Weekly reading – 7th January 2023

What I wrote last week

Book Review: A.P. Giannini: The Man With The Midas Touch

Legacy Systems Can Cost Businesses Dearly

Business

How digital helps businesses serve ice cream and smiles 24/7. “Smart freezer cabinets are currently being piloted. These can capture products that are out of stock in the cabinet and send a push message to the store that suggests a quantity that can be ordered and sent automatically, drastically reducing the chance of their running out of stock. The pilot saw 1,200 trade customers offered the opportunity to make orders through a virtual sales rep via WhatsApp at any time of the day. Once the order was placed, a team at the distribution hub got it prepared in an average of 60 minutes. It was then delivered in backpacks with special cooling zones in less than four hours – a system that guaranteed product stability.”

‘They’ve gone too far’: How Spotify dug a giant hole — and how it can dig itself out. The piece pains a pessimistic outlook on Spotify’s future and it does have some valid points. The company generates almost $10 billion in annual revenue, but it hasn’t turned profitable so far. The competition is getting fiercer and fiercer every year. Spotify may have some bargaining power as a major industry player, but the label companies still have a lot of sway. It makes sense in theory to create a library of podcast content and sell podcast ads. But it’s the execution that counts and right now, some analysts and investors are not buying Spotify’s ability to execute. If they couldn’t turn a profit when the tide was high, how would they do so when the tide is retreating out?

($) Facebook Wanted Out of Politics. It Was Messier Than Anyone Expected. Facebook did try to limit the virality of some content, even more than anybody thought. I never thought that the company put that much effort into suppressing toxic yet viral content. However, Facebook was a little too late. The damage was already done. They never got rid of the image of being politically toxic. Their work on the newsfeed still didn’t address what happened within Facebook Groups. More importantly, any attempt to moderate content contradicts Facebook’s business model which hinges on engagement and ads revenue. “Views of civic content in newsfeed fell by nearly a third, internal data showed. With the company no longer amplifying posts it predicted were most likely to draw lots of replies, comments on civic posts dropped by two-thirds. Anger reactions fell by more than half on civic content, and nearly a quarter platform-wide. Bullying, inaccurate information and graphic violence fell, too.”

Apple Fitness+ unveils new offerings for the new year. My wife and I pay $84 a year for access to Apple Fitness+ and I can tell you that it’s one of the best investments we make. We exercise almost every day and there is a variety of workouts that keep us interested. With Kickboxing and a new meditation theme, consumers will have more workout options and Fitness+ content library keeps growing. I can’t think of another company that has a fitness IP this size and a popular fitness gadget like Apple Watch. This, of course, doesn’t happen overnight. It takes patience and vision. Software drives hardware sales and hardware is the tool that makes consumer lives better.

Other stuff I found interesting

Micromobility in Limbo: Takeaways from Paris and LA. Scooters are good and should be used for short trips. Cities that want to reduce car traffic must revamp their public transportation systems to accommodate longer trips. Any scooter startup that banks on and advertises the prospect of their services replacing cars deserves a rude awakening and no support from city governments.

(S) Tourism and Manufacturing Fight for the Future of Power in Europe. I get that renewables play an important role in our fight against climate change. It’s even more important for Europe to reduce its reliance on energy from Russia after it invaded Ukraine. But I do think that wind turbines don’t need to be built around historical landmarks or areas that source most of their revenue from tourism. And it is particularly baffling when local officials admit that turbines could be built in areas far away from the lands where there is protest.

How a vanished Ice Age lake shaped the past and present of Missoula, Montana. It is mind-blowing how much the climate changed over the last hundreds of years and how much our life today was shaped by it.

Meet the most powerful Uber driver in India. Salauddin has a computer science degree, drove for Uber and nowadays spends his time as a union leader for gig workers in India. What an interesting arc!

How New Lines Magazine built a home for long-form international reporting. I hadn’t heard about this magazine before, but now I have and the first couple of long articles that I read did not disappoint

Stats

Total holiday spend grew nearly 7% in 2022

150 million users are using Google TV and Android TV

Amazon Prime Video averaged 9.6 million viewers for its first season as exclusive rights holder to the NFL’s “Thursday Night Football” package.

Online holiday shopping topped $211 billion between 11/1/2022 and 12/31/2022

Source: CDC

Legacy systems can cost businesses dearly. Southwest’s screw-up is just the latest example

Southwest, the IRS and Royal Bank of Scotland, what do they have in common? Well, they all serve as reminders to companies that failure to modernize internal systems can cost them dearly. Here is how:

Southwest

As 2022 was inching to a close, the airline that used to be known for customer services had the biggest meltdown in the industry’s recent history. Southwest cancelled more than 15,000 flights in the past few days, making up 80%, 86% and 94% of the country’s total cancelled flights on 27th, 28th and 29th of December respectively. This catastrophe left hundreds of passengers stranded, not knowing where to go or where to pick up their luggage. All of this could have been avoided, if it were not for Southwest’s inexplicable reliance on outdated tools and baffling refusal to modernize them.

Southwest uses an in-house system called Sky Solver to assign crews. Southwest flight attendants and pilots have been calling for an overhaul of this system for years to accommodate the growing complexity of the airline’s operations. Yet, the calls fell to deaf ears. Brutal winter storms and heightened demand unfortunately exposed Sky Solver’s shortcomings to the fullest. Phone lines jammed up. Crew members didn’t know which planes they should go to. Pilots booked their own hotels while flight attendants spent the nights at crew lounges. The airline couldn’t locate even their own employees. Although planes were ready to take off, Southwest had no choice but to cancel flights because there were no crew members to operate those planes.

By no means is this an isolated incident. In 2021, cancelled flights over 4 days in Q3 cost Southwest $75 million. Because what happened this week is bigger in scale, it is going to cost Southwest a lot more than what they paid out last year. Moreover, it is part of a trend that has been coming. In the last 10 years, Southwest consistently had more cancellations than its peers as its cancellation rate jumped from 0.8% in 2013 to 2.4% in 2022. As cancelled flights piled up, only 7 out of 10 Southwest flights have arrived on time.

The story of Herb Kelleher heroically fighting the status quo at the time to found Southwest is widely cited and studied in business schools. The airline prides itself in customer services. Yet, recent management teams have prioritized familiarity and bottom lines over making tough yet necessary investments. And now, they are paying the price. Not just in terms of the financial impacts, but also regulatory scrutiny and damaged trust from passengers.

