Weekly reading – 14th May 2022

What I wrote last week

Uber Q1 FY2022 Results

Book Review – After Steve: How Apple Became A Trillion-Dollar Company And Lost Its Soul

Business

Newest trend in delivery apps: move from cars to e-bikes. Micromobility is great for short-distance deliveries in a busy city like San Francisco. This is how Grab Food, Shopee Food and others manage deliveries in Ho Chi Minh City. Consumers order food within 3-4 kms most of the time. Traffic jam is a feature of the city. If couriers used cars for deliveries, there wouldn’t be any food delivery business! eBikes are also environmentally friendly. I hope to see more innovation and governmental subsidies in this space

John Gruber on the European Commission’s calling Apple Pay an illegal monopoly. I like John’s takes on Apple-related things. He is experienced and more importantly nuanced and fair. “This passage, as well as much of the rest of the E.C.’s “statement of objections”, seeks to dismiss the hard work Apple has done to make Apple Pay successful. Yes, NFC is an industry standard, and Apple Pay is, in part, built on top of that. But before Apple Pay, NFC was hardly used, even though Android had supported it since 2011. When Apple Pay launched in late 2014, its support for the existing NFC infrastructure was so good, it worked with many credit card terminals that had no explicit support for “Apple Pay” specifically. Apple Pay was so easy to use people were using it at retailers who weren’t even Apple Pay partners. That’s not a credit to NFC, which had been in place for years. That’s a credit to Apple. I honestly don’t understand where the E.C. sees anticompetitive behavior with Apple Pay. What I see is market share dominance stemming from the hard work of designing better integration into iOS and iPhones and educating users about the feature. How else could the iPhone’s share of NFC payments so far exceed the iPhone’s share of mobile phone sales? I’m not saying Samsung and Google suck at this, per se, but Jennifer Bailey’s team at Apple is really good, and perhaps just as importantly, really diligent about this sort of thing.”

Congress is ‘moving too slowly’ on semiconductor supply crunch, Commerce Secretary says. The dysfunction and ineffectiveness of Congress, especially in this matter, will cost America a lot both in the short and long term.

Buy Now, Pain Later? An interesting read on BNPL and specifically Affirm

Don’t forget Microsoft. Business schools around the world should teach students about Microsoft and its revival by Satya Nadella.

Business Travel Rebounds as Execs Choose (Real) Face Time Over Zoom. I, for one, am curious about whether business travel will come back to the pre-pandemic levels and how it will come back. During the pandemic, articles were written on how business travel would never be the same. Anecdotally, my colleagues at work traveled to Omaha, Nebraska for monthly meetings and quarterly department reviews as if nothing had happened in the past two years. China remains a question mark. Because they remain persistent on the zero-Covid strategy, they are not a viable destination at the moment. And I hope that the prolonged fight with Covid does not give other variants a chance to spring up. I think we have enough of a pandemic for, let’s say, the next few decades.

Inside the Collapse of CNN+, the News Channel’s ‘Apollo Mission’. The launch of CNN+ seems rushed and more like a political move by some executives than a savvy business initiative

How Gillette Embraced the Beard to Win Over Scruffy Millennials. Gillette went from demonizing beards to embracing them. After years of fruitless resistance and declining sales, they finally realized that their bread and butter product is no longer what men want. More than half of the men in the world don beard, including two-thirds of millennial men. Sensing that the tide they were going against was too strong, Gillette launched new beard-friendly products rolled into a line named King C. Gillette. A deviation from what the company is always known for, but a good strategic shift, I think.

Other stuff I found interesting

Could solar power solve Puerto Rico’s energy nightmare? I can’t imagine living in this day and age without electricity. Especially when that happens in a U.S territory.

Moon soil used to grow plants for first time in breakthrough test. This discovery inspires a lot of questions, possibilities and dreams

Cat Litter Could Be Antidote for Climate Change. I don’t know about you, but I don’t have “cat litter could absorb methane before it goes up in the air” in my 2022 bingo card. But it’s a nice surprise and discovery.

