Apple Q2 FY2022 Results

On Thursday, Apple announced the results of their Q2 FY 2022. Overall, the company recorded almost $97.3 billion in revenue the last 90 days, a record for Q2 in Apple’s history. That means they generated more than $1 billion a day. The 9% YoY growth is already on top of the 54% growth last year. To put it a bit more in perspective, only 26 companies in the S&P 500 had more revenue in the whole year of 2021 than what Apple made in this quarter. It’s also worth noting that these numbers were affected by the supply chain constraints. Just really spectacular! While YoY growth rates have been declining, it’s not a surprise given the rule of big numbers. Plus, this year will see some hardware upgrades that can catapult Apple’s revenue to new heights.

Product, Service and Overall Margin
Figure 2 – Product, Service and Overall Margin
Apple 4-quarter rolling average revenue
Figure 1 – Apple’s YoY Revenue Growth & Rolling Average Revenue

While Services still only makes up 20% of the company’s revenue, its gross margin is a spectacular 73% due to higher sales from advertising, the App Store and cloud services. I suspect this trend will continue in the future. It costs Apple little to offer cloud storage and how many Apple device owners who love taking photos and videos yet are limited by the free storage don’t have an iCloud subscription? Apple Care is a warranty program that gives a bit more assurances to device owners. Given that Apple products last a very long time and most customers are careful with their devices, Apple Care is a very profitable service for the company. The iconic tech giant recently launched Apple Business Essentials, which is similar to Apple Care, but for small businesses. The new service has a lot of potential and will be a great contributor to the company’s margin. Last but not least, advertising. It’s not a coincidence that every popular platform wants to have an ads solution. The demand is always there and the margin is high. Apple is still in the early stage of monetizing traffic to the App Store; therefore, will undoubtedly fine-tune its ads operations so that it will keep raking in profitable dollars.

Apple Paid Subscriptions
Figure 3 – Apple Paid Subscriptions

In the last quarter, supply chain constraints still badly affected iPad, making it the only major business segment of Apple without a YoY growth. Wearables and Services haven’t had a down quarter in the last three years. In fact, growth has been in double digits. Mac showed an impressive 15% growth on top of a 70% increase last year. According to Apple’s CFO, “we had a March quarter record for upgraders, while at the same time, nearly half of the customers purchasing a Mac were new to the product”. iPhone, led by the iPhone 13 line-up, grew by 5% after recording 66% increase last year. The company estimated that the lockdown in Shanghai will impact revenue by $4-8 billion in Q3. Hence, the winning streaks of some segments may likely come to a halt in 90 days, but since demand is very strong for Apple products, the company has reasons to be confident in the long-term health.

Apple's Business Segments' YoY Revenue Growth
Figure 4 – Apple’s Business Segments’ YoY Revenue Growth

Regarding geographic segments, Americas is a bright spot with YoY growth of 19%, better than management’s expectations. Europe was adversely impacted by the pause in Russia for a month. China is still Apple’s 3rd biggest segment, but the company warned that Covid-related restrictions would affect demand, at least for Q3 FY2022. Japan and Rest of Asia Pacific felt the impact of unfavorable foreign exchange rates.

Apple Geographic Segments' 4-Quarter Rolling Average Revenue
Figure 5 – Apple Geographic Segments’ 4-Quarter Rolling Average Revenue

Overall, it is another great quarter from Apple despite all the macro challenges. It is proof that the underlying strengths of the business are still intact and goes to show the calm and competent leadership of the management. Zoom out and you will see that there is no other company that can rival Apple in terms of product and service portfolio, the global scale and the customer loyalty. There are challenges and uncertainty ahead, including the war between Russia and Ukraine, Covid-related restrictions in China, the supply constraints, especially silicon shortages, and unfavorable exchange rates. Nonetheless, I am confident Apple will navigate through such challenges deftly and come out stronger.

Disclaimer: I own Apple stocks in my portfolio

Weekly reading – 30th April 2022

What I wrote last week

Thoughts on Buy With Prime

Business

Starbucks Is Having an Identity Crisis. Can Howard Schultz Fix It? 70% of Starbuck’s orders are to-go. The popularity of their mobile app is magnificent, yet it goes against the identity that Howard Schultz envisioned when he bought the brand. He wanted Starbucks to be the 3rd place that people frequent in addition to work and home. Starbucks needs to decide on its future identity and positioning. Because if most orders are picked up at drive-through, what the hell are the stores for?

Will Ford’s new truck finally make Americans buy electric? “Surveys, both by the company and independent analysts, have found that customers for the F-150 are typically younger, richer, more urban than the truck’s traditional mainstream buyer – and in many cases have never owned a truck before. Like the rest of the industry, the company is contending with shortages of key computer processing chips, batteries and other materials that have held back production – and challenged the company’s effort to keep the starting price at about $40,000 (£31,500)”. It doesn’t sound very easy, does it?