Southwest's cancellations
Source: CNN

Internal Revenue Service (IRS)

As the agency that handles taxes of millions of Americans every year, you’d think that the IRS uses state-of-the-art systems. The reality is anything but. The IRS is the poster boy of how failing to modernize systems can cause significant damages:

  • In 1985, computer issues at the IRS delayed 1.5 million individual returns. Those who filed on time were eligible for interest on delayed payments, but that also meant millions of dollars in additional expense to the government
  • In 2007, the IRS handed out $318 million in fraudulent refunds
  • In 2018, a computer glitch on the deadline day caused widespread confusion and prevented more than 5 million Americans from filing tax returns electronically
  • The government literally spent tens of thousands of dollars over the years, trying to modernize the tools that the IRS used, with nothing to show for it
Source: Bloomberg Tax

The IRS built a system called Individual Master File (IMF) in the 1960s that holds tax payer data. More than 60 years later, the same software is still what processes our tax returns. As arguably the oldest system used in the US government, IMF runs on a legacy code that few people know. As the number of developers that can handle such an archaic code dwindles every year, the software is increasingly expensive to maintain. For good measure, the IRS has to tweak the legacy code every year to reflect changes imposed by Congress, adding complexity in the process. There has been no lack of effort to modernize IMF over the years. The latest attempt is called Customer Account Data Engine 2 or CADE 2. Announced in 2013, the project has suffered multiple setbacks and is now slated to be completed by 2030. But don’t be surprised if there are further postponements.

IMF is just the core system and one of the hundreds that the agency has developed over the years to meet its needs. Unfortunately, these systems don’t necessarily talk to one another. Per National Taxpayer Advocate:

Example: When a custodial parent wishes to amend her 2019 tax return to allow the non-custodial parent to claim a child as a dependent and to claim various credits, she can file an amended return electronically, but must mail the Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, along with Form 1040-X, Amended U.S. Individual Income Tax Return. The return-processing arm of the IRS does not have the capability to accept the Form 8332 electronically, so it must scan and upload the data from a paper form received. The delay resulting from mailing and processing of a paper Form 8332 could cause complications for the taxpayer or the non-custodial parent if the audit arm of the IRS acts on the amended return based on outdated return information of either parent.

To be fair, the IRS’s budget has decreased over the years while their job is not any simpler. Regardless, it’s very hard to fathom that one of the richest countries on Earth, if not the richest, and the birthplace of many tech companies cannot solve this issue. Everybody’s life will be dramatically improved if the IRS can overhaul its aging systems and make filing taxes easier. It seems far-fetched, but in the spirit of a new year, let’s just wish that would happen soon.

Royal Bank of Scotland (RBS)

Despite their pivotal roles in our societies, banks are notorious for tardiness in modernizing legacy internal systems. Such a failure to invest in IT infrastructure properly can result in serious business and financial consequences; one example of which is Royal Bank of Scotland (RBS).

In June 2012, a computer glitch wrecked RBS operations and exposed its systems’ weaknesses. About 12 million consumers had their accounts frozen and couldn’t complete transactions or withdraw cash from ATMs. Some said they couldn’t even see their account details. The meltdown cost the bank 56 million pounds in fine and another 175 million to compensate affected customers. It also put a regulatory spotlight on the bank and damaged the trust among customers.

At the time, RBS’ mainframes were using codes that dated back in the 1970s. The codes were so complicated that even insiders at RBS couldn’t understand. To make matters worse, the bank dismissed experienced employees that had the technical abilities to maintain the system and outsourced those jobs to low-paying staff in India. All in the name of cost savings. Guess what? The disaster in 2012 stemmed from one of those outsourced technicians making a major error on the job. Whether outsourcing was the root cause of RBS outages remains unclear, but perhaps given what was covered after the incident, an experienced operative would have helped avoid it.

Book Review: A.P. Giannini: The Man With The Midas Touch

My first completed book in 2023. “A.P. Giannini: The Man With The Midas Touch” offers a quick look into the life of A.P. Giannini, the legendary immigrant founder of Bank of America and an all-time great businessman. His work ethic, entrepreneurship and unyielding focus on customers are a great example of founders and companies alike. Below are some of my takeaways:

Short bio

Amadeo Pietro Giannini or A.P. Giannini was born in San Jose in 1870 to Italian immigrants. His father Luigi migrated from Italy to the US, wishing, as many, to find gold and change his life. He returned to Italy to marry Virginia DeMartini, whose brothers worked alongside Luigi in gold mines, and brought her over to the US. The Gianninis bought a farmland in California and started to grow vegetables and fruits for sale. Then, a life-altering tragedy struck. Luigi was killed by an employee over a pay dispute, leaving a 22-year-old Virginia as the lone caretaker of two boys while being pregnant of a third. Virginia married Lorenzo Scatena and relocated to San Francisco. Here, Lorenzo quit his job and launched his own product company named L. Scatena & Company, which would give young A.P. the first opportunity into the business world.

Business Acumen

A.P had an amazing business acumen, strong customer orientation and a nose for opportunity. Even at a young age of 16, he already prioritized strong relationships with farmers over short-term sales. He remembered their names individually, asked questions about their business, delivered timely payments in cash and helped the farmers out if they needed it. During the summer of 1887, believing that there would be a supply crunch for pears, A.P. made arrangements with farmers to buy their crops before everybody else. When the price of pears shot up due to supply shortage, L. Scatena & Company benefited handsomely from A.P’s hunch. A.P became so valuable to his step father’s company that he became a partner at the age of 19.

He promised farmers payment in cash and on time. Pop honored those promises, and the farmers learned that they could expect honesty and integrity from L. Scatena & Company. They also could expect accuracy and attentive customer service. A. P. always remembered the farmers’ names. In fact, he remembered the names of their wives and children. He also remembered dates and prices and quantities. This impressive memory won the confidence of potential customers and convinced many of them to do business with Pop’s firm.

After disagreements with other Board of Directors members at a bank, A.P quit, decided to launch a bank of his own and called it Bank of Italy. A.P wanted his bank to cater to poor immigrants, instead of just the rich, because he believed that if Bank of Italy helped them in difficult times, the good will would make them customers for life. Long-term wins over short-term gains, indeed. One of his first hires was a cashier named Armando Pedrini. Armando learned his cashier craft in Italy, South America and the US, spoke multiple languages and more importantly, treated poor immigrants as he would the people in suits.

