When we sat down to negotiate the offering, I said to the investment banks, “I want my drinkers to be able to buy shares at a discount. Maybe it’s never been done before, but there has to be a way.”

“In the end, I prevailed. With the help of legendary venture capitalist Bill Hambrecht, who understood what we wanted to do and worked hard to help, we put a carefully worded press release (to comply with federal securities law) inside our six-packs announcing the offering of public stock. Consumers would mail in the press release to get a copy of our prospectus. They could then decide whether or not they wanted to participate in the initial offering. If they did, they had to mail in funds to purchase stock during a designated time period. Any investor could purchase a block of thirty-three of our shares for $495 dollars, or $15 a share—which turned out to be a 25 percent discount from the $20 a share that institutional investors got. The drinkers would do better than the big guys. Pretty cool.”

The future of payments lies on the phone

For the last couple of months, a score of technology companies have announced support for Tap to Pay on phone. Here is a quick rundown:

Clover, a Point-of-Sale and business management platform by Fiserv, now enables small & medium sized businesses to accept Tap-to-Phone payments on iPhones:

As a point-of-sale platform for merchants, Clover processes over $234 billion in payments each year. Small- and medium-size businesses (SMBs) in the U.S. can now accept in-person contactless payments on their own iPhones thanks to an integration with the Clover Go iOS app and Tap to Pay on iPhone. For Clover merchants on the move, including fitness trainers, home service providers, market vendors and food truck operators, the addition of Tap to Pay on iPhone enables contactless payment acceptance without the need for additional hardware. Businesses can also use Tap to Pay on iPhone as a complementary solution to accept payments for needs like line busting or accepting payments at the table.

Fiserv, one of the leading payment technology providers in the world, launched digital issuance for debit cards:

Financial institutions can eliminate the wait that often goes along with receiving physical debit cards with the launch of new capabilities from Fiserv, a leading global provider of payments and financial services technology solutions. Cardholders now can access a new or replacement debit card electronically, allowing them to make in-store and online purchases immediately and eliminating the need to wait for a physical card to be mailed out, received and activated.

Houzz will allow contractors and professionals on its platform to get paid with Tap to Pay on iPhone

Houzz Inc, the leading platform for home remodeling and design, today introduced Tap to Pay on iPhone within Houzz Pro, the all-in-one business management and marketing software for residential contractors and design professionals. With Tap to Pay on iPhone, industry professionals can turn their phones into point-of-sale devices to quickly collect electronic payments in person. Pros simply open any invoice in Houzz Pro, choose a scheduled payment and select “Collect Payment”. Then they tap their iPhone to their client’s contactless credit card, debit card, or smartphone to accept the charge from a digital wallet.

ACI Worldwide and MagicCube Partner to Deliver Tap to Pay Acceptance for Mid- to Large Retailers

ACI Worldwide, a global leader in mission-critical, real-time payments, has teamed up with MagicCube, the creator of i-Accept™, to deliver secure and seamless contactless payments on commercial off-the-shelf (COTS) smartphones and tablets using Tap to Pay—with or without PIN. The solution will provide mid-size and large retailers operating in complex environments with device-agnostic control and visibility of transaction data. This comes on the heels of MagicCube’s announcement extending its platform to big-box retailers.

i-Accept empowers financial services institutions to enable large merchants and retailers to accept contactless transactions through payment cards and mobile wallets such as Apple Pay, Google Pay, and Samsung Pay. Uniquely, i-Accept adapts to local card schemes and crypto wallets and supports Buy Now, Pay Later programs. It also allows for secure PIN capture on a COTS device screen without the need to scramble or shuffle the PIN entry device keys, making the transaction experience intuitive and efficient for the customer.

Stripe launches Tap to Pay on Android

Stripe, a financial infrastructure platform for businesses, today announced support for Tap to Pay on Android, enabling businesses in six countries to accept contactless in-person payments using a compatible phone or tablet.

Square software turns Android devices into powerful payment technology

Square today launched Tap to Pay on Android for sellers across the U.S., Australia, Ireland, France, Spain, and the United Kingdom. The new technology empowers sellers to securely accept contactless payments with a compatible Android device, and at no additional cost.

Visa offers fascinating commentary on Tap to Pay (TSP). In the US, T2P penetration is now at 34%, up 700% compared to three years ago.

And tap-to-pay continues to be a powerful driver of engagement. Globally, 74% of all face-to-face transactions outside the U.S. are now taps. In the U.S., we’re at 34%, up 7x from three years ago and up more than 10 percentage points from last year.