Netflix’s Battle for Asian Subscribers Pits It Against Rich Rivals, Hundreds of Local Upstarts. The challenge for Netflix in Asia is multiple-fold. First, it has to keep the subscription prices low while needing to spend millions of dollars on local original content. Second, its competition is nothing but fierce and they are willing to keep the prices low to retain customers. Some such as Disney or Amazon are willing to splash a big sum on sports such as IPL to woo local viewers in India. Netflix hasn’t shown interest in following suit so far. The company once thought invincible at least in the streaming world doesn’t look invincible, does it?

Kard, a fintech that helps credit card issuers build custom reward programs by brands. “The company works with roughly 30 issuers today, representing 10 million consumers, Mackinnon said. It helps process about 60 million transactions per month, and has seen revenue grow 10x over the past year, according to Mackinnon, though he declined to share a specific revenue figure. He describes the business as a two-sided marketplace for rewards, with merchant partnerships on the supply side and card issuers on the demand side. For issuers, the API is powerful because it “connects them to merchants, brands, retailers that essentially are the funding vehicle for any of their rewards,”

Netflix’s Big Wake-Up Call: The Power Clash Behind the Crash. Cindy Holland seems to be the one person who wants to steer Netflix to adopt Apple TV+’s strategy. Nobody can guarantee that if Cindy hadn’t left, Netflix wouldn’t be in where they are today. She could have stayed and Netflix could have been just as bad or worse. But it’s baffling to let go the relationship-building wizard that forged a bond with the studios and not find a replacement. I have to say, though, that when Netflix was dominating the streaming market and a darling of Wall Street, you didn’t get to read these pieces. You were served with articles on how great Netflix and its culture were. As soon as the company’s fortune plummeted, critical reporting show up like mushrooms after rain.

Vietnam’s VinFast takes the EV battle to Tesla with U.S. push. The pace of development at Vinfast fits the culture of quick results and brand ambition at Vingroup. That’s how they always do things. That approach doesn’t necessarily come with the best quality of products or services. Hence, the question becomes: do they think up a thorough plan to penetrate and dominate the EV market in the US? Every car maker in the world wants to succeed in the US. It’s home to Tesla, which has an enormous scale advantage. It’s home to Ford, which is always a familiar brand in the mind of Americans. There are always Volswagen, Hyundai, Kia, Subaru, Toyota, Mazda etc…Such a list of world-famous brands indicate nothing but fierce competition. The first movers also have great scale advantage. List cars at too high a price and Vinfast won’t make enough sale. List them too low and the company wont have any profit. Whether Vinfast can weather the initial storm to reach critical mass remains a giant question mark.

Inside the first suburban Amazon Go store. I have a nagging feeling that Amazon is playing a really long game here and soon enough in the future they will become a major grocery chain

Other stuff I find interesting

Why didn’t our ancient ancestors get cavities? It is a very interesting theory that our transition to agriculture is the likely cause of our cavities

Women and girls have to pay for water with their body and dignity. The struggle people in poor countries around the world has to face makes it even more incredulous whenever folks in the US complain about trivial problems. I don’t know like having to wear a mask during Covid or taking life-saving vaccines.

Stats

According to the founder of TSMC, it costs 50% more to produce the same chips in the US than in Taiwan

80% of US consumers use BNPL to avoid credit cards, according to Experian

According to Mastercard, global first-party fraud which refers to a legitimate online purchase being disputed after the fact amounts to $50 billion

Online retail sales in India is estimated to reach $85.5 billion in 2025

Banks and credit unions pulled in more than $15 billion in overdraft and related fees in 2019 and $12 billion in late credit card fees in 2020

Google Pay has 150 million users across 40 countries, as of April 2022

Thoughts on Buy With Prime

A few days ago, Amazon made a big announcement on Buy With Prime (BWP). Prime benefits loved by thousands of shoppers, including free & fast delivery, easy return and quick checkout, have been restricted to Amazon.com. That’s how Amazon persuades millions of shoppers to pay $10/month for the privileges. Now, imagine you can enjoy all of those benefits on other websites, not just Amazon. That’s what the new service is all about.

For Prime shoppers, there is virtually nothing that needs to be done beforehand. Once you come across eligible products from merchants that participate in BWP, you just need to repeat the usual checkout process on Amazon.com. There is no additional sign-up. At first glance, everything about BWP looks good, except that here are two things that concern me. The first is return. The language from Amazon reads that only some BWP orders, not all, are eligible for return. To me, the name Buy With Prime insinuates that all products enlisted in the program can be returned hassle-free. As a result, what does it mean that only some are qualified? What about the rest? How do I know which products are returnable and which aren’t? The other thing that gives me pause is that if there is an issue with my BWP orders, I have to contact the sellers. My experience with Amazon Prime so far has been great. I don’t have much to complain about. On one or two occasions when I needed to inquire about my orders, the Customer Service from Amazon was helpful and great. However, I wonder if the same level of excellence can be expected from BWP merchants. In case there are unresolved issues, will Amazon help me? What kind of purchase protection can I expect?