Two years after A.P opened his bank, a devastating earthquake hit San Francisco and leveled the city. Knowing that his customers needed money for food, home and their future, he made his bank and money available for loans while other banks stayed closed. A.P. set up a temporary desk at the site of fire near the waterfront. He wanted the people to see him, his gold and the Bank of Italy sign when they came for food and supplies. Word of mouth traveled far and fast as people lined up to get loans from A.P’s bank.

A.P took his wife on vacation to New York. The trip was the first vacation the couple had, but it was also an opportunity for A.P. to learn about the banking world in New York. What he learned was alarming. Talking to people in the industry, A.P. learned that banks in New York had dangerously low levels of gold and would not have enough for mass withdrawals. Customer fear is often contagious. If customers on the East Coast fear that banks don’t have their gold ready to be withdrawn, such anxiety will soon spread to the West Coast. A.P. cut short his trip and promptly worked to boost his own gold reserves. His foresight paid off. In 1907, prices on the New York Stock Exchange dropped, causing worried consumers to lean on gold and try to withdraw it from their banks. Riot broke out when banks did not have enough gold to meet customer demand. Not Bank of Italy, though. A.P. spread the word that his bank had enough gold in hand and even publicly displayed it to assuage customers. Bank of Italy came out of the crisis intact and gained trust from customers.

The book is littered with other stories and anecdotes on A.P’s knack for business. Here are a few:

On November 18, 1909, A. P. opened the doors to his first bank outside of San Francisco. He gained the good will of local customers by rehiring the tellers from Commercial and Savings instead of bringing in outsiders. He appointed local business, community, and ethnic leaders to an advisory board to help guide the bank and bring in new customers. He charged lower interest rates than his competitors. He kept the bank open in the evenings and on Saturdays so it would be convenient for working people to use.

A. P. began by focusing on the banking needs of immigrants as he had done in San Francisco. He wanted working-class people to feel comfortable in his bank. Most banks had marble pillars and fancy ceilings to impress rich customers and scare off any poor ones. Tellers hid behind barred windows to prevent someone from reaching in and stealing the money, and the managers worked in private, locked offices. At Bank of Italy, employees worked in the open where it was easy for customers to see and approach them. The decoration and furnishings were designed to blend in with the neighborhood. Especially in poorer communities, A. P. believed a bank should be simple, sturdy, and orderly.

As usual, Bank of Italy conducted business outside the constraints of conventional wisdom. Times were changing, and A. P. knew it. He believed that women who could vote also would demand greater choice and independence in managing their own money. He saw a great untapped base of customers in this half of the population, and he wanted Bank of Italy to be the first to welcome them at the only bank in the nation run entirely by and for women.

A. P. envisioned attracting women customers on an entirely different scale. With his usual dramatic flair, he selected a prominent and symbolic place to begin. He dedicated an entire upper floor of the bank’s new headquarters in downtown San Francisco as a Women’s Bank. Its sole purpose was to promote the economic independence of women. A. P. set out to create an inviting atmosphere for the customers he wanted. The bank was attractively decorated and filled with flowers. More important, he made sure that the women customers in front of the counter were welcomed by women employees behind it. A. P. appointed a woman to manage the bank.

A. P. had no private office. He had no personal secretary and answered his own phone. He sat at a desk on the open floor, ready to meet with any customer who wanted to see him. With 200,000 depositors, A. P. had built the largest bank west of Chicago, but he did not want his success to alienate the fishermen and dock workers who were his long-time clients.

At a time when most bankers were desperately calling in loans, A. P. was determined to be patient. Many borrowers, both individuals and businesses, were slow to repay their loans during the Great Depression because they did not have the cash. A. P. chose to wait for eventual repayment rather than force borrowers into possible bankruptcy. He believed the economy would improve sooner if people were not forced into desperate actions. He knew, also, that they would feel loyalty to a bank that trusted them. As always, he cultivated long-term customers rather than short-term profits.

For instance, A. P. recognized the great potential of the automobile industry. Automobiles had existed since the 1906 earthquake, when the few available cars had been seized by troops to provide emergency services. After World War II, many people moved to the suburbs where cars were essential for transportation. As cars became more affordable, more people wanted to buy them. A. P. was a pioneer in helping people to pay for expensive purchases. Bank of America offered installment plans that allowed customers to buy cars and other goods—stoves, refrigerators, washing machines, vacuum cleaners—by paying a little each month over time. With low rates and efficient service, the bank attracted many customers. In just a few years, only General Motors would finance more car loans than A. P.’s bank.

As founder of the world’s largest bank, A. P. became one of the most powerful people in the world. However, he had no interest in becoming one of the richest. He studiously avoided personal wealth. “I don’t want to be rich,” he said. “No man actually owns a fortune; it owns him.” A. P. believed that “a lot of people working together can create a lot of wealth for a lot of people. But one man who works selfishly for his own wealth at the expense of others creates nothing worth having. He generates poverty. There’s poverty in his mind, in his heart, and in time it will show up in his pocket.”

Personal tragedy

Having legendary successes in his professional life, A.P. unfortunately endured overwhelming personal losses. As a young child, he saw his own father shot to death. As a man, only three of his eight children lived to adulthood. Both his two surviving sons, Virgil and Mario, had chronic health conditions and died at the age of 38 and 57 respectively. A.P. outlived his wife and all but two of his own children. His daughter Claire died childless, marking the end of the Giannini family.

After reading about A.P.’s success as a founder, many may tempt to envy him. However, would you still want his professional success, knowing what he suffered personally? Granted, in the case of A.P., his personal tragedies didn’t seem to be linked with professional conquers. But that’s not how it works. If you envy, envy the whole deal. That’s probably one of the more effective ways that I know can help quell the thirst of envy.

Weekly reading – 31st December 2022

This is the last post of 2022. If you come across this little blog of mine or have been following, thanks and I wish you and your loved ones a great holiday.

What I wrote last week

My 2022

Business

Direct-to-clinician—How product-led growth is changing healthcare and life sciences. A really nice write-up on how the Direct-to-Clinician model is changing the healthcare landscape and powering startups that specialize in the field

The ABCs of health tech: key metrics to know and grow your business. These metrics and formulas are also used in other industries, not just healthcare. Hence, it’s helpful to have a list like this

Podcasting could be in for a rocky 2023. An interesting data point in the article: an ad agency executive claimed that only 5% of its client base submitted an advertising budget for 2023. The figure does seem unusually low, but given the uncertainty of the economy, I get where they are coming from. With that being said, I think this will be positive news to incumbent ads platforms like Google, Facebook or Amazon, just to name a few. They provide a sense of security that brands will get something for their bucks. Podcasting ads have potential, but at the moment, I don’t think they are there yet.

