The Mundanity of Excellence

Below are my notes from the academic essay named The Mundanity of Excellence, which was written by Daniel Chambliss. The essay drew on his years of studying swimmers on different levels to understand the sources of excellence. And as you can see below, the lessons aren’t only applicable to swimming. They can be very useful to us all in every walk of life.

What are NOT the sources of excellence

Excellence is not, I find, the product of socially deviant personalities. These swimmers don’t appear to be “oddballs,” nor are they loners.

Excellence does not result from quantitative changes in behavior. Increased training time, per se, does not make one swim fast; nor does increased “psyching up,” nor does moving the arms faster. Simply doing more of the same will not lead to moving up a level in the sport.

Excellence does not result from some special inner quality of the athlete. “Talent” is one common name for this quality; sometimes we talk of a “gift,” or of “natural ability.”

I agree with Daniel that socially deviant personalities, quantitive changes or innate talent ALONE does NOT explain excellence. There are plenty of world class athletes who seem very socially friendly such as Kobe Bryant (Rest in Power, Mamba), Roger Federer, Leo Messi or Lewis Hamilton. If the amount of practice alone was the determinant of excellence, why wouldn’t we have more world class competitors? Why would people have different skill levels even at the same age and likely the same amount of practice? If the innate talent could determine excellence, then why did we have several 1st draft pick players in NBA fail to meet expectations? Why did we have the likes of Ravel Morrison, who people at Manchester United labelled as genius, fail to reach the heights that seemed destined for them?

On the last point, the author expanded on why he didn’t think talent alone doesn’t lead to excellence

Talent is indistinguishable from its effects. One cannot see that talent exists until after its effects become obvious. One of the more startling discoveries of our study has been that it takes a while to recognize swimming talent. Indeed, it usually takes being successful at a regional level, and more often, at a national level (in AAU swimming) before the child is identified as talented. 

It seems initially plausible that one must have a certain level of natural ability in order to succeed in sports (or music or academics). But upon empirical examination, it becomes very difficult to say exactly what that physical minimum is. Most Olympic champions, when their history is studied, seem to have overcome sharp adversity in their pursuit of success. Automobile accidents, shin splints, twisted ankles, shoulder surgery are common in such tales. In fact, they are common in life generally. While some necessary minimum of physical strength, heart/lung capacity, or nerve density may well be required for athletic achievement (again, I am not denying differential advantages), that mini- mum seems both difficult to define and markedly low, at least in many cases. Perhaps the crucial factor is not natural ability at all, but the willingness to overcome natural or unnatural disabilities of the sort that most of us face, ranging from minor inconveniences in getting up and going to work, to accidents and injuries, to gross physical impairments.

Excellence is mundane

Superlative performance is really a confluence of dozens of small skills or activities, each one learned or stumbled upon, which have been carefully drilled into habit and then are fitted together in a synthesized whole. There is nothing extraordinary or superhuman in any one of those actions; only the fact that they are done consistently and correctly, and all together, produce excellence.

Doing more does not equal doing better. High performers focus on qualitative, not quantitative, improvements; it is qualitative improvements which produce significant changes in level of achievement; different levels of achievement really are distinct, and in fact reflect vastly different habits, values, and goals

All the world class put in thousands of hours in practice before they burst into fame. Not only do they train as hard as anyone else, but they are almost maniacal about improving their craft. The late Kobe Bryant studied cheetahs to improve his fade away shots. He called up Hakeem to learn about post-up moves. He talked to Michael Jackson to become a better athlete. LeBron James and Cristiano Ronaldo have taken care of their body and skills so well that they are still performing exceptionally at the age of 36.

Motivation is mundane, too

But even given the longer-term goals, the daily satisfactions need to be there. The mundane social rewards really are crucial. By comparison, the big, dramatic motivations— winning an Olympic gold medal, setting a world record—seem to be ineffective unless translated into shorter-term tasks. Viewing “Rocky” or “Chariots of Fire” may inspire one for several days, but the excitement stirred by a film wears off rather quickly when confronted with the day- to-day reality of climbing out of bed to go and jump in cold water. If, on the other hand, that day-to-day reality is itself fun, rewarding, challenging; if the water is nice and friends are supportive, the longer-term goals may well be achieved almost in spite of themselves. 

You see the effect of short-term goals and daily satisfactions every often in reality. Fitness apps have leaderboards so that you can compare yourself with friends or strangers. The confidence and satisfaction boost derived from seeing your name on the top of the leaderboard makes you likely committed in the long run. Personally, when I started to learn English, the road to fluency wasn’t easy. First, I needed to reach some local certificates that were proof of the mastery of the language in Vietnam and the stepping stones for international tests such as IELTS or TOEFL. After I achieved those certificates, then came the preparation for IELTS. Even after I got my IELTS, I still needed to practice a lot to use English comfortably. Without the small wins, I am not sure I would have persisted for years to learn a second language.

Maintaining mundanity is the key psychological challenge

In common parlance, winners don’t choke. Faced with what seems to be a tremendous challenge or a strikingly unusual event, such as the Olympic Games, the better athletes take it as a normal, manageable situation18 (“It’s just another swim meet,” is a phrase sometimes used by top swimmers at a major event such as the Games) and do what is necessary to deal with it. Standard rituals (such as the warmup, the psych, the visualization of the race, the taking off of sweats, and the like) are ways of importing one’s daily habits into the novel situation, to make it as normal an event as possible

Rafael Nadal is famous for his rituals on the tennis court. He always takes a cold shower before every game. He walks into a court with his bags on one shoulder and a racquet in the other hand. He never steps on the court lines. He has two bottles, one is water and the other can be juice. They have to be placed in a certain order and the labels always face the side that he is on. There is no scientific explanation for his behavior, except that doing these little things make him focused and at ease.