Buy With Prime. Source: Amazon

For Amazon, this is a hit-multiple-birds-with-one-stone move. First, expanding Prime to other online stores brings more selection to shoppers, enhancing the value of Prime. The more valuable shoppers find Prime, the stickier the membership will be and the more grip Amazon has on these coveted shoppers. Such influence will translate into bargaining power in negotiations with merchants and suppliers. Second, this service will help Amazon get the most out of their fulfillment capability. Any merchant wishing to participate in BWP does not need to sell on Amazon.com but must have their orders fulfilled by Amazon. The giant retailer has spent a fortune on building out their fulfillment capacity. In the 2021 shareholder letter, the CEO Andy Jassy wrote:

We spent Amazon’s first 25 years building a very large fulfillment network, and then had to double it in the last 24 months to meet customer demand. We’d been innovating in our fulfillment network for 20 years, constantly trying to shorten the time to get items to customers. In the early 2000s, it took us an average of 18 hours to get an item through our fulfillment centers and on the right truck for shipment. Now, it takes us two. 

Given the level of investments, it’s understandable that Amazon wants to maximize the utility of these fulfillment centers. The more orders the centers process, the higher their utilization and the higher the ROI. If you were Amazon, would you want the same thing? Third, off-Amazon purchase data! Amazon knows the behavior of Prime customers, based on their purchase history on Amazon.com. Nonetheless, they don’t know what these customers buy outside of its online store. The company tried to remedy this issue through initiatives such as Amazon Shopper Panel. With BWP, they can capture purchase data on other online stores and use it for their benefits such as private label launches, targeted ads or fine-tuning product recommendation.

For merchants, there are pros and cons from using BWP. Obviously, the Amazon Pay checkout option can help reduce cart abandonment. That’s the sales pitch that we often see the likes of PayPal or Apple Pay sing. Having Amazon take care of fulfillment is attractive to merchants that do not have the means to set up their own logistics. It’s also great for merchants to own the relationship with shoppers, instead of relinquishing it to Amazon entirely like before. While such benefits carry a great deal of appeal, merchants need to be aware of the risks related to BWP. Firstly, the fees paid to Amazon will cut deep into the margin of these merchants. Secondly, they may open the gate to the henhouse for the fox by letting Amazon know what Prime shoppers order on their website. It’s widely reported that some sellers thrived at first on Amazon.com, only to falter and disappear later when Amazon introduced similar products. Who is to say that it’s not a possibility in this case? In addition, BWP merchants have to be responsible for marketing. The greatest perk of being on Amazon.com is that sellers are almost guaranteed traffic. BWP just takes care of checkout and fulfillment. It doesn’t bring valuable traffic. With the reduced margin, due to Fulfillment by Amazon fees, can merchants afford the marketing expenses too?

The introduction of BWP can be a threat for the likes of PayPal, Shop Pay or Apple Pay. Apple Pay and Shop Pay don’t have a fulfillment solution attached to the checkout button. PayPal does with Happy Returns, even though its scale can’t be compared to Amazon’s. Merchants, especially small ones, will consider BWP because they don’t want to be distracted by all the shipping headaches. The adoption of BWP will certainly decrease the amount of transaction volume processed by PayPal, whose revenue is transaction-based. As a consequence, BWP is not welcoming news for PayPal. To remain competitive, PayPal needs to continue offering more values to merchants and simplify the checkout process as much as possible. In this game, having one more click than your rivals is like being slower by one second in F1. Moreover, they should be wise to point out the threats that Amazon can pose with BWP and hope that they can scare merchants into avoiding BWP. After all, few things are as persuasive as fear.

Weekly reading – 23rd April 2022

Business

The Pandemic Was Supposed to Push All Shopping Online. It Didn’t. A great business should pass a macroeconomic test, even one as challenging as the pandemic, without losing its competitive advantages. Take Apple for example. The pandemic gave the company a boost as consumers were more interested in Macs and iPads. But the stay-at-home restrictions also limited traffic to its stores and affected adversely how employees interacted. Nonetheless, Apple’s business grew from strength to strength in the past two years. On the other hand, firms with unclear competitive advantages may have received a boost from Covid-19 but came back down to Earth when things gradually returned to normal. We see that trend in Zoom, Peloton or companies mentioned in the article. Businesses shouldn’t think about it as online vs offline. It’s about how to stay agile to the unexpected challenges and deliver values to customers no matter what.