Stats

NYC subway ridership as of March 2022 is 60% of the pre-pandemic levels

Germany has 9% of all bitcoin nodes

“In 2021, U.S. podcast advertising revenues rose to $1.4 billion”

Only 50% of the time when a PayPayer user goes to a site that has PayPal does that user use PayPal

Uber Q1 FY2022 Results

Last week, Uber announced the earnings results of Q1 FY2022 and the numbers show that its operation continues to recover well after Covid-19 disruptions. Here are the highlights:

  • Gross Bookings: Gross Bookings increased by 35% to $26.5 billion
  • Mobility & Delivery Gross Bookings: Mobility saw 58% in Gross Bookings while Delivery had a 12% YoY growth
  • Revenue: Revenue rose by 136% to $6.8 billion. Total revenue was boosted by the acquisition of Transplace. Nonetheless, Mobility and Delivery revenue grew by 195% and 44% respectively
  • Net loss: While net loss was an astounding $5.9 billion, $5.6 of which came from the loss in value of equity investments in other companies. Loss from operation stood at $482 million, down from $1.5 billion a year ago
  • Free Cash Flow: FCF for the quarter was -$47 million, up from -$682 million a year ago. Uber’s operation cash flow was $15 million, up from -$611 million in Q1 FY2021

For Q2 FY2022, forecast Gross Bookings is between $28.5 to $29.5 billion, resulting in growth of 30% to 35%, on top of the 114% growth booked in Q2 last year. The company also expects to generate positive free cash flow for the full year of 2022. Investors and analysts must love the forecast by Uber as the drop in its stock price last week was much less severe than Lyft’s. And they should like what they see from Uber, especially when we dig into the numbers a bit more.

As mentioned above, revenue growth outpaced gross bookings growth in both Mobility and Delivery. Mobility take-rate hit 23.5% in Q1, back to the pre-pandemic levels, and it’s still short of the long-term target of 25% set on Investor Day 2022. Delivery has seen a steadily increasing take-rate for the past 3 years, reaching 18% in Q1 FY2022, which is already higher than the target of 15%. Delivery is a highly competitive space with the presence of heavyweights such as DoorDash or Instacart. I wonder if this heightened take-rate will remain stable or if Uber will reduce its cut to attract and retain merchants.

Uber's take rates

The good news for Uber is that such an increase in revenue didn’t come at the expense of profitability. Mobility’s adjusted EBITDA margin came back to the 2019 levels while Delivery’s was positive for two consecutive quarters in a row. Last quarter saw Freight become adjusted EBITDA profitable for the first time in the company’s history. Since the management team forecast to have positive FCF for the whole year, this trend seems to become a norm moving forward, rather than a fluke. Furthermore, the Fed plans to have more rate hikes in the coming months to curb inflation. At a time like this, companies will do well to demonstrate to investors that they can generate profits. To that end, Uber is in the pole position to reach profitability in an industry whose unit economics have long been questioned.

Uber Delivery adjusted EBITDA
Uber Mobility Adjusted EBITDA Margin

There are a few levers that can help Uber grow both the top and bottom lines. First, airport rides. Rides to and from airports used to account for 15% of Mobility Gross Bookings. From the low during 2020, share of airport gross bookings have grown to 13% of Mobility. There is still room to get back and probably exceed the pre-pandemic levels. Additionally, the same goes for Mobility as a segment. Its Gross Bookings is still down by compared to the 2019 levels. Total GBs for Mobility in 2021 trailed that in 2019 by $14 billion. Once that gap is closed, the higher take rate from this segment can only help with the bottom line. Additionally, the next lever is ads. The ads business is growing healthily as annualized run rate rose to $225 million in Q1 FY2022, more than double what was reported a year ago. Almost one out of four Delivery merchants is an active advertiser on the platform. As Sponsored Video Ads is available on a pilot basis, we should see more merchants advertise and more ads revenue. Last but not least, new verticals. These verticals have been doing about $4 billion in annualized run rate every quarter in the last few months. That’s less than 10% for all Delivery GBs in 2021. Given the latest developments such as the deepened partnership with Albertson, the expansion of Eats in Germany, the new deal with BP, the collaboration with Rakuten and Amazon Prime in Japan, and the introduction of group ordering, I expect new verticals to grow substantially soon.

In summary, I find the earnings report positive. Uber stock has been battered for months as its price dropped by 44% in the last year. Folks are concerned about the business model and they have reasons to be. Uber functions as a middleman working with a lot of important stakeholders: consumers, drivers, merchants and lawmakers. Maintaining those relationships on a global scale in different cultures and political agendas is extremely difficult. For good measure, competition is fierce with deep pockets as well. To invest in the company means that one believes in flawless strategy AND execution. One down quarter wouldn’t do as much damage to Apple as it would to Uber because the former has a dominant market share and is in a much better position than the latter. With that being said, Uber management navigated a pandemic by pivoting to Delivery, which changed the business forever. Could another management team have done better? Possibly, but we never know. The fact that Uber now has a friendlier image than it did, that its Delivery business is an equal of Mobility and that it has other levers to pull is a testament to the work of the management. Just look at Lyft. Even though its revenue is smaller than Uber Americas, its revenue growth rate hasn’t recovered as quickly. That’s due to Delivery, because as mentioned above, Uber Mobility’s business is still down compared to the 2019 levels. That goes to show how important it was for Uber to react and execute effectively during the pandemic. While it’s highly challenging to stay competitive and create profit in this industry for factors mentioned above, it’s precisely such factors that can make Uber’s moat robust if they can get execution right. A big if, indeed. I get where the skeptics come from, but personally, I am still on the believer side, for now.