Are discount grocers outpacing traditional operators? I am a frequent shopper at Aldi in Omaha. I can attest that there have been more shoppers lately than in the past. The appeal of discount grocers is very simple: fewer items yet prices are hard to beat. In the time of inflation when everything is still more expensive, shoppers look for bargains. That’s exactly what these discount brands offer. They also benefit from a growing acceptance of private labels from shoppers. Private labels used to be stigmatized with low quality. That’s no longer the case. Even high-income households shop private labels nowadays which make up the majority of hard discounters’ inventory. Will these discount brands replace big box retailers? I don’t think so. But the likes of Walmart or Target will have to sell to shoppers in a different way and face pressures on margin.

The fintech reckoning is upon us. Here’s what to expect next year. Despite all the hype, rarely do I see a neobank or a fintech startup with meaningful market share, profitability and a sustainable growth trajectory. In the meantime, incumbent banks keep generating more profits and invest in their own capabilities to ensure feature parity with smaller competitors. Interest rates will persist at the current level for a few more months. Funding is more expensive to come by. The market will likely remain pessimistic next year. Investors put a premium on profitability, not growth. I expect that a lot of fintech startups will be acquired in the near future, mainly for talents and Intellectual Property. Their revenue and market share will be too small to mean anything.

($) How Southwest Airlines Melted Down. “Airline executives and labor leaders point to inadequate technology systems, in particular SkySolver, as one reason why a brutal winter storm turned into a debacle. SkySolver was overwhelmed by the scale of the task of sorting out which pilots and flight attendants could work which flights, Southwest executives said. Crew schedulers instead had to comb through records by hand. Upgrading Southwest’s technology has been a yearslong endeavor. Before it grew from a small player to a national and then international airline, Southwest didn’t need the same kinds of commercial platforms that rivals used, and developed many of its own systems instead. As Southwest grew and took on more complicated operations, such as flying outside the U.S., that has changed. SkySolver, an off-the-shelf piece of software that Southwest has customized and updated, was nearing the end of its life, the airline said.” The airline’s pilots and flight attendants have said outdated technology is part of the reason Southwest has struggled to rebound after upsets. Last year, a severe storm and an air-traffic control slowdown in Florida set off a chain reaction that rippled through Southwest’s network for several days. The airline canceled flights in a disruption that ended up costing $75 million.” There is another Reddit thread on the same issue. In the digital world we live in, companies live and die by IT infrastructure. Regarding Southwest, it’s remarkable that they let it come to this point even though the antiquated systems have been called out for a while.

Other stuff I find interesting

How cellphones transformed life at a women’s prison in Argentina. Most of our daily activities are online; which makes the lack of cellphones crippling to inmates. Although they are in prison for a reason, it doesn’t mean that they don’t deserve the right to access life essentials like we all do. I am happy for those inmates to have a little life brought back to them

Online shopping in the middle of the ocean. A practical look into how difficult online shipping is in remote areas such as Haiti or French Polynesia and how local companies are filling the gap left by giants like Amazon

($) Putin, Isolated and Distrustful, Leans on Handful of Hard-Line Advisers. What the article describes is concerning. Putin has unquestioned power in Russia, yet he is surrounded by hard liners that don’t have the courage to give him true facts and intelligence. Worse, some factions in the Russian government are willing to tap into Putin’s desire to restore Russia to what it once was, in order to advance their career regardless of consequences. The war in Ukraine is an example. And from what goes on in the article, it may not be the last example.

Stats

Salesforce predicts that holiday shopping returns this year will increase by 57% year over year

Gartner forecasts that global IT spending will reach $4.7 trillion in 2023

3 out of 4 developers surveyed by StackOverflow use Visual Studio as the preferred Integrated Development Environment

Vietnam GDP grows 8.02% in 2022; fastest expansion in 25 years

My 2022

Here is what happened to me in 2022

Books

I read 16 books in 2022 and reviewed some of them:

Blog

I published 112 entries this year, the lowest since 2019, and gained about 50 more followers, despite virtually no advertising. Next year, I’ll resolve to write more.

Fitness

In terms of fitness, I’ll give myself an F grade in 2022. Here are some data points according to my Fitness and Health app:

  • I set my daily goals of 11 stand hours, 600 calorie move goal and 50 mins of exercise for 2022. I closed all three rings only one every two days so far this year
  • 681 active calorie on average
  • 41 minutes of exercise
  • 14 hours of standing
  • 6,032 steps every day
  • 1,000 Apple Fitness+ workouts, including 250+ Yoga and 100+ HIIT

Another F grade in 12 months is NOT an option.

Diet

I spent half a year on a Mediterranean diet and the other half consuming more carbs than I should. Plus, I am a snack lover. My friends and wife never waste a chance to remind me that I snack too much. The goal next year is to limit the amount of carbs & to snack more healthily.

Immigration

I went back to Vietnam for my wedding. As a result, I had to get an H1B visa from the Consulate. Back to the US, I had to extend my H1B status while continuing my Permanent Residence process.

My wife got a tourist visa to visit my back in February. Then, she had to get an H4 visa to relocate to the US. As my spouse, she is also participating in the PR process while trying to secure an H4-based work permit.

All of those paperworks are time-consuming, expensive and frustrating. But we know we are lucky enough to even have an opportunity. I just hope that it will be over next year and we can share our experience with whoever needs it.

Self-improvement

Mentoring

I love mentoring people at work. Apart from the good feeling of know that I helped others, I benefit from being a mentor myself in multiple ways. First of all, I must make sure I don’t embarrass myself and I don’t give bad advice. As a result, I am motivated to validate what I know and deepen my knowledge at work even further. Second, I improve as a communicator as well. No matter how technically good you are, none of that matters if you can’t communicate. It’s a challenge to break down complex and technical issues in layman’s terms. I still have a long way to go, but I am better at it than I was in 2021. Last but not least, I learn what I am terrible at. Patience and occasionally control of my emotions. One of my interns candidly told me that he knew I was demanding and I didn’t do it on purpose, but I was harsh to him a couple of times. I took that feedback to heart and am working on it.

I have worked with 4 interns and a colleague this year. There are successes, but there are also failures. Personally, I learned a great deal from mentoring folks and am thankful for that.