A couple of highlights in the second quarter include U.S. quick service restaurants, where penetration surpassed 40% and in key metro areas across the United States, we continue to see great traction beyond the success in New York and San Francisco, L.A., Detroit, Seattle, San Diego and Ocean to Miami are all now over 40%.

Mass transit continues to be one of the best ways to get people used to tapping and we’ve set records. In the first half of 2023, we processed more than 745 million Visa Tap to Ride transactions globally, up 35% over the first half of last year. We’ve enabled 55 new transit systems, bringing our footprint to over 650.

The rising popularity of payments on the phone carries significant ramifications for different industries. Payment facilitators will face a major strategic risk if they don’t introduce the technology in time. T2P on phone will soon be table stakes and like in a poker game, a company needs to buy their way in before they can think about winning. The same logic applies to debit and credit card issuers. Enabling the addition of a card to a digital wallet is no longer enough. Instant provisioning to digital wallets will be a required standard. I believe that while card plastics still play a role in the payment world, but more and more transactions will take place on smartphones. Hence, any card that wishes to gain top of wallet must find a way to consumer phones.

Furthermore, the increasing adoption of T2P on phone represents a huge tailwind for device manufacturers. It’s very simple. The more popular T2P on phone is, the more phones these manufacturers will ship. Apple, in particular, will be among the biggest beneficiary. Even if consumers take time to upgrade hardware, Apple can still extract revenue from subscriptions and the App Store. That’s in addition to the 0.15% cut that Apple earns on every Apple Pay transaction.

Retailers that don’t allow T2P on phone will have no choice, but to follow the trend. The biggest name in this bucket is Walmart. They stubbornly refuse to accept contactless payments, except their own Walmart Pay. But when even the Costcos and the Aldis of the world accept T2P on phone and the trend is irreversible, I expect Walmart to concede and change their mind in 2-3 years.

What about PayPal? I believe this trend will make it more important for PayPal to push their branded credit/debit cards. Think about it this way. Even if PayPal announced support for T2P on phone with PayPal app tomorrow, consumers would still need to install the app on their phones. It takes only 2-3 finger taps to complete the task, but it’s by no means easy. On the other hand, Apple Pay and the Wallet app are ready to use from the get-go. No further installation required. That’s a significant disadvantage from PayPal’s perspective. To overcome that, they need to be involved in in-store transactions.

Because rewards are accumulated through a PayPal account, any point earned through the use of PayPal/Venmo cards in stores can spur activity on their apps. PayPal will have time to act as consumer behavior is often difficult to change. But they should make sure their cards are provisioned in digital wallets and their branded cards are in as many hands as possible.

Weekly reading – 29th April 2023

What I wrote last week

a16z pushed a weak narrative for ACH. I disagree


($) Pepsi’s New Healthy Diet: More Potato Chips and Soda. Under the previous CEO, Pepsi was pushing towards healthier products and drinks. Under the current CEO, that’s no longer the case. Pepsi is back to being a brand of soda and chips. Ramon Laguarta understands that consumers are more conscious of potential impact that his company’s products can have on health. But he also has a mandate to increase shareholder values. Therefore, Pepsi is trying to thread the needle: still sell the processed food and soda, but make them as less salty or sweet as possible. So far, it has been positive because Pepsi has had a revenue spike. But for how long? There is only so much you can do to limit salt and sugar before soda and chips don’t taste good any more. And the consumer trend towards healthy snacks may accelerate again. Perhaps, the previous CEO didn’t succeed, not because her direction was wrong, but because her timing was.

Bud Light’s attempt to market to new customers alienated old ones. A very interesting article on how direct-to-consumers brands struggle to strike the right balance in a politically volatile market like the US. Success stories like Apple with their inclusive marketing campaigns are as common as drama like Anheuser-Busch. Brands will need to take a leap of faith, test & learn and adjust accordingly.

Some brands pull back on Pinterest ad spend because of weak performance metrics. Pinterest is still a good top-of-the-funnel channel to drive brand awareness. But if you are looking for a channel to improve performance, Pinterest may not be the best option.

Apple’s Device Ecosystem Multiplies its Brand Strength and Stickiness. Incredible stickiness of Apple products and ecosystem.