One of my favorite movies is Burnt, which stars Bradley Cooper as a 2-star Michelin chef named Adam striving for his 3rd. Adam is infamous for his short temper, ridiculously high standards and lack of patience. He kept pushing his team to the limit every day and wore out everybody in the process. After a betrayal of his Sous Chef, sorting out his personal problems and with the help of his new girlfriend, Adam became more relaxed in his pursuit of the 3rd Michelin star. This scene below is what he got his chance. At 0:22 when being informed that the judges arrived, Adam nonchalantly said “We do what we do”. Everybody looked shocked because it wasn’t what they expected from him. But it’s exactly that attitude that helped him and his team psychologically in their triumph.

The biggest take-away for me from this article is that in addition to putting the work in, I need to spend more time on thinking about how to improve myself qualitatively and how to be smarter and more disciplined with my practices.

Weekly reading – 2nd October 2021

What I wrote last week

How our brains receive messages and some implications

Articles on Business

Bessemer Venture Partners struck gold with their investment in Toast, which went public recently. Their memo outlining the rationale such an investment is worth a read, especially for those who want to learn about Toast, those who want to learn Business and those who wish to go into Venture Capital.

Apple’s power move to kneecap Facebook advertising is working. A pretty biased article if you ask me. This is a complicated and nuanced issue, yet the author focuses more on the alleged impact that the privacy-centric features Apple introduced have on Facebook business. It does mention: “People are opting out of Facebook’s tracking for a reason: they no longer trust the company with their data after years of evidence they should not. But the context of Apple’s power move is important too.” What it fails to convey is that small businesses do have a problem when it relies on a single channel (Facebook, in this case) for survival. The article fails to articulate why it is Apple’s responsibility to take care of Facebook’s interest. Look, I totally agree that Apple does things out of its self-interest as all of us do. Most of the time, Apple masks its true intention with shiny marketing language as all companies do. But it’s strange to side with Facebook and its tactic to use small businesses as weapons in the war with Apple WITHOUT looking at the issue from the consumer perspective.

Google, Battling Amazon, Tries an E-Commerce Makeover to Win Back Advertisers.Amazon’s accelerating ad business has raised alarms inside Google, prompting Chief Executive Sundar Pichai to assure Alphabet’s board that rejuvenating its flagging e-commerce efforts is a priority, according to former Google executives. He must fix a mess of Google’s own making. The company has rebooted its digital shopping strategy at least four times over two decades and has had five leaders of its e-commerce operations in 10 years, the former executives said. “Google is almost like the living dead” in e-commerce, said Guru Hariharan, chief executive of CommerceIQ, an online-retail service provider. “No one goes there for shopping.”

How IBM lost the cloud. “Over and over again during the last decade, IBM engineers were asked to build special one-off projects for key clients at the expense of their road maps for building the types of cross-customer cloud services offered by the major clouds. Top executives at some of the largest companies in the country — the biggest banks, airlines and insurance companies — knew they could call IBM management and get what they wanted because the company was so eager to retain their business, the sources said. This practice, which delayed work on key infrastructure services for months or even years, was still happening inside IBM as recently as last year, according to one source.

Narrative Distillation. “Even today, the ability to get strong engineers to work on a problem engineers normally don’t want to work on remains a very strong formula for returns. You can increasingly see other top companies shifting to invest more in their company and founder brands. Product market fit is just narrative distillation for customers. It only makes sense that this same process is as crucial for investors and employees, too. And just as we have spent so many years reinforcing the primacy of founders focusing on product market fit—and the process of how companies converge on it—so too must founders take distilling their narratives for all audiences equally seriously.

BNPL Fund Flows
Neobank Landscape

Other stuff that I find interesting

History’s Seductive Beliefs. “Everything has a price, and the price is usually proportionate to the potential rewards. But the price is rarely on a price tag. You don’t pay it with cash. Most things worth pursuing charge their fee in the form of stress, doubt, uncertainty, dealing with quirky people, bureaucracy, other peoples’ conflicting incentives, hassle, nonsense, and general bullshit. That’s the overhead cost of getting ahead.

Ditching your commute: worth ~$40K/year in happiness

Our constitutional crisis is already here. “There was a time when political analysts wondered what would happen when Trump failed to “deliver” for his constituents. But the most important thing Trump delivers is himself. His egomania is part of his appeal. In his professed victimization by the media and the “elites,” his followers see their own victimization. That is why attacks on Trump by the elites only strengthen his bond with his followers. That is why millions of Trump supporters have even been willing to risk death as part of their show of solidarity: When Trump’s enemies cited his mishandling of the pandemic to discredit him, their answer was to reject the pandemic. One Trump supporter didn’t go to the hospital after developing covid-19 symptoms because he didn’t want to contribute to the liberal case against Trump “. A somber yet real read on the constitutional crisis that is unfolding right in front of our eyes.

This embroidery has a great talent in bringing aerial landscapes to life. Check it out!