“Just start”

High intensity interval training (HIIT) is a staple of my exercise routine. HIIT helps burn a lot of calorie in a short amount of time. Very useful to people that want to stay healthy yet are short on time. At the end of each HIIT session, I am satisfied and proud of myself after enduring physical challenge for about 10-30 mins. But it’s not mentally easy to press the “Start” button. No matter how much I practice HIIT, I still feel deterred and intimidated when I think of tired quads and short breaths half way through a session. Overcoming that fear personally is more difficult than the physical strain I put on my body. But once I get going, my body responds to the challenge and adapts accordingly. The key is to just get started and see how it goes.

I have struggled to blog as much this year as I did in the past. Much as I like to use work and taking care of my family as excuses, the main reason is that I was lazy. I am not a native speaker nor am I a great writer. But I often find it easier to complete a blog entry when I sit down and just get cracking. There will often be silly words, awkward sentences and raw ideas at first before major editing, but once words flow, it gets much easier to continue and finish. All I need to do is to sit down and type.

Gratitude

My wife and I have been in the process of getting permanent residence in the US for almost two years. There has been a lot of paperwork and even a greater deal of frustration. You’d think that someone with two STEM Master’s degrees that is a law-abiding citizen with not so much of a parking ticket should be rewarded with a more permanent status. But life is anything but fair. On a few occasions, I regretted the decision to move to the US. Had I gone to Canada to study and work, I would have got PR by now. Thankfully, talking to my Indian coworkers, I was reminded that they would have to wait for years to get a Green Card. In fact, a teammate of mine only received her status a few months ago and she applied for it back in 2012. Who am I to complain?

Last week saw some of the coldest days I have ever had in Omaha since I came here in 2016. The temperature dropped to -25 Celsius degrees and wind chills were as low as -39. As tough as it was for me, such a harsh condition was even tougher for my wife who is so used to the hot climate in Vietnam and just has her first ever winter this year. But on more than one occasion, we just looked at each other and were thankful that we got a roof on our head, hot soup to warm ourselves and warm clothes to wear. Not so many people even have that luxury.

Weekly reading – 24th December 2022

Business

Fortnite Video Game Maker Epic Games to Pay More Than Half a Billion Dollars over FTC Allegations of Privacy Violations and Unwanted Charges. This announcement is devastating to Epic Games. Two record-breaking settlements in the history of the FTC that amount to more than half a billion dollars unquestionably hurts. Not only financially but also legally and reputationally. Epic Games has been involved in legal battles against Apple, claiming to fight for developers. Instead, they were caught red-handed. This case shows that Apple has a point in centralizing payments in order to protect consumers, especially minors. I am not saying Apple is perfect. Far from it. But in this case, Epic Games is the worst company on the market that brings an antitrust lawsuit against Apple. Apple lawyers cannot have a better start of the week.

($) Supply Chains Upended by Covid Are Back to Normal. “Goods are moving around the world again and reaching companies and consumers, despite some production snarls and Covid outbreaks inside China. Gone are the weekslong backlogs of cargo ships at large ports. Ocean shipping rates have plunged below prepandemic levels. “It’s obvious that freight rates peaked and began to normalize, driven by falling demand and an easing supply-chain congestion,” said Soren Skou, chief executive of Maersk. In November, the shipping company lowered its 2023 forecast for container demand—a proxy for global trade. It now expects a decline from 2% to 4%, from a maximum decline of 1% previously.

How Mastodon is scaling amid the Twitter exodus. It is fascinating that Mastodon has 2.5 million monthly active users yet is maintained as a non-profit organization by one person only

The Blackstone of Innovation. A quick overview of the Venture Capital business. I’d recommend the Venture Deals book if you were interested in the VC world and key terms that are often mentioned on the news.

Why YouTube spent the money on NFL Sunday Ticket. YouTube wants content creators to spend more time creating content for Shorts. The more content, the more eyeballs and hence the more advertising revenue. Platforms are fighting one another fiercely to keep creators and generate quality content. Even though this deal is not cheap, it does seem to serve YouTube in more than just one way

Invisible asymptotes. At a certain point, every company will have a ceiling that caps its growth curve if there is no change in strategy. Such a ceiling is called invisible asymptote. Eugene Wei wrote a great post on invisible asymptotes of some of the biggest tech names out there.

A fascinating Twitter thread on perfume ads

Other stuff I find interesting

#WorldCup on Twitter: The G.O.A.T.

($) Many Hospitals Get Big Drug Discounts. That Doesn’t Mean Markdowns for Patients.Under the program, hospitals buy drugs at reduced prices and sell them to patients and their insurers for much more, often at facilities in affluent communities. One participant is the Cleveland Clinic’s flagship hospital, which reported $1.35 billion in net income last year. The hospital doesn’t admit enough Medicaid and low-income Medicare patients to qualify for low-cost drugs under the program’s original requirements. But a quirk in federal law allowed the hospital to qualify as a “rural referral center,” despite its location near the center of Cleveland. Despite the benefits, the program hasn’t resulted in new drug discounts for low-income Cleveland Clinic patients, nor has it caused the hospital to increase the financial assistance it offers to those who can’t afford care. The charity care the main hospital writes off represents less than 2% of its patient revenue, according to a Wall Street Journal analysis of hospital Medicare filings.” How much patients would benefit if the government could look into loopholes like this and close them?

TikTok Spied On Forbes Journalists. This is very devastating to TikTok and concerning for everybody else. I deleted my TikTok app a long time ago and never regret it even for one second. Stories that surfaced recently show that TikTok gathers a lot of data on user and engages in surveillance tracking. The US government already bans TikTok on government devices. But why stops there? Why not outlawing the service throughout the US? In that case, it would badly decimate TikTok’s ads business and could probably bankrupt the company. That’s not to mention the EU that is even less forgiving on this kind of surveillance than the US. Honestly, I don’t see a way back for TikTok.

The Secret To Better Habits in 2023. A great timely read

Unpacking India’s growth, geopolitics, technology and superpower potential. “I asked him to make the strongest case he could against the growth story. He set the stage by saying India is a vast and diverse country. There is no other democracy of this size and heterogeneity in both a social as well as geographical sense. Rajeev has held a view that the Western countries want India to do well enough to be an attractive market for their own companies but that they may not actually want India to keep building economic capabilities because, with economic size and capacity, India could become more competitive in the foreign policy realm in particular.