Uber US & Canada revenue growth vs Lyft revenue growth

Disclaimer: I own Uber stocks in my portfolio.

Weekly reading – 7th May 2022

What I wrote last week

Apple’s Q2 FY2022 results

Book Review: Just Keep Buying

Business

DTC brands are slowly warming up to Amazon. The ability to tell stories and appear authentic to shoppers on Amazon is hugely important. The commission may cut deep into margin, but Amazon commands the kind of online traffic that few others can rival. Some retailers now use Amazon as an acquisition tool. Sell part of the catalogue on the site, lure shoppers to their own native page and hopefully convince them to buy what is not on Amazon. It’s not as straightforward as it should be, but if you can’t win every battle, you may as well pick the ones that can help you win the war

Amazon Will Close Six Whole Foods Stores in Four States. I look forward to seeing how Amazon’s physical store strategy unfolds. Will it transition all Whole Foods to the cashierless version that Amazon Go pioneers? Will it keep both brands at the same time? Or will it designate Amazon Go as the flagship store brand moving forward?

Snapchat’s flying camera Pixy. Kudos to Snapchat for making a portable, small and allegedly easy-to-use drone. There is certainly a niche market for Pixy: consumers who want to film drone footage but can’t afford a drone or do not want to carry a heavy one around. I am certain that Snapchat will iterate furiously to improve Pixy: longer lasting batteries, higher quality cameras, better integration into the Memories section and more AR effects. Snapchat is already great at software. Hardware is hard, but if it can be great at it too, it’ll be formidable (ask Apple).

Formula One Finally Found a Way to Get Americans to Care. Cracking the America code is fantastic for Formula 1 as a sport and a business. A long-time fan of Formula 1, I noticed the difference after Liberty took over. Prior to the take-over, clips in which experts explain aerodynamics, rear wings or floor of F1 cars didn’t exist. Beautiful charts that discuss where one driver is slower than another in a lap were the stuff of imagination. For a global sport such as F1, it was unfathomable to think that it didn’t even have a subscription app to watch races. The Americanization of the sport is not perfect. I am not a fan of how much Drive To Survive excessively dramatizes F1. Just ask Max Verstappen or a few other drivers about it. Having more than one race in the US is…nice, but the final verdict should wait till we get a feel of how the new tracks are. Austin is a great spectacle that provides awesome racing. Miami and Vegas should offer a gigantic boost in popularity, but I am not sure about the racing. We’ll see. For now, I am happy for the sport that I have loved for the past 17 years.

Mercedes-Benz Says Self-Driving Option Ready to Roll. Mercedes is the first car manufacturer that achieves an internationally valid certification for self-driving level 3. This looks a big progress in this space. From the technology perspective, I am excited about self-driving cars. From a practical perspective, I still don’t grasp the actual benefits of driving a driverless vehicle on busy urban streets. Accidents happen all the time. Reliance on computers just makes careless drivers more careless. Plus, if you are in a car and don’t have to drive it, what could you do in the meantime? It’s not like you can go to the back seat and have a nap…

TikTok’s Work Culture: Anxiety, Secrecy and Relentless Pressure. The older I am, the more put off I become of a workplace like TikTok. Imagine needing marriage therapy because you spend your dinner time with your husband on the phone discussing work.

American Consumers Are Shopping, Traveling and Working Out Like It’s 2019. Among a slew of bad news such as high inflation, supply chain constraints and stock market crashes, this is probably the best silver lining for companies. The question is: how long can this strong consumer spending last?

Other stuff I found interesting

103 Bits of Advice I Wish I Had Known. A lot of goof stuff that I wish I had known 10 years earlier

The Arc of the Practical Creator. “A Practical Creator doesn’t view a boring job as a dead-end endeavor, but as an active patron of their creativity. When you’re in this first stage, you must rigorously work on your creative endeavors after your day job responsibilities. This is an absolute must “. I love this website.

Stats

Zenly, a subsidiary of Snapschat that is very popular in Russia, has 35 million monthly active users

Internet companies in China raised $3.51 billion in Q1 2022, down from $15 billion in Q1 2021

The average price for ground beef in America grocery stores has jumped 18% from a year ago

Dr Strange 2 minted $36 million in preview performance, the 8th largest of all time. For comparison, Avenger’s Infinity War notched $39 million and Spiderman: No Way Home did $50 million

US reaches 1 million Covid deaths

Airbnb said more than 800,000 people flocked to its careers page after it announced that employees could live and work anywhere

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

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