Stats

Almost 25 million people played golf in the U.S in 2020

TikTok Claims the App Now Tops 1 Billion Monthly Active Users

How our brains receive messages & implications

Do you have trouble communicating your ideas or land your sales pitch? Do you understand why human attention is fleeting & difficult to maintain? Read on because this entry may give you an answer.

Before I move on, I want to give a shout out to the book “Pitch Anything” by Oren Klaff. Everything I am saying below is based on this really interesting book that can have a tremendous impact on readers’ professional and personal lives.

Humans brains drive communication as that’s where messages are developed, presented, received and processed. Anatomists will say that a human brain is highly complex, but for sake of simplicity, consider it having three main parts: Neocortex, Midbrain and The Old Brain or Crocodile Brain.

The human brain consists of Neocortex, Mid-brain and the Crocodile Brain
Figure 1 – The three parts of a human brain. Source: Pitch Anything by Oren Klaff

The Old Brain/Crocodile Brain is responsible for the initial basic filtering of all incoming messages. As a physically weak and small species compared to others in the wild, our ancestors, for their survival, relied on ability to detect threats early. This Crocodile Brain is the part that does that detection job and tells the rest of the body whether something is a threat or not. Over the ensuing thousands of years, while our human body evolved a lot with the time and communication became more sophisticated and nuanced than just “yeah it’s dangerous/no it’s actually friendly” responses, this Old Brain hasn’t, staying largely as primitive as it was.

Above this Crocodile Brain are Mid Brain, which “determines the meaning of things and social situations”, and the Neocortex, which evolved with our society over time and allows us to reason and think in complexity. Neocortex is where we develop ideas, reasons to back those ideas up and language to present . In other words, everything that we can’t do with Crocodile Brain.

You can already see the root-cause reason why communication fails sometimes. In any exchange, a message that is developed by the most advanced or smartest part of the brain is initially perceived by the 5-million-years-old most primitive part. If the amygdala part of the Crocodile Brain considers a message as threatening to our survival, it will essentially shut down the brain and ignore the message in question. If the message is too novel and complex, the Crocodile Brain, which is high-maintenance, dumb compared to the Neocortex and lazy as it doesn’t like to work a lot, will get bored and refuse to let it go to the upper parts of our brain.

That’s why professional writers say that the beginning of an article or paragraph is super important in persuading us to keep reading. We tend to lose focus and attention quickly if something is not simple, easy to understand nor concrete. Our Crocodile Brain will shut down if it is forced to process jargon, remotely unknown words or abstract concepts.

That’s why you hear some professional presenters want us to open every presentation with a bang, something make us laugh, something that we can relate to or something that is positively shocking yet concrete (like a statistics). If a presentation’s first few slides don’t have a shock-and-awe element, the Crocodile Brain will get bored and attention will wane.

That’s why when a chart or a table contains loads of data and information, it’s better to highlight the part where audience should focus on. Remember, the Crocodile Brain is lazy. If you ask it to scan a lot of information quickly, it will get bored.

That’s why a relatable and known brand in business is a highly valuable asset. The Crocodile Brain will be more at ease when it recognizes a familiar logo or a familiar brand name.

That’s why in some cases even well-intentioned & well-reasoned messages aren’t received. They never get to Neocortex (Your bosses are NOT that dumb to not understand you. They just don’t receive the communication the way we want them to).

In short, what makes pitches difficult is that our highly developed Neocortex has to persuade a lazy, primitive and dumb Crocodile Brain, which only likes clear, simple, straightforward and friendly ideas. All the communication tips or recommendations are aimed to do one thing and one thing only: to get through the Crocodile Brain and to the Neocortex without triggering fear. There are tons and tons of tips and tricks out there on improving communication. I won’t be able to get to them all in this post. I hope that I gave you the root-cause problem so that you can come up with solutions accordingly.

Weekly reading – 25th September 2021

What I wrote last week

Is BNPL replacing credit cards?

My thoughts on Visa’s new benefits for U.S Signature/Infinite cardholders

Articles on Business

When to Buy Now, Pay Later, and When to Just Pay Now. “Affirm doesn’t report payments on its four biweekly payment zero-interest loans, it said, or when consumers are offered a three-month payment option with no interest. Afterpay doesn’t work with credit bureaus at all. Sezzle Up explicitly informs users that it will report on-time payments to Equifax and TransUnion. Affirm doesn’t charge late fees, but late or partial payments can hurt your credit score, and may prevent you from using the service in the future. Sezzle Up also reports delinquencies. Klarna and Afterpay revoke access to their platform until payment is made. Both companies also charge late fees, tacked onto your next payment. Afterpay charges $8, or 25%, of the purchase, whichever is less, while Klarna charges a maximum $7, or no more than 25%, of the past due amount. Klarna said it will contact users to collect payment before charging a late fee.

This delivery app went above and beyond for its workers. Then Uber took over. Cornershop’s original operating model was more beneficial and friendly towards workers. After the acquisition, life became more challenging for drivers. It remains to be seen whether the regulation in Chile will allow workers to unionize and force Uber to recognize drivers as full-time employees. This is a classic case of conflicting interests between gig companies and drivers as well as of the important role that governments play in this conversation.

Why the University of Florida gets a ~$20m cut of Gatorade profits every year. A fascinating story on a wildly popular drink.