Stats

The EU will grant €1.13bn to tech startups in 2023. Still it doesn’t seem enough in the grand scheme of things

World Cup Final Draws Record 16.8 Million Viewers for Fox

Amazon Fresh is currently operating 44 stores

Servers cost Twitter $1.5 billion a year

Weekly reading – 17th December 2022

Business

How Walmart is pursuing omnichannel profitability. Automation can indeed help retailers like Walmart pursue profitability. Increased productivity and lower labor costs are the key main drivers, However, it should be pointed out that Amazon has been using automation in their fulfillment centers for years and look at what happened to their eCommerce site. Last quarter, their profitability mostly came from AWS and their US operations suffered a loss. Walmart may have a few short-term wins, but in the long run, will the gains from automation persist?

The global microchip race: Europe’s bid to catch up. Even though the US and Taiwan are the two prominent names when it comes to chip design and manufacturing, Europe has the potential to catch up. It is home to a handful of companies that are indispensable to the industry such as Carl Zeiss SMT, ASML or Trumpf. Without them, ASML would not be able to produce extreme ultraviolet lithography (EUV) machines; TSMC would not have the equipment to manufacture cutting-edge chips; the likes of Apple would be constrained technologically and consumers would be deprived of the latest advances. However, Europe doesn’t own other pieces of the chip value chain nor does it set aside enough capital to compete with other countries. Most importantly, there is a shortage of skilled labor. Europe can address that problem by aggressively wooing talent and taking advantage of the terrible immigration policies of the US that don’t seem to get better any time soon. The question is: will they?

What the Kroger-Albertsons merger means for their private label portfolio. Putting Kroger’s private labels in Albertsons stores and vice versa is an interesting idea, but it would also come at a cost. What makes private labels valuable to retailers is the exclusivity. Breaking that exclusivity may lead to cannibalization of store revenue and perhaps some unintended and unforeseen consequences. What I am interested in is the bargaining power that the combined company would have over suppliers for their private labels. A roster of private labels worth $40 billion in annual revenue must command a lot of respect.

Bob Iger vs. Bob Chapek: Inside the Disney Coup. Great reporting into the frayed relationship between Chapek and the CFO as well as that between Chapek and Iger. Hiring is hard. The fact that Chapek was Iger’s pick and he personally wrote a public recommendation for him just for Iger to be disappointed at his successor is high-profile evidence of that. Moreover, Christine took a lot of risks by pitching Iger on the prospect of returning to the CEO spot and taking the idea to the board. But she did so reportedly from the place of love. You have to love the place you work for enough to rush to a return from a battle with cancer while caring for a sick spouse. Last but not least, I do think the board and Iger himself have to take responsibility for the mess that Disney has been through.

Visa to invest $5 billion in Africa in the next 5 years. There are half a billion people that are unbanked in the continent. Africa is also home to the youngest population on Earth. The growth prospect is limitless. And that’s why Visa commits this amount to tap into that growth. Apparently, their rival Mastercard shares the same feeling

Other stuff I find interesting

($) California Long Ruled U.S. Shipping. Importers Are Drifting East. “The hierarchy of U.S. ports is getting shaken up. Companies across many industries are rethinking how and where they ship goods after years of relying heavily on the western U.S. as an entry point, betting that ports in the East and the South can save them time and money while reducing risk. The share of all U.S. containerized cargo handled by Los Angeles and a neighboring port in Long Beach fell through the first 10 months of the year to a combined 25% as measured by weight, according to census data analyzed by Jason Miller, interim chair of Michigan State University’s supply chain management department. That was their lowest level in nearly two decades, down from a height of 33%

New Zealand bans young people from buying cigarettes for life. I honestly cannot think of a good reason to smoke cigarettes. The argument that small convenience stores would go bankrupt due to lost cigarette revenue should not stop a government from looking out for its citizens.

TikTok’s Secret Sauce. An interesting theory but there doesn’t seem to be a lot of evidence to back up.

Stats

US Vegetable Prices Soar Nearly 40%

Only a quarter of US iPhones are sold through Apple

Nov. ’22 U.S. eGrocery Sales Total $7.7 Billion, a 10% Drop Versus Year Ago

Source: unctad.org

Weekly reading – 10th December 2022

Business

Who will be Disney’s next CEO? Here are the top contenders to succeed Bob Iger. Disney is a textbook case of a company’s failure to make succession right. Bob Chapek was fired unceremoniously after a bit more than 2 years on the job. Bob Iger is back for what seems to be like the 100th time. None of the internal candidates mentioned in the article seem to have the skillset that emulates that of Bob Iger. The ones that do were passed over for the CEO job. If they weren’t picked then, why would they be this time around after 3 years away from the company?

TSMC to up Arizona investment to $40 billion with second semiconductor chip plant. This TSMC plant is the largest foreign investment in Arizona and one of the largest in the US history. Once completed, it will have enough capacity for chip demand in the US and produce the most cutting-edge chips (3 and 4 nanometers). In my view, this is a great move. TSMC can bring supply closer to the largest market in the world and reduce the geographical risk of being close to China. The US will house a strategic investment on its soil and also decrease its exposure to a take-over of Taiwan by China. Additionally, this will bring hundreds of jobs to Arizona and the US

In-store bakery is becoming a consumer magnet. “In-store bakery is becoming increasingly attractive to consumers, according to a new report. A whopping 95% of shoppers consume products from the department at least occasionally and 63% do so weekly, according to the “Power of In-Store Bakery 2022” report, published by the Food Marketing Institute (FMI). Among the shoppers who visit the in-store bakery weekly are Millennials (35%), urban dwellers (42%); large households of three or more persons (49%); and households with an income of at least $120,000, the report says.”

Disney’s CEO drama explained, with Julia Alexander. Julia Alexander is the Twitter account that I go to for anything media-related. This is a great interview and there are a lot of important nuances that media coverage on Disney and the Bobs missed

($) Former Apple Executive Says Company Blundered by Firing Him After TikTok Video. This should be a good case to be discussed in Ethics and Business Management classes. Apple was in a “I’ll be damned if I do, and I’ll be damned if I don’t” situation. Tony Blevins played an integral role in the Apple empire and to be frank, there was an argument to be made that his firing was too harsh. On the other hand, as he held a high-level position, the expectation on him was much higher. How would Apple maintain the culture if employees thought they were partial to Tony because he was higher up on the food chain?