How Bed Bath & Beyond lost its suppliers’ trust, and doomed itself. Realizing that they had serious problems, Bed Bath & Beyond brought in a Target executive to save the day. The CEO wanted to push the company into omnichannel and private labels. While the new strategy might make sense, it was writing a check that the company’s infrastructure could not cash. Plus, I find it ridiculous that the Board authorized the buy-back program that unsettled critical supply partners and started the downward spiral into bankruptcy. A massive management failure of an iconic retail brand

($) The Boss Wants to Make You More Efficient. It’s important to identify areas where technology can make a difference and be more efficient. It’s equally important to determine whether what you are trying to make efficient is the right thing to do. That’s called effectiveness.

Other stuff I find interesting

($) Still Going Fast, Inflation Changes Drivers. A great article discussing the drivers of inflation. First, it was about the supply chain crisis. Then, the war in Ukraine happened. These days, services drive inflation

The EU has approved the world’s first carbon tax on imports. Everything is going to get pricier in Europe. “The carbon tax is part of a wider overhaul of the bloc’s carbon market that will require European industries to comply with strict emissions standards, making their products more expensive to produce. The tax is intended to ensure that the costlier, lower-carbon EU goods will not be undercut in price by those from countries with more lax rules on emissions. Any companies importing such products into the EU will be required to buy certificates to cover their carbon emissions, based on the volume of goods they bring in and the emissions footprint of those goods. The tax will also prevent manufacturers, hoping to evade the EU emissions standards, from moving operations to another country, and then sending their goods into the EU, a process known as “carbon leakage”. The carbon tax, to be phased in from 2026, will cover some of the most polluting industries: steel, aluminum, cement, fertilizer and electricity, as well as hydrogen. In the future, it could be expanded to include organic chemicals and polymers, including plastics.

Africa fell in love with crypto. Now, it’s complicated. I think this sums it up nicely. “Mohamed Taysir, co-founder and CEO of Egypt’s Singularity Finance, believes the trend of crypto startups closing down is driving attention away from the promise of quick money to more “beneficial use cases of blockchain.” Adepoju Adebowale, a 27-year-old crypto enthusiast from Nigeria, told Rest of World he once believed Africa and crypto were the perfect couple. However, the events of the last few months have forced him to change his mind. He said his crypto investments grew from 70,000 naira ($152) to 3 million naira ($6,514.23) within six months in 2021. Now, Adebowale has lost almost all of that money

The Italian farmers saving an ancient fruit with solar power. I hope the Italian government can support farmers in this endeavor. This is where some governmental subsidies can make a lot of difference, given how expensive it is to install solar panels on farms.


PetSmart has 60 million customers in its loyalty program

U.S. Bureau of Labor Statistics found that car dealer markups contributed between 0.3 and 0.7 percentage point of the nearly 16% rise in the consumer-price index between the end of 2019 and the end of 2022

iOS App Store has 101 million monthly active users in Europe

Nearly Half Of New Subs Find Netflix’s Ad Load ‘Heavy’. Source: MediaPost

a16z pushed a weak narrative for ACH. I disagreed

a16z pushed a weak narrative for ACH. I disagreed

The renowned venture capital firm, a16z, recently published an article named “The Future of Payments is… Red?“, whose content I find at best unconvincing. The gist of the article is that the author believed fintech startups could challenge the two dominant networks (Visa & Mastercard) by pushing for ACH transactions to replace credit cards. The example used to substantiate the thesis is Target Red Card. Per the article, and sorry for the lengthy excerpt:

Look at Target’s full-year revenue for 2022: they made $107.6 billion in sales and $3.4 billion in pre-tax income. Now imagine if every transaction at a Target store or at target.com were made with a credit card—which is currently not the case—at an average fee of 2%. This would result in $2.2 billion in incremental income if all payments shifted to ACH, which would be 65% more profit!

Target has impressively shifted 20% of their entire sales to their own cards. The only “illogical” part of this is that to save ~2%, the company is… giving up 5%, albeit to the user in the form of direct savings at Target, which is the primary benefit of the RedCard.

Target isn’t an outlier here. Most “frequent interaction” or high-frequency billing companies do the same. Verizon and AT&T, as additional examples, give you substantial monthly savings for moving your bill-pay off of credit cards and to ACH (or sometimes debit cards, given the lower average fee).