The Most Important iPhone Ever. “What makes the iPhone and perhaps Apple special is that it seems to deliver things that nobody asks for but then everybody wants while eschewing overshooting a performance dimension that a few demand but most won’t use. The tragedy of overservice and disruption is that if you don’t shift the definition of performance eventually you run out of demand at the top of the performance curve. That opens you up to “good enough” competition from below. Instead you need to re-define the notion of performance: compete on a new basis, reset expectations. That the iPhone can find new dimensions of performance and hence demand is effectively a solution to the innovator’s dilemma.”

PayPal Introduces Customers to the Next Digital Payments Era with the New PayPal App. “The new PayPal app will introduce new features including PayPal Savings, a new high yield savings account provided by Synchrony Bank, alongside new in-app shopping tools that will enable customers to earn rewards redeemable for cash back or PayPal shopping credit and uncover deals with hundreds of merchants. Additionally, the new app offers PayPal customers a single place to manage their bill payments, get paid up to two days earlier with the new Direct Deposit feature provided through one of our bank partners, earn rewards and manage gift cards, send and receive money to friends, family and businesses, pay with QR codes for purchases and redeem rewards in-store, access and manage credit, Buy Now, Pay Later services, buy, hold and sell crypto, as well as support causes and charities they care about.”

Other stuff

The tangled history of mRNA vaccines

Stats that may interest you

“One in five consumers made a purchase using a “buy now, pay later” service within the last 12 months.

One in six consumers who made a buy now, pay later service purchase regret doing so, commonly citing high interest rates, a lack of options to build credit, or making unnecessary or unaffordable purchases.”

There have been 47 startup venture deals in Africa in 2021 so far with the average deal size of $21 million

CPC on Amazon ads is $1.27 in August 2021, up from 86 cents from a year ago, according to a survey

31% of online grocery shoppers use PayPal, according to a new study by ACI Worldwide and PYMNTS

Fuel Wasted Due to U.S. Traffic Congestion in 2020 Cut in Half from 2019 to 2020

14% of U.S consumers said they switched to an iPhone from another operating system in the last two years, a report said

Is BNPL replacing Credit Cards?

BNPL is a red-hot phenomenon now both in the financial and retail worlds. Because most BNPL transactions are funded using debit cards or checking accounts rather than credit cards, one of the main debates is whether it is replacing or will replace credit cards.

When asked about BNPL and its impact on credit card balance, the CFO of Discover, John Greene, had this to say:

What we’ve seen to date is consumer appeal has been on the lower credit quality folks. I think there will be a natural evolution that, that will come up the credit spectrum. We’ve also seen in terms of the firm, some higher credit quality customers actually electing to do a buy now pay later transaction, whether it’s paid in for or something else.

We haven’t seen any discernible impact whatsoever. So where I would likely see that is through new customer acquisition, and that’s — that activity has been very, very robust. The balance sheet on existing customers here, so loans, that’s been impacted by stimulus and kind of how they’ve allocated their dollars within their household. Nothing from the details we’ve looked at that would indicate that buy now pay later’s impacting the portfolio.

Discover Financial Services – Barclays Virtual Global Financial Services Conference

Echoing that sentiment, Brian Wenzel, CFO of Synchrony Bank, said there was no visible impact from BNPL on their credit card portfolio:

Yes. So first, we have studied buy now, pay later impact over the last couple of years as it really has grown, and we partnered with an outside firm to kind of do a deep analysis really on the — at the customer account level to kind of understand the behavior patterns it has. So when we see it and the data we’ve seen, I think, 75% of the buy now, pay later accounts are funded out of a debit account, right? So the view is that they are — you’re using cash and taking what would be a debit transaction through the buy now, pay later. We then looked — and really the impact of our business, and we looked at it and talked a little bit about it in Q&A last week about the impact on our business.

Are we seeing anything that says buy now, pay later is impacting credit? And so when you look at it versus a cohort population of our Mastercard as well as our Dual Cards, we see a low penetration, and we have not seen any changes certainly with how they use credit with us. In fact, they are more engaged with us than our average customer. They generate more revenue for us, but we have not seen any change. So as we look at it — when we look at applications come through, go over some of these products are offering, we have not seen any change, discernable changes.

So when you think about the impact to us in credit, we don’t really see it yet. We think that there is a shift that’s happening probably from cash as a tender type. And I think this is where the merchants and our partners are taking a step back. They are saying, “Yes, we understand your offer, consumers like it. But is this driving incrementality for us, true conversion?

Synchrony Financial – Barclays Virtual Global Financial Services Conference

One may argue that the main business of Discover and Synchrony is credit card so they had to put on a brave face. They might have. But since they are publicly traded companies; which often require them to be truthful to investors, I’ll give them the benefit of the doubt. More importantly, what they say seems to be in line with what Marqeta sees in their 2021 State of Credit report.