Other stuff I find interesting

Why wind energy isn’t living up to its pollution-preventing potential. Wind energy has become increasingly important across the US, making up 10% of the country’s electricity mix today. A new research has proven that wind energy is linked to improved air quality, but such benefits are not the same to different communities. “Only 32 percent of those benefits reached low-income communities. And just 29 percent reached racial and ethnic minority populations. People of color are 3.6 times more likely to live in counties with multiple failing air pollution grades. Low-income communities in the US have also been consistently exposed to more particulate pollution than more affluent neighborhoods.”

($) Where Does All the Cardboard Come From? I Had to Know. A long interesting piece on the cardboard economy. “Cardboard manufacturers broke production records in 2021, and they’ve been breaking them basically every quarter since. By 2025, according to one estimate, the size of the international market for corrugated packaging will reach $205 billion, commensurate with the gross domestic product of New Zealand or Greece. In 2020, for example, the world’s paper and cardboard factories produced an estimated 400-million-plus metric tons of product; by 2032, analysts have predicted, that number will rocket to 1.6 billion metric tons, the weight of 16,000 aircraft carriers. Safe to say that never in human history have we relied on one kind of mass-produced packaging material for so much, and certainly not at such scale. “

A $100 Billion Lesson In Why Building Public Transportation Is So Expensive in the US. Pete Buttegig and The Department of Transportation should look at this article and take appropriate actions to address what I consider a national embarrassment.

Face to face with ancient Egyptians. Scientists use technologies to craft ancient Egyptians’ portraits based on mummies. Fascinating!

Uruguay is plotting to poach Argentina’s tech sector. “As the infrastructure of cities from Bali to Mexico City creaks under the strain of new digital-nomad arrivals, Uruguay’s luring of Argentines is different. Uruguay, whose population hasn’t grown significantly in 30 years, has opted to leverage its own labor shortage — which, for years, has contributed to holding back its burgeoning tech scene — with the economic upheavals of neighboring Argentina. Between 2020 and 2021, more than 21,415 Argentines applied for permanent or temporary residency in Uruguay, six times more than the requests accumulated in the previous two years combined. Starting in mid-2020, Uruguay’s center-right government extended tax breaks for foreign earners living in the country, and lowered residency requirements. Software companies pay no income taxes. “

Nigeria limits ATM withdrawals to boost digital payments. “The central bank has sent out a circular to lenders cutting the daily cash machine withdrawal limit from 150,000 naira to 20,000 naira, according to Bloomberg. Weekly cash withdrawal limits of 100,000 naira for people and 500,000 naira for corporations have also been set. The limit is the latest effort by Nigeria to discourage cash usage. The country is set to redesign high-value notes and is giving people until January to switch out their old paper money.

Stats

US-based small businesses had $1 billion in sales on Amazon between Thanksgiving and Cyber Monday

According to an EU-funded survey, one in four 16-19-year-olds in Europe engaged in online trolling last year

In 2021, U.S. corn was worth over $86 billion

Source: Science.org

Weekly reading – 3rd December 2022

What I wrote last week

My notes from the 2022 McKinsey Global Payments Report

Business

($) Adidas Top Executives Discussed Risk of Staff’s ‘Direct Exposure’ to Kanye West Years Ago. This mismanagement and scandal raise a serious red flag on Adidas. The influence of Kanye West impacts the company’s financials so much that it put up with the artist’s horrible and childish behavior for so long. Despite repeated complaints from employees. Is it really worth putting an iconic brand through the mud?

($) Why America Doesn’t Have Enough EV Charging Stations. “The government is pouring billions of dollars into developing a national highway charging network. But businesses aren’t sure how they will make money, and the nascent industry looks messy. Utility companies and gas stations are at war with each other over who will own and operate EV chargers. Rural states say some charging stations could operate at a loss for a decade or more. New companies that provide charging gear and services are contending with the equipment’s spotty reliability. The network’s build-out has a chicken-or-egg quality: EV advocates say many drivers will only be comfortable purchasing vehicles if rapid charging is as easy as using a pump at a gas station. Yet businesses interested in offering charging say they can’t make money until more EVs are on the road. Around 1% of U.S. drivers own EVs, but wait lists are growing and auto makers including General Motors Co. and Ford Motor Co. are expecting EV sales to keep rising. Wisconsin’s Dairyland Power Cooperative told the Biden administration in August that sparsely used chargers in the northern part of the state would likely “operate at a loss for years” and that rural areas need flexibility in planning. Maine officials said the operation of some sites may need government subsidies because they won’t turn a profit for a decade. Wyoming estimates that no rural charging station built to the requirements the federal government expects—four chargers placed every 50 miles along highways—would be profitable until the 2040s.”

It’s not your imagination: Shopping on Amazon has gotten worse. The article is a serious warning to Amazon, its executives and shareholders. It reflects my experience with the website lately. Search results are no longer authentic. Most are driven by ads. Items are delivered improperly. Wait times get longer. Prices are no longer competitive. It’s a far cry from what it was 2 or 3 years ago. Once consumers leave, what’s left for Amazon to hold on to?

($) Apple Makes Plans to Move Production Out of China. Trade wars and the unrest in China are making it difficult for Apple to continue to rely on the supply chain network in the country. It is not a surprise that Apple is hedging its bets by moving some production to other countries, but I don’t expect to see the fruits of this effort any time soon. Apple will have to find a country where it’s more stable and friendly to do business; to find partners that have the human and technology capital to handle the workload; to work out the logistics part to link every piece of the supply chain jigsaw. That’s not easy by any means

Source: The Transcript
Cumulative Gross Merchandise Volume Processed By Shopify During Black Friday. Source: Tobi Lutke

Other stuff I find interesting

($) It’s Public Land. But the Public Can’t Reach It. Before reading this piece, I didn’t know that there were acres of public lands that could not be reached because they were surrounded by petty private land owners. In fact, there are 15 million acres of federal and state land that is “landlocked” by private properties. This phenomenon begs the questions: who gets to go where and how do citizens get to public land without being charged of trespassing?

The dirty road to clean energy: how China’s electric vehicle boom is ravaging the environment. People praise electric vehicles for their impact on climate change because they are not emitting carbon dioxide. Well, these EVs require batteries which force us to destroy the environment to build. When we tally up everything we do to get EVs on the roads, are they still a net positive to our life and environment? That argument looks shaky now

New energy storage technologies hold key to renewable transition. “Long duration energy storage (LDES) generally refers to any form of technology that can store energy for multiple hours, days, even weeks or months, and then provide that energy when and if needed. It is a technology that is essential if the world is to increase the proportion of renewable energy, given it is an inherently intermittent source. The Long Duration Energy Storage Council, launched last year at COP26, reckons that, by 2040, LDES capacity needs to increase to between eight and 15 times its current level — taking it to 1.5-2.5 terawatts (85-140 terawatt hours)— to enable a cost-optimal net zero energy system.