That said, while I think Target has been smart to roll this out, paying 5% to save 2% (and justifying it by showing increased engagement, which likely reverses cause and effect and shows sampling bias!) is not smart. A better alternative, in my opinion, would be to provide customers with a one-time benefit to make the switch. As an example, imagine if Netflix started offering such a benefit and started offering customers, upon log-in, a $2 one-time discount if they clicked and switched their payment method to direct debit. This would provide Netflix with long-term savings of more than $100 million a year in North America alone, based on their rough interchange costs.

Luckily, inertia, one of the twin moats that protects so much of banking, is now decreasing thanks to improved technology, and consumers are more willing to switch up their payments methods. (Rewards, the process by which merchant fees fund customer benefits, with banks in the middle, remains a stubborn reason why “RedCard as a Service” hasn’t previously taken off.)

There are several points with which I disagree with the author and I’ll go over them one by one.

The claim that Target gives 5% discount on Target transactions to save 2% in interchange is not true. A loyalty program is more than just payments. First of all, loyalty programs existed way before credit cards came around. Brands understood that a loyalty program helped build customer relationship and retain customers. Second, a branded debit or credit card is a tool with which retailers collect valuable first-party information. Who a customer is, how often a customer visits a certain store, what they buy, what combination of goods they buy, what promotions they are most responsive to, whether they want to pick up goods at drive-through, in store or have them delivered. The kind of information not only assists a retailer in personalizing offers and making operational adjustments accordingly, but also powers a high-margin advertising platform. Look at the big retailers on the market. The Walmarts, the Amazons and the Targets of the world all have ambition to build an advertising machine popular with advertisers. How else do they provide targeting to those advertisers without data about their own customers?

There are a bunch of 2% cash back credit cards on the market. Some even offer a higher rewards rate on Target purchases. Consumers are pretty savvy. They will use whatever saves them the most money. Remember that Target would have no information on a customer if they used a non-Target card. Without offering a competitive earn rate, how could Target compete and gain valuable customer information?

The Target credit card is underwritten by TD Bank USA. Co-branded credit cards usually serve as a revenue stream for brands and Target credit card is no exception. According to the latest 10K, Target recorded $734 million in profit sharing from TD Bank as revenue. $734 million! Of course, that’s not entirely pure profit as I believe Target shoulders some of the rewards expenses, but it’s still one hell of a figure. Because Target debit card is issued by Target itself, in collaboration with a bank, they earn much less, if anything at all, from the debit card. So why do they have it in the first place? Why does Target have a reloadable account with the same 5% cash back?

One word: accessibility. Not everyone has a Social Security Number or an ITIN to open a checking account and get a debit card. Then, not everyone with an SSN can get a credit card. TD Bank must have some say in whom they want to give credit to. A FICO of 600 should disqualify a lot of folks from having a credit card. Hence, a lineup of different options helps Target widen their target audience. And if Target already offers a debit card or a reloadable account, they may as well give a reason to customers why they should use those options.

The author of this article argues that retailers should incentivize consumers to use ACH and abandon credit cards. His example is that utility providers already do so. There are two errors with that argument. First, consumers love credit card rewards. Why would they turn away from concrete savings and benefits? Second, using utility providers as an example doesn’t make sense. Consumers pay for utility once a month. Twice or three times at most. These providers charge 4%, which is substantially higher than most credit cards’ earn rate. The extra fee deters consumers from using credit cards as payment method. The gain is smaller than the expense. It doesn’t hurt because most of the time, it’s just one transaction every month. For retailers like Target, it’s different! They want consumers to shop as often as possible. Retailers rarely impose a transaction fee like utility companies do (they negotiate a favorable interchange rate with the networks) and consumers want their rewards. Hence, it’s exceedingly difficult here to change consumer behavior.

In addition, I don’t understand why the Target Debit Card is an example of how Visa and Mastercard can be disrupted. Visa and Mastercard are two of the most known and trusted brands in the world. Walk to a restaurant in a remote country and if you see the Visa logo, you know that your Visa card will work there and you are protected from fraud. How popular is Plaid globally? Is it as trusted as Visa and Mastercard? The networks built an incredible business model in that they are accepted by millions of merchants and millions of consumers trust them. Plaid has been around for a while and if they haven’t gained much traction, what are the odds that Plaid will build a similar business model like the networks?

Plus, how could we replicate that model with ACH? Mom-and-pop merchants want customers and frictionless payments that are proven and tested. Yes, saving 2% is great, but it’s still a lot better than losing business to a competitor nearby because that competitor enables card payments.

I understand that a16z wants to push a narrative that is favorable to their fintech investments, but this is not a good one as the reasons mentioned above.