Recently, Marqeta released a 2021 State of Credit Report with some interesting insights into how consumers in the U.S, the U.K and Australia use BNPL and credit cards. The report is based on a survey of 3,500 people across three countries. Here are my take-aways regarding consumer preferences in the U.S:

  • 78% of respondents in the U.S use credit cards while 25% actively use BNPL
  • 50% of U.S consumers use credit cards because of rewards, something that is still a weakness of BNPL providers but they are working on it
  • “60% of U.S. 18-25-year-olds said they made more than five purchases on their credit card online each week, compared with 19% of 50-65-year-olds”
  • “79% of consumers surveyed who use BNPL reported having three or less BNPL plans open at a given time, with 45% of people reporting their average BNPL purchase at less than $100.”
  • “Older consumers however, were decidedly against, with survey respondents 51-65 years old voting overwhelmingly (63%) in favor of the credit card-first status quo.”
  • “Americans were again slightly worse off, with 30% responding that they’d struggled to meet payments”

3 out of 4 U.S consumers use credit cards. 60% of the younger segment use their cards regularly every week while the older and wealthier crowd want to keep the status quo. That, to me, is the sign that the credit card business is still healthy and well, at least for now. By no means do I insist that BNPL doesn’t have a chance to overtake credit cards. More and more issuers such as Citi, Amex or Chase introduced the ability to put qualified transactions on installment plans (BNPL). All the major retailers in the country allow shoppers to have a payment plan. Even Apple is reportedly working on their own version of BNPL. Who knows what the future holds? But for now, all signs point to a healthy credit card industry holding their ground.

Some thoughts on new benefits for Visa U.S Credit Cardholders

Per Visa:

Visa Inc. (NYSE: V) today announced the addition of Shipt, Skillshare and Sofar Sounds – as exclusive benefits – for Visa’s U.S. Consumer Credit cardholders. Eligible cardholders can now get a free Shipt membership to receive free same-day delivery on groceries and household essentials on orders over $35; boost their creativity through Skillshare’s online learning community; and get access to presale tickets plus be eligible for a free concert ticket while discovering Sofar Sounds’ global community of music lovers.

Specifically, the benefits vary from one product to another. Signature/Infinite credit cardholders will be able to enjoy more benefits from Visa than other cardholders:

ShiptSkillshareSofar Sounds
InfiniteUp to three years of free Shipt membership (normally $99
 per year)
Free membership for three months plus 30% off annual renewalsSeven-day Visa Exclusive Presale to Sofar-presented events, plus a free ticket with each purchase of one or more tickets to a show during the presale window
SignatureThree months of free Shipt membership, then nine months of membership at 50% offFree membership for three months plus 20% off annual renewalsSame as Infinite
OthersOne month of free Shipt membership, then three months of membership at 50% offSame as Infinite but limit two free tickets per year

You may wonder now if you are qualified for Infinite or Signature benefits. Infinite cards are typically high-end premium cards with a significant annual fee such as Chase Sapphire Reserve or U.S. Bank Altitude Reserve Visa Infinite Card. Hence, if you are already paying in the hundreds of dollars a year for a credit card, chances are that you have an Infinite card.

It’s a bit easier to get a Signature card. Every year, issuers have campaigns to increase credit limit for qualified customers. There are two reasons for it: 1/ a higher credit limit can stimulate more spend from customers and 2/ a Signature card earns an issuer more interchange revenue than a Classic card. One of the key criteria for an upgrade is that customers must have less than $5,000 in credit limit, which is the threshold for a card to be considered by Visa to be Signature. After an upgrade, a Signature card will have more than $5,000 in credit limit.

Therefore, if you have a good credit history and standing, ask your issuer to increase your credit limit to above $5,000. Do check with them if it means you are getting a Signature card. Each issuer will have a different set of criteria to look at, in addition to credit score, to see if they will upgrade your account. There may be a hard/soft credit pull involved and as a result, your credit score may take a hit. However, if your monthly balance doesn’t change, a bigger credit limit means that your utilization would be lower and hence, your credit score would bounce back soon.

I don’t know the exact agreement between Visa and these companies, but if I have to guess, it won’t be Visa that subsidizes these benefits. Visa only earns a tiny piece from every transaction (like 0.2% give or take). The maths don’t add up for them to subsidize these benefits. On the other hand, the likes of Shipt, Skillshare and Solar Sounds have a perfect partner in Visa to market their services and acquire new users. Visa is the biggest card network in the world and in the U.S. It will be highly challenging to find an issuer that doesn’t have a Visa product. After this announcement, issuers will include the new benefits in their marketing: social media, direct mails, emails or websites. Credit card is a highly competitive and fragmented business. Every player pours millions of dollars into marketing and user acquisition every year. Hence, the names of Shipt or Skillshare will be more popular. I also think they will get more new users to the door. The difficult part is to make them stay. But hey, if you want to keep someone close, they have to be familiar with you first. This is about it.

For Visa, this is a good move to deepen their moat. Not only does the network have the biggest pool of merchants AND consumers in the U.S, but they also have the same advantage globally. While powerful, this moat doesn’t guarantee future successes. Visa has competitors circling. Apart from the traditional competitors such as Discover, Mastercard or American Express, there are new challengers on the horizon such as this startup Banked from the UK as well as alternative payment methods such as BNPL via ACH. This new slate of benefits is a plus for consumers as well as card issuers, at no additional cost. It is aimed to acquire new cardholders and keep them on the network as long as possible.

Weekly reading – 18th September 2021

What I wrote last week

The importance of reading footnotes

Interesting articles on Business

Facebook Says Its Rules Apply to All. Company Documents Reveal a Secret Elite That’s Exempt. The sentence “we’re not going what we say publicly we are” can be applied to any company to some extent. The problem for Facebook is that the trust-eroding incidents happen way too often for a company with grandiose ambitions. Facebook wants us to trust them and use some of the new services for Facebook Pay, but how can trust be formed when stuff like this happens? I am sure this won’t be the last time that Facebook got a PR black eye.