Amazon’s 2021 shareholder letter. If you think Andy’s writing style is different from Jeff’s, well, it’s because they are two different people and it’s not a surprise. Andy’s primary message in the letter is that Amazon remains a Day 1 company that stays Day 1 by investing in the future and being willing to experiment, fail and iterate. I love the Minimum Lovable Product instead of Minimum Viable Product.

Quartz Drops Its Website Paywall in an Unorthodox About-Face. Quartz specifically said that the decision to go paywall-free results from the analysis of internal data. They found out that readers were more engaged if they could access the content through newsletters and appreciate the value that the publisher brought. They could be wrong about this, but there is nothing wrong with making an informed decision

Charlie Rose’s interview with Warren Buffett. There are always nuggets of wisdom whenever Warren speaks. There are two I specifically love from the interview: 1/ whenever he makes an investment, it’s about the business, not the stock. 2/ Even though Rockefeller was immeasurably richer than most people on this planet, we have a much higher quality of life than he ever did. Would you trade that off?

Kroger Is Building a Grocery Ecosystem for the Future

China’s Covid-19 Restrictions Threaten Economic Recovery. If China continues their insane and stubborn Zero Covid policy, does that mean a recession for the US economy is on the horizon?

An interesting write-up on Divvy

EU approves groundbreaking rules to police Big Tech platforms. It’s great to ban targeted ads on minors or manipulative practice to increase engagement. It’s also really important to police content and fight disinformation. However, a million dollar question remains: how? The devil is in the details. Which information should be policed and removed? Would over-reaction from platforms curb the freedom and diversity on the Internet?

Other stuff I find interesting

Tokyo’s Manuscript Writing Cafe only allows writers on a deadline, and won’t let them leave until finished

TurboTax’s Fight Against Free Tax Filing. Because I was in Vietnam for two months up till the deadline to file tax returns, I had no choice but to use TurboTax to fulfill my obligation. I ended up paying $134 for the service. It’s just plainly ridiculous that some private companies can successfully do this to thousands of consumers and the US government hasn’t been able to do anything about it

Web scraping is legal

Inside the fierce, messy fight over “healthy” sugar tech. A fascinating story of a talented and ambitious Chinese American making great discoveries on sugar tech and getting arrested for defrauding the US government

Stats

Food-at-home CPI jumps 10% year over year in March

According to Bank of America, Zelle transaction volume reached $65 billion in Q1 FY2022

Grocery store sales up over 9% for March

According to PYMNTS.com, Fifteen percent ($91 billion) of all the money U.S. consumers spent on clothing and accessories went to Amazon in 2021

U.S. retail sales of dog and cat treats were expected to reach $9.87 billion by the end of 2021

Weekly reading – 16th April 2022

Business

Pricey Jet Fuel Punishes Airlines and Passengers. “Jet fuel, a kerosene-based product akin to diesel fuel, has roughly doubled in price since last April across the U.S., according to S&P Global Commodity Insights, while gasoline has risen about 45%. A fall in exports of Russian diesel in recent weeks has driven Western refiners to shift resources from jet to diesel production, leaving jet fuel undersupplied, S&P Global Commodity Insights analysts said.”

Apple’s privacy focus means fewer app features, slower development, say company’s own engineers. The skeptics or critics that say Apple’s focus on privacy is self-serving should read this article. Of course, when you run a business, I believe your MO should be to maximize revenue and profit. However, what differentiates one company from all the others is its ability to align such a goal with actions that also benefit other stakeholders. In this case, Apple has repeatedly proven that they align their business with user privacy. There are things that the company could have done to further its business interests, but those things were put on shelf because they went against their promise to users on privacy. If that’s not proof of Apple’s intention, I don’t know what is.

Wedgewood Partners First Quarter 2022 Client Letter. Some great commentaries on a few companies such as Meta, PayPal or First Republic Bank.

Amazon sellers face 5% fuel and inflation surcharge to offset rising costs. What sellers get from platforms such as Amazon is traffic, eyeballs and business. However, such dependence also means that in the times of inflation, it becomes more expensive for sellers to generate revenue and profit. You can only pass on the costs to consumers so much before business is lost.

The Chips That Rebooted the Mac. A nice piece by WSJ on Apple’s decision to develop its own chips. Business students should really be encouraged to study Apple for business lessons and insights. The company is a great case study in terms of customer orientation, platform development, business strategy, execution, supply chain, pricing and marketing. The move to rid itself of dependence on Intel and decide their own future is a masterpiece

Intangibles and Earnings. Improving the Usefulness of Financial Statements. Accounting is the language of business. Some companies use sophisticated accounting practices to often hide the true state of their businesses. This article walks readers through how to sort of earnings, investments and the implications on valuations.