Intuit Agrees to Buy Mailchimp for About $12 Billion. “Mailchimp, established in 2001, is based in Atlanta and is still owned by founders Ben Chestnut and Dan Kurzius, according to its website. The company, which hasn’t taken any outside funding, began as a web-design agency and ran an email-marketing service on the side that later became its focus. Today it also offers other digital-ad services and customer-relationship- management tools. Already popular among small businesses, Mailchimp became something of a household name in 2014, when it advertised on the first season of the hit podcast “Serial.” The company now serves 2.4 million monthly active users, including 800,000 paying customers. Half of its customers are outside the U.S. It had about $800 million in annual revenue last year, a 20% rise from the year earlier.”

Square Offers Sellers and Consumers a New Checkout Experience with Cash App Pay. It’s a natural progression in my opinion. Square is competing with PayPal to be the Super App for consumer financial needs as well as the go-to partner for commerce. PayPal has enabled payments by QR Code and mobile wallet for a while. Now, Square and Cash App have it too.

Facebook Knows Instagram Is Toxic for Teen Girls, Company Documents Show. “For the past three years, Facebook has been conducting studies into how its photo-sharing app affects its millions of young users. Repeatedly, the company’s researchers found that Instagram is harmful for a sizable percentage of them, most notably teenage girls. Expanding its base of young users is vital to the company’s more than $100 billion in annual revenue, and it doesn’t want to jeopardize their engagement with the platform. The features that Instagram identifies as most harmful to teens appear to be at the platform’s core. The research has been reviewed by top Facebook executives, and was cited in a 2020 presentation given to Mr. Zuckerberg, according to the documents.” Guess what Facebook chose to do? Nothing. Absolutely nothing.

Adobe jumps into e-commerce payments business in challenge to Shopify. The race to be the force that powers eCommerce features some of the biggest firms in the world: Amazon, Walmart, Shopify, PayPal, Adobe and Square. If you notice, the first three have fulfillment capabilities. PayPal bought Happy Returns. So it’s only a matter of time the latter three build out their own fulfillment muscle.

Amazon Is Doing It. So Is Walmart. Why Retail Loves ‘Buy Now, Pay Later.’ “Shoppers spend more at Macy’s when they use installment plans offered through Klarna Bank AB, Macy’s CEO Jeff Gennette said on a recent earnings call. Klarna also is helping the retailer attract younger customers, he said. A desire to boost loan approvals was among the reasons Walmart in 2018 decided to end its decadeslong credit-card partnership with Synchrony Financial. Citigroup Inc. saw a sevenfold increase in the dollar amount of credit-card purchases converted to installment loans in July, compared with the same month a year prior, said Gonzalo Luchetti, head of Citigroup’s U.S. consumer bank.”

Other stuff I find interesting

One Woman’s Mission to Rewrite Nazi History on Wikipedia. I hope down the line, years from now, there will be folks who come across what Ksenia Coffman did and be thankful that she did. Same way as I do today.

What Makes Work Meaningful — Or Meaningless

Stats

“Close to half of all new U.S. gun buyers since the beginning of 2019 have been women”

55% of shoppers start their 2021 holiday season shopping before Thanksgiving

Source: JungleScout

When reading reports, read the footnotes!

It’s not natural for most people to pay close attention to the small fine print in the footnotes. When I was at school, nobody told me about it. But in some cases, what the footnotes contain is very valuable and can change the information that goes before it. In this post, I’ll give you an example of how a $27 billion publicly traded company (Synchrony Bank) manipulates numbers to their advantage and how paying attention to the footnotes can help you jump through that manipulation.

Per Synchrony’s Investor Day Presentation

Synchrony shows their acquisition cost and customer lifetime value of their co-branded credit card portfolio

The point of the upper slide is that Synchrony Bank is more efficient than its peers in acquiring new and more valuable accounts. Well, there are some caveats. First, it may well be true that it costs Synchrony less to acquire new co-branded accounts. They partner with some of the most popular brands such as Amazon or PayPal. They don’t need to send out a lot of direct mails or run plenty of digital ads. However, I strongly suspect that they will have to pay these brands a high finders fee as in every time an account is opened, the brands receive a fee. In these cases, I won’t be surprised if the fee is north $100. Technically speaking, the finder fee isn’t classified as an acquisition expense, but to ordinary audience who doesn’t work in banking, the net financial impact isn’t clear from this presentation.

Second, the comparison data is from Argus. Argus collects data from different issuers in the country and shares back to each participant its benchmark’s data. It can be a very useful tool as management teams. The main drawbacks of Argus are 1/ as the identity of the participating issuers is kept anonymous, one doesn’t really know exactly who they are compared against; 2/ Argus data is on a quarterly basis and usually lags behind by 90 days. In other words, since we are not wrapping up Q3 2021 yet, the most up-to-date data in Argus should be for Q1 2021, but I know from personal experience that as of this writing, benchmark data is only up to Q4 2020. My point is that it’s unclear from the presentation that Synchrony is comparing data from the same period.

Last but not least, the way they calculate Customer Lifetime Value is a bit flattering. The footnote, if I interpret it correctly, states that they look at the CLTV of accounts that are on the books for 10 years. In the credit card world, if a customer stays with you for a long time, usually it means that customer is more valuable than shorter-tenured ones. Hence, it seems Synchrony looks at the CLTV of only some of their best customers, instead of the general population of their co-branded cards.

I’ll give you another example of the importance of footnotes. From the same presentation by Synchrony:

Synchrony tries to show how they manage risk

The point that Synchrony is trying to make here is that they grow their portfolio responsibly by curtailing the riskier customer group (subprime, which include the Low and Medium). The confusion comes from how Subprime is defined. In their explanation, Synchrony considers anybody with VantageScore less than 650 to be Subprime. According to The Balance, Vantage Score 3.0 and 4.0 use the same tiers as FICO score and Subprime refers to people with less than 600 in Vantage Score. To the Consumer Financial Protection Bureau, Subprime includes anyone with less than 620 in credit score. To Experian, the threshold is 670. The lack of a universal definition of Subprime means that Synchrony is likely not trying to manipulate the audience in this particular case. Rather, if somebody wants to use this information, they should really need to look at how Synchrony defines Subprime. Otherwise, any comparison would be flawed.

These are just two small examples of how critical information is sometimes buried in the footnotes. There are plenty of other examples. Everyone that publishes something has an agenda and employs tactics to highlight such an agenda and tuck away what can seed doubt. We should strive to be vigilant and mindful while reading others’ reports.

Weekly reading – 11th September 2021

What I wrote last week

I did a quick review to show which remittance services you may want to use to transfer money to Vietnam or India

My reservation on PYMNT’s study on Apple Pay’s usage in stores

Interesting articles on Business

Why the global chip shortage is making it so hard to buy a PS5. In the silicon manufacturing process, for the most advanced tool inside a fab, typically you’ll have hundreds of different tools. Actually in a large fab, like one you might see at TSMC (Taiwan Semiconductor Manufacturing Company), you’ll have thousands of these tools. And these tools are big machines that process these wafers and do various things. And most tools cost, starting with a couple of million dollars, to the most expensive tools are in excess of 150 million euros. In Asia, they’ll build these things in a year. They’ll move in equipment in the second year, get it qualified, running, by the end of the year. In the US, or in the West, it takes a lot longer, because we don’t have the same mentality they have in Asia. We’re going to do all the permitting, all the hearings, and all that stuff. So it wouldn’t surprise me if it took 50 percent longer to twice as long. Now, let me tell you why that’s a problem. Because to your second question, a modern fab these days, one of the closer-to-leading-edge ones will cost you $10 billion-plus for the smallest efficient scale, and a really efficient scale will probably cost you closer to $20 billion. Think about how much depreciation that can generate. In Asia, the mentality is every day, every hour this thing isn’t running costs me tens of thousands, hundreds of thousands, sometimes millions of dollars. I’ve been in Asia on Christmas Day, and there are people out there with jackhammers and pouring concrete because it was like, “Man, every minute this thing gets done sooner, we can start generating cash.” We do not have that mentality in the West.”

Companies Need More Workers. Why Do They Reject Millions of Résumés? A gap on a resume should not be used to disqualify a candidate immediately. Many need to take a break, whether it was because a family member was sick or it was for their mental health. A less-than-stellar historical record shouldn’t disqualify a candidate either. We all make mistakes and we all deserve chances. Plus, if someone has the necessary skills, does it matter where they got those skills? Does it matter if they don’t have a degree? We use software to evaluate hundreds, if not thousands, of applications a year. It’s understandable. But I do believe that we can write better software to accommodate hiring needs and give people chances.

The surprisingly big business of Library E-books

PayPal To Acquire Paidy. PayPal agreed to acquire Paidy, a BNPL provider in Japan, for $2.7 billion in cash. Paidy reportedly has 700,000 merchants and more than 6 million users. As PayPal itself already has more than 400 million users, this acquisition isn’t likely about inflating the user base. The second reason is likely capabilities. Paidy, which shoppers can use without creating an account first or using a credit card, has a proprietary machine learning models to evaluate credit worthiness of consumers. In other Asian countries, it’s not uncommon for shoppers to pay cash on deliveries for online orders. Perhaps this is something that PayPal wants to replicate in other Asian markets.

Australia’s Top Court Finds Media Companies Liable for Other People’s Facebook Comments. The Court’s argument is that media companies post articles to stimulate conversations and engagement through comments. Hence, they should be liable for such comments. I don’t think that line of reasoning totally lacks solid grounds. I mean, a company’s Facebook page is essentially its property where it has the ability to curate (with Facebook’s help, of course) and it should have some responsibility for defamatory comments taking place there.

Source: CNBC

Stuff that I found interesting

This wildly reinvented wind turbine generates five times more energy than its competitors. This proposal, if materialized, can generate power for up to 100,000 households with one station while reducing the waste that is usually seen with the traditional turbines.

A great series on the study of obesity

Stats that may interest you

Mobile transactions in Vietnam are expected to increase by 300% between 2021 and 2025

Apple has around 52% to 57% of the mobile game transactions market (page 138)

Even though Apple doesn’t have a separate P&L for its line businesses, the Court found that the App Store’s operating margin is approximately 75% (page 145)

Truths about that 6% of People with iPhones in the US Use Apple Pay In-Store

A new article from PYMNTS claimed that only 6% of iPhone users use Apple Pay in stores.

As someone who works in the credit card industry and a follower of Apple, I have a few points to make with regard to this article. Per PYMNTS.com

Seven years post-launch, new PYMNTS data shows that 93.9% of consumers with Apple Pay activated on their iPhones do not use it in-store to pay for purchases. That means only 6.1% do. After seven years, Apple Pay’s adoption and usage isn’t much larger than it was 2015 (5.1%), a year after its launch, and is the same as it was in 2019, the last full year before the pandemic.