Other stuff I found interesting

Why Germany Won’t Keep Its Nuclear Plants Open. It is baffling to me that Germany decides to favor other sources of energy and electricity over nuclear. If there is EVER any silver lining, in addition to laying bare what we should know about Putin already, it’s that Germany starts to move away from Russia and the dependence on its gas and oil

America’s highest earners and their taxes revealed. It’s an informative read, but by no means do I mean that billionaires are legally guilty for successfully exploiting the loopholes to reduce taxes. It’s the lawmakers’ job to make sure high earners pay their fair share AND keep the attractiveness of the US as a business environment. On the other hand, rich folks want to keep as much money as possible. The fact that they can do so without being in jail shows who successfully did their jobs

An example of how China uses technology, surveillance and facial recognition to inflict human rights abuses on its own citizens

Stats

Digital ad revenue in the U.S. jumped 35% to $189 billion last year

Fintech app installs grew by 35% YoY in 2021

In March, total U.S. online grocery sales pulled back 6% to $8.7 billion versus March 2021’s record high of $9.3 billion

Weekly reading – 9th April 2022

Business

From Belonging to Burnout, Five Years at Airbnb. An interesting story from a former employee at Airbnb on the culture and how full-time staff and contractors are treated differently.

Instacart Faces Turbulence After Pandemic Boom in Grocery Delivery. Covid-19 might be a great business boost initially, but for some companies, the pandemic may expose their flimsiness and fragility. Fast is shutting down after raising millions of dollars and riding the wave of Covid. Instacart is another firm whose future looks bleak. Merger talks went fruitless. IPO plan was put on hold. Valuation plummeted. The market that Instacart is in is tough, not only because of the competition, but also because of the unit economics. The $24 billion valuation as of now may likely be looked back as a fond memory in a few months’ time.

Amazon to Spend Billions on Space Launches as SpaceX Ramps Up Satellite-Internet Service. Amazon is authorized to launch more than 3,200 satellites into orbit by 2026, but it must have at least half to be operational by then. The thing is that it hasn’t sent anything up yet.

Banks Weigh Using Zelle to Challenge Visa, Mastercard. Some banks are in favor of curing the fraud issue first while others want to expand the current scope of Zelle beyond P2P payments. I am firmly in the first camp. Fraud is rampant on Zelle and a real serious threat to the service. Why enlarging the scope when such a threat hasn’t been properly addressed?

Octahedron Capital compiles quarterly reports of trends and interesting observations. Here is the latest report.

Other stuff I found interesting

Earth is a desert planet compared to these ocean worlds in the solar system. “Our home planet is a desert compared to some places the solar system, both in terms of its total water volume and the amount of liquid on Earth relative to its size. Consider Jupiter’s ice-encrusted moon Europa, which is smaller than Earth’s moon. Scientists recently used 20-year-old Voyager data to find even more evidence that Europa has twice as much water as our planet. Even tiny Pluto may have an ocean nearly as large as Earth’s.”

Deep Roots. “When you realize you can’t connect one dot without a million other dots entering the picture, you realize how impractical it is to predict what the world will look like in the future. The craziest events – good and bad – happened because little events, each of which was easy to ignore, compounded. Innovation in particular is hard to envision if you think of it happening all at once. When you think of it as tiny increments, where current innovations have roots planted decades ago, it’s more believable – and the range of possible outcomes of what we might be achievable explodes.”

Shanghai’s stunning fall from grace. I am very glad my country didn’t follow what is going on in Shanghai. Am I nervous that we live with Covid nowadays? Yes. But what is happening in Shanghai is just awful. Folks are forced to shelter at home and take rations from the government for an extended period of time. Yes, we had stay-at-home orders in the US but we still could go out and buy groceries. The draconian measures from the government just doesn’t seem to make sense. I get it. They do not want to lose face and admit mistakes, but it’s just horrible to sacrifice others’ lives just for that

Stats

Credit card late fees in the US hit $14 billion in 2019

March Madness Final drew 18.1 million viewers

US teens spend 30% of their daily video consumption on Netflix and YouTube each

Advertising employment gained 3,200 jobs in March 2022

On average, US households spend $148 on groceries in 2022, up from $142 in 2021, due to inflation

16.6% of all US retail sales in 2021 were returned by consumers. The rate of returns of online sales was 20.8%

Weekly reading – 2nd April 2022

Business

FTC Sues Intuit for Its Deceptive TurboTax “free” Filing Campaign. The FTC is suing Intuit for bombarding tax filers with a message that its product is free while 2 out of 3 filers couldn’t use its “free” service in 2020. I am surprised that it took the government this long to go after Intuit and that the IRS has been lobbied away from launching its own free tax-filing website.