That finding is based on PYMNTS’ national study of 3,671 U.S. consumers conducted between Aug. 3-10, 2021.

First, I am naturally skeptical of surveys. To properly design and execute a representative survey whose results you can use to project trends both an art and a science. In other words, it’s difficult and tricky. Without knowing the specifics of the surveys that PYMNTS used over the years, I can’t really say for sure that their data is 100% accurate or representative. For instance, did these survey represent the U.S population demographically? We all know that older folks tend to be more reluctant towards technology than the younger crowds are. What if some of these surveys were more skewed towards Baby Boomer or late Generation X?

With that being said, let’s assume that these surveys were properly designed and conducted as there is no reason to believe that they weren’t either. Still, there are some important context points that I’d love to discuss. The U.S is traditionally slow in adopting tap-to-pay payments, compared to other developed countries in Europe. Here is what Visa had to say at the RBC Capital Markets Financial Technology Conference back in June 2021:

Canada is almost 80% of all tap to pay of all face-to-face transactions, almost 80% are tap to pay. In Europe, it’s over 80%. Australia, it’s almost 100%. Across Asia, it’s over 50%. And in the United States, it’s now over 10% from basically a dead stop a couple of years ago. So right now in the U.S., we’re a bit over 1 in 10 transactions with tap to pay, 1 in 10 of all face-to-face transactions of tap to pay. About 350 million cards, last time I looked, 268 of the top 300 merchants, 23 of the top 25 issuers are issuing contactless.

What Visa essentially said there is that mobile wallet transactions in stores basically didn’t exist two years ago. The low adoption isn’t confined to Apple alone. It’s applied to all mobile wallets on the market. Hence, it’s not a surprise that only a small number of consumers used Apple Pay in stores. Since then, the tap-to-pay transaction share has increased a lot, but from contactless cards, not from mobile wallets.

The issuer where I work only introduced contactless cards in August 2019. The roll-out was gradual as we enabled the feature only on new cards and renewal replacements. Before August 2019, we saw contactless transactions make up only a low single digit percentage of all transactions. After the change, there was an increase in contactless transaction share, but it mostly came from contactless cards (as in you tap a plastic card against a card reader). It makes sense for several reasons: 1/ Using a plastic card, whether it’s debit or credit, is a habit. It’s unreasonable to expect consumers to change their habit overnight; 2/ To some consumers, it’s just not convenient to take out a phone to pay. During the pandemic, we all had to wear a mask. That contributed to the inconvenience as most Apple Pay transactions have to be approved by using Face ID (few iPhones in circulation are too old for Face ID); 3/ Sometimes, the card readers just don’t accept mobile wallet transactions. I personally experienced it myself several times when a technical glitch forced me to pull out my wallet and use my plastic. Even when card readers are to become more reliable & friendlier with mobile wallets and the pandemic closes out soon, the current habit of flashing a plastic card in stores won’t go away any time soon. It’s a painstaking process that will take quite a while and it’s not even a guarantee that it will change significantly at all.

The low adoption of mobile wallets in general leads me to my next point: how is Apple Pay compared to other wallets? The article by PYMNTS did bring up some comparison between Apple Pay and its peers:

Today, Apple Pay remains the biggest in-store mobile wallet player, with 45.5% share of mobile wallet users. Over the last seven years, the total amount of Apple Pay transactions at U.S. retail stores has increased from an estimated $5 billion in 2015 to $90 billion in 2021.

Although that growth is commendable, it is largely the result of more people with iPhones upgrading to newer models and more merchants taking contactless payments, both leading to a general increase in retail sales – 12.9% greater in 2021 than 2019. But to be successful, innovation must solve a problem, fix a source of friction or improve an experience that is so painful that consumers or businesses are motivated to switch.

The article is so focused on Apple Pay that it missed two important points. One is that Apple Pay isn’t Apple’s main business. It may well be in the future, but it surely hasn’t been since 2014. Why is it Apple’s fault that the adoption of tap-to-pay payments in the whole U.S is low? It’s not really reasonable to expect Apple to go all out and force a new habit on consumers when there is little financial reward. The other miss is that if only 6 out of 100 people used Apple Pay, which captured 92% of all mobile wallet payments using debit card in the U.S in 2020, what does it say for others? 1% or lower? Yes, 6% adoption is low for the most valuable company in the world, but in the grand scheme of things and in comparison with its peers, that figure suddenly looks significantly different, does it?

The last point I want to make is that it is NOT comprehensive and helpful to look at the mobile wallet share of in-store transactions. What about consumers who use Apple Pay or other wallets for online transactions? How many transactions do Apple users make using Apple Pay on their phones or through the App Store? How many transactions on web pages are through Apple Pay? Said another way, is Apple Pay more suited for online transactions than for in-store payments? And PYMNTS is judging Apple Pay on something that it’s not meant to address in the first place?

In short, I believe that this article from PYMNTS is useful to some extent as we have a reference with regard to in-store mobile wallet payments. However, the entire write-up lacks important context that can lead readers to misguided conclusions. My hope is that the whole conversion is more balanced now with what I mentioned above.

Disclaimer: I own a position on Square, Apple and PayPal.