Brand Loyalty Takes a Hit From Inflation, Shortages. “Well-known brand names and flashy ad campaigns are no longer enough to command U.S. consumers’ loyalty in grocery stores, retail executives said. As inflation spreads and stretched supply chains leave gaps on shelves, shoppers are becoming increasingly fickle, with availability and price determining what goes into their shopping carts.”

Apple now allows video, music apps to sign up new subscribers without paying fees. “Reader” apps can now display an external link to their website and process payments without using Apple’s own system. There will be a hit to Apple’s bottom line, but I doubt it will be a big one as most of the App Store revenue is concentrated on games which still need to adhere to Apple’s payment rules. The motivation for the move is likely to appease lawmakers and reduce regulatory pressure. To me, it seems a shrewd move, but we’ll see whether it will yield the intended results and how big a financial hit there will be.

Apple wants to bring more financial services in-house. I agreed with Mark Gurman that Apple won’t be a bank in the future. Being a bank brings a lot of regulatory scrutiny and compliance issues. Apple doesn’t need it. The drive to bring more in-house is likely to add more margin, cut the middlemen and improve the customer experience. Why would you need someone else in the middle when you could do more for customers and save money in the process? Apple is about personal computing and improving personal life. Few things are as personal as financial well-being.

Cross River Bank hit $3+ billion valuation and plans to move forward with a crypto-first strategy. Growing their loan balance from $2.4 billion to $24 billion in 7 years is quite an achievement. We often get to know fintech startups such as Marqeta, Affirm or Square, but the banks who partner with these guys don’t receive enough attention. Good to have an article like this on one of such banks.

Stuff that I found interesting

The secret police: Inside the app Minnesota police used to collect data on journalists at protests. The thought that the police have a secret app profiling journalists at protests is disturbing and, as cliche as it may sound, unAmerican.

Technicolor Tokyo. Beautiful and colorful photos of Tokyo at night

How Your Shadow Credit Score Could Decide Whether You Get an Apartment. A nice investigate piece by ProPublica on how poorly regulated the tenant screening industry is and how it is doing real harm to consumers. This is where consumers really need lawmakers to be on their side, not only for the screening issue but also renting in general. Far too often do landlords draw up rental agreements with favorable terms for themselves. Lucky tenants have choices, but less lucky ones have to be legally cornered. Furthermore, tenants are often restricted to exclusive service providers such as Cox for Internet. These providers have all the power to drive up prices every year for the same services and there is nothing that tenants can do about it. It’s just ludicrous.

The Maya—and the maize that sustained them—had surprising southern roots, ancient DNA suggests. The migration from South America might allegedly have resulted in the Maya’s adoption of corn which plays a pivotal role in the Mayan culture

Stats

“In 2020, recycled toilet paper accounted for just 1.6% of sales from U.S. retailers, while the big three — P&G, Kimberly-Clark and Georgia-Pacific — controlled 70% of the market, according to Euromonitor International”

Source: Morgan Stanley
Source: Bloomberg

Weekly reading – 26th March 2022

Business

The 2022 iPhone SE. “There is a profound thoughtfulness and longevity to this design. Like an all-time great athlete, years past their prime, but still pulling their weight on the team, contributing something essential. This is backward compatibility Apple-style — not technical compatibility, but experiencecompatibility. The iPhone SE is the comfort iPhone”

‘Extremely awkward’: Bob Chapek and Bob Iger had a falling out, they rarely talk — and the rift looms over Disney’s future. I remember when Jobs passed away and Cook took over as the CEO, many thought it would mean a bleak future for Apple. Nothing could be further from the truth. As a consequence, even though I personally admire Iger and remain positively cautious about Chapek, what happened to Apple might be repeated for Disney. Yes, Chapek may not be a people’s leader and his promotion of Kareem puts too much power in the hands of his confidante. Yet, even some of his skeptics admit that Chapek is a skilled and determined operator. Perhaps, that’s what Disney needs. We’ll see at the end of FY2024.

Two-Minute Battery Changes Propel India’s Shift to E-Scooters. “Sagyarani, a 38-year-old e-shuttle driver for MetroRide, pulls up to one of startup Sun Mobility’s 14 automated orange-and-black booths, taps her authentication key to open a vacant compartment, inserts a drained battery and pulls out a fully powered pack. That means more hours on the road transporting commuters to metro stations, MetroRide’s main business. Another bonus: it costs just 50 rupees (67 cents) to swap out a single fully discharged battery, which is about half the price of 1 liter (¼ gallon) of gasoline. Swapping in India will be mainly used by the nation’s 1.5 million electric rickshaws that make up 83% of total EV sales. Because swappable batteries deliver a shorter range, they’re a better fit for the low-speed vehicles as opposed to sedans and SUVs, which need high-power batteries to deliver greater distance

European Lawmakers Reach Deal on Sweeping New Digital-Competition Law. “Widely known as the DMA, the legislation could affect many corners of the tech world. It is aimed broadly at limiting the ability of the biggest tech companies from taking advantage of their powerful presence in digital markets—including the app ecosystem, online shopping and online advertising. Provisions in the text, if agreed upon, would allow developers to make their apps available to iPhone users without going through Apple Inc.’s App Store and could limit how sites such as Alphabet Inc.’s Google and Amazon.com Inc. can rank their own products and services ahead of those offered by smaller competitors in search results.”

Other stuff I found interesting

A truly great site on iconic food packaging

An excellent profile of Mohammad Bin Salman (MBS). It’s utterly unthinkable to see how much power a man can have over a country in this day and age. Until you look at the rulers of Saudi Arabia. What is frightening is that some said that when, not if, he becomes a king, Crown Prince MBS will look like an angel.

Inside the Fight Over the Future of New York City’s Outdoor Dining. When I was in New York a few months ago, I was fascinated by the outdoor dining scenes of the city. Industry, entrepreneurship and authenticity. The Open Restaurants program has saved more than 100,000 jobs since June 2020. Evidence of how outdoor dining contributes economically to the city. Personally, I loved to visit some of those restaurants. However, there are downsides. The city can look messy and dirty, and the restaurant outdoor settings take up invaluable parking space that is already in far greater demand than supply can handle.

Stats

The U.S. online grocery market hit $8.7 billion for February

New car total sales are expected to hit 3,228,000 units in Q1 2022, according to J.D Power

“U.S. retail sales of plant-based foods grew 6.2% in 2021 over a record year of growth in 2020, bringing the total plant-based market value to an all-time high of $7.4 billion”

The average price for an Oscar commercial is about $1.71 million

Weekly reading – 19th March 2022

Business

Amazon’s Washington Strategy Wins Few New Friends in the Biden Era. One of the skills I admire in Satya Nadella and Tim Cook is that they manage the relationship with Uncle Sam very well. As unhinged and unpredictable as Trump was, he didn’t attack (much) Microsoft and Apple while being critical of Amazon. Even when a Democrat is in the White House, Amazon also has a rocky relationship with the US government. Now that Andy Jassy is in charge instead of the combative Jeff Bezos, will Amazon finally forge a cordial and productive bond with the White House and Congress?

Taiwan invests in next generation of talent with slew of chip schools. “Taiwan is racing to set up specialised “chip schools” that run year-round to train its next generation of semiconductor engineers and cement its dominance of the crucial industry. Taiwan’s government has partnered with leading chip companies to pay for these schools. The first four were established at top universities last year, each with a quota of about 100 master’s and PhD students, and another has been approved, the education ministry said.” Any country that is serious about their future should have a look at this. I am not saying that having such an initiative is universally applicable, but the consideration for such a strategic asset is. The more

An Oral History of Apple’s Infinite Loop. A very cool collection of Apple anecdotes. He has been gone for over a decade, but fans still love anecdotes about Steve Jobs. At least this fan does.

Discontent With Disney Over Bill Adds to Trouble for CEO Bob Chapek. As a Disney fan and shareholder, I don’t think it’s great in the long term for the company to lose creative and engineering talent for tax breaks. The war for talent is only going to get fierce and expensive from now. Those tax breaks from Florida will look small in the grand scheme of things. I also don’t support Chapek’s move to prioritize business and distribution personnel over creative folks. At Disney, creativity is in its DNA and what differentiates the company from competition. As a result, it should be nurtured.

Most Medical Debts to Be Removed From Consumers’ Credit Reports. While I understand that access to capital is very important, I don’t fully support this policy from credit bureaus. Consumers should know how much debt they have before they go out and borrow more. Otherwise, they’ll be leveraged up to their eyeballs and go bankrupt. Having medical debts reflected in credit reports is a deterrent. Removing it may create unwanted consequences. Financial firms may look at prospects without unaccounted medical debts as higher risks, but eventually they’ll use a wealth of data on their hands to come up with something to help them evaluate those risks.

Other stuff I find interesting

Face-to-face interaction enhances learning, innovation. “New Cornell psychology research finds that sitting face-to-face, rather than shoulder-to-shoulder, enhances learning and innovation – even when we’re learning complex physical skills that should be harder from that perspective. Across ages, test subjects performed better when they could observe not only an instructor’s hands but also their eyes, gaze and facial movements. The researchers propose that face-to-face interaction transmits valuable social information about goals and motivations in addition to visual information about the task.”

A futuristic McDonald’s in Australia is on the cutting edge of experiential retail.

Historical Redlining Is Associated with Present-Day Air Pollution Disparities in U.S. Cities. “Communities of color in the United States are systematically exposed to higher levels of air pollution. We explore here how redlining, a discriminatory mortgage appraisal practice from the 1930s by the federal Home Owners’ Loan Corporation (HOLC), relates to present-day intraurban air pollution disparities in 202 U.S. cities. Our findings illustrate how redlining, a nearly 80-year-old racially discriminatory policy, continues to shape systemic environmental exposure disparities in the United States.”

Matthew Klein on the Economic Fallout from the Russia-Ukraine War. A great podcast episode on Russia – Ukraine

Stats

As of February, retail gas prices in the U.S. were up 38% year-over-year, according to the U.S. Energy Information Administration

Battery Electric Vehicles made up 5.3% of all new models in Romania. In December 2021 alone, the mix hit 17%

3% of the funds invested in African startups between 2013 and 2021 went to female-led endeavors

Total volume was at its lowest level since 1985, with 11.75 million new cars registered in Europe

Weekly reading – 12th March 2022

What I wrote last week

Cuisine in Saigon (Ho Chi Minh), Vietnam

Business

‘Batman’ and the Movie Pricing Predicament. A good article on AMC’s move to charge one more dollar to every ticket for the upcoming Batman movie. Yield management by theaters often involves higher ticket prices in the evening or on Fridays and weekends. Charging more for a specific movie is rare. I look forward to seeing how this will benefit or harm the theaters.

Metaverse is all…hype? Google introduced Google Glass years ago. Today, you’ll have the same odds of seeing that Glass on the streets as finding Nokia’s iconic flip phones. I don’t know what these tech visionaries see, but I won’t bet my money on seeing metaverse or whatever the hell it is in the next 10 years.

Moving money internationally. A fantastic read on SWIFT.

Visa, Mastercard Prepare to Raise Credit-Card Fees. Visa and Mastercard are going to charge higher interchange fees to big merchants while lowering the fees for small merchants whose annual revenue is less than $250,000. Visa said merchants could avoid paying more by offering more transaction data and using its tokenization services. I look forward to seeing how this increase will harm consumers as merchants are likely to pass on the higher expense. It’s no wonder why lawmakers want to look into this sort of duopoly enjoyed by Visa and Mastercard. They simply have too much power

The Three Sides of Risk. “You realize that the tail-end consequences – the low-probability, high-impact events – are all that matter. In investing, the average consequences of risk make up most of the daily news headlines. But the tail-end consequences of risk – like pandemics, and depressions – are what make the pages of history books. They’re all that matter. They’re all you should focus on. Once you experience it, you’ll never think otherwise.”

Fraud Is Flourishing on Zelle. The Banks Say It’s Not Their Problem. “Nearly 18 million Americans were defrauded through scams involving digital wallets and person-to-person payment apps in 2020, according to Javelin Strategy & Research, an industry consultant. When swindled customers, already upset to find themselves on the hook, search for other means of redress, many are enraged to find out that Zelle is owned and operated by banks. Banks say they take fraud seriously and are constantly making adjustments to improve security. But police reports and dispatches from industry analysts make it clear that the network has become a preferred tool for grifters like romance scammers, cryptocurrency con artists and those who prowl social media sites advertising concert tickets and purebred puppies — only to disappear with buyers’ cash after they pay.”

Why Commercials Are Coming to the Biggest Streamers. A good piece on streamers weighing on offering ads.

Other stuff I find interesting

Unleash collaboration with new experiences in Google Workspace. The new features look very sweet. If you are a Google Drive/Docs/Workspace user, check this out!

How U.S. Visa Delays Are Taking a Costly Toll on Frustrated Workers. I can tell you from personal experience that these delays add unnecessary stress to immigrants’ life. My colleague’s PERM application in 2019 took 52 days to get adjudicated. Mine is expected to take 6-8 months.

The story of how Swahili became Africa’s most spoken language. “During the decades leading up to the independence of Kenya, Uganda and Tanzania in the early 1960s, Swahili functioned as an international means of political collaboration. It enabled freedom fighters throughout the region to communicate their common aspirations even though their native languages varied widely. Swahili lacks the numbers of speakers, the wealth, and the political power associated with global languages such as Mandarin, English or Spanish. But Swahili appears to be the only language boasting more than 200 million speakers that has more second-language speakers than native ones.”

The Magic of the Japanese Convenience Store Sandwich

Stats

Hertz had more than 3,300 cars stolen each year

“Just one pint of beer or average glass of wine a day may begin to shrink the overall volume of the brain”

Solar power and batteries account for 60% of planned new U.S. electric generation capacity

US merchants paid more than $55 billion in interchange fees to Visa and Mastercard in 2021

Tap-to-pay penetration in the US as of March 2022 is 20%, according to Visa (from KBW Fintech Payments Conference)