Apple’s iPhone 14 Emergency SOS via Satellite Feature Saves Stranded Man in Alaska. Saving one life is already worth having this feature in my opinion.

Stats

2022 Black Friday sales exceeded $9 billion

Harvard Business Review has 220,000 subscribers who pay for print and digital access, half of which are digital readers only

By 2027, data centres will consume 31% of Ireland’s electricity

An estimated 37 per cent of the world’s population – or 2.9 billion people – have still never used the Internet.

Death from road accidents, per million people from OECD countries. Source: NYTimes
Black Americans are most likely to live alone. Source: NYTimes

The 2022 McKinsey Global Payments Report

McKinsey just released a long yet insightful report on global payments. If you haven’t decided whether to spend time on reading it fully, here are my notes

Asia’s payment revenue is half of the global payment revenue

In 2021, payment revenue in Asia reached $1.1 trillion and was as large as that of the rest of the world combined. North America has the highest revenue per capita at $1,424. The composition of payment revenues varies from region to region. Half of North America’s revenue came from Consumer and credit card made up 50% of all Consumer, the same trend observed in Latin America. Meanwhile, Consumer was only 37% of all Asia’s revenue. McKinsey predicted that global payment revenue would grow by 9% every year between now and 2026, with most of the growth stemming from Asia and North America.

Global Payment Revenue in 2021
Figure 1 – Global Payments Revenues in 2021
Global Payments Revenue - 2012-2026F
Figure 2 – Global Payments Revenue – 2012-2026F

Cash usage varies, depending on where you look

Cash is not a popular payment method in Europe and especially some countries like Norway, where the usage dropped to 3%. The pandemic accelerated the process to move away from cash in Czech Republic and Greece, where the use of cash dropped by 12 and 15 percentage points between 2019 and 2021. On the other hand, hard cold cash is still the most popular in other areas. In Africa, 95% of all transactions in 2021 involved cash. Cash still dominated in-person point-of-sale (POS) transactions in Southeast Asian markets. It made up 63%, 54%, 51% and 48% of POS transaction value in Thailand, Vietnam, Indonesia and Philippines respectively. In Latin America, the figure was 36%.

This presents a huge opportunity for growth to the likes of Visa or Mastercard and future fintechs.

Central Bank Digital Currency

Roughly 90 percent of the world’s central banks are pursuing central bank digital currency (CBDC) projects. Some, including those in the United States and South Africa, are at the exploratory phase; others are development projects (the European Union) and pilots (China). In some locations, including Nigeria and the Bahamas, solutions are already operable, and central banks are looking to expand. Despite the high level of activity, most CBDC initiatives today remain in the nascent stages of market development and, in many cases, even technical design.

CBDCs differ fundamentally from other forms of digital coins in that they are directly backed by central bank deposits or a government pledge. Therefore, they offer stable value and can aim to combine benefits in the areas of trust, regulatory stability, and audit transparency. CBDCs can be deployed under a variety of technology models, depending on a central bank’s desired objectives and use cases. CBDCs do not necessarily rely on decentralized technologies, as they can be administered by central bank agents as well as distributed via digital-ledger technologies. They can be held on physical devices such as cards or phone wallets or exist as a purely digital book entry. They can be issued as stand-alone tokens (stored at any of multiple carriers) or as account-based assets held directly at the central bank.

Wholesale CBDCs mostly target financial institutions (banks and nonbanks) and large corporate treasury centers as their primary users, and they aim to improve the efficiency of settlements—both payments and securities, domestic and cross-border. This may or may not involve providing nonbanks with direct access to central-bank accounts.

Retail CBDCs target consumers and local businesses as end users, with possible use cases including disbursement of social benefits, an alternative to cash for e-commerce point-of-service and bill payments, and enabling of seamless peer- to-peer transactions for banked and unbanked users. In more complex initiatives, CBDCs combined with smart contracts,6 such as the Bank of Israel’s initiative, aim to improve payments convenience. Examples include payment of sales tax directly to tax authorities at point of sale and automated distribution of social benefits for economic relief conditioned on the recipients meeting defined requirements.

Nigeria became the first African country to introduce a digital currency with the October 2021 launch of retail CBDC eNaira. Its intended bene- fits include faster and more equitable distribution of cash assistance to households and communities participating in social welfare programs, lower transaction costs and faster settlement, efficient cross-border transaction capabilities, and traceability and security to limit fraud. The eNaira app garnered almost 800,000 downloads in the first seven months following its launch. According to some reports, half of those downloads have not been activated. Merchant adoption of digital currency has been similarly limited, with fewer than 100 active retailers accepting eNaira payments as of May 2022—a small number, given Nigeria’s status as Africa’s largest economy.

The low initial uptake of eNaira has been attributed to limited knowledge of the CBDC and how it functions, fear of exposure to security breaches, and poor internet access in some regions. In response to these challenges, the Nigerian government recently announced that eNaira will be made available on feature phones via Unstructured Supplementary Service Data (USSD), which will expand the potential market by 100 million citizens on top of the current 25 million to 40 million smartphone holders.1 The government also recently sponsored a hackathon to promote visibility and identify key feature and technology improvements.

Instant Payments

Instant payments are inching towards the inflection point of mass adoption. Usage doubles annually in countries like India, Spain and Thailand, increases by 50% every year in Australia and Singapore, and grows at double-digit rates in China and the UK. In India, UPI has 260 million users, 300 registered banks and 6 billion transactions a month. In Brazil, Pix has reached half of the population and more than 775 registered institutional participants, including banks, government agencies and others. In the US, instant payments’ growth rates have exceeded 60%, but the volume is relatively small.

Wallet

Digital wallets play an important role in consumer life and payment landscapes in several markets across the globe. In the Philippines, Vietnam and Indonesia, wallets account for 31%, 25% and 39% of transaction value respectively. In the Philippines, the majority of adults in the country are users of the top two wallets, GCash and Maya. In Brazil, 70% of the respondents to a recent survey said they use digital wallets, even though the transaction value and frequency still remain low.

To offer more utility to users and find revenue, wallets look to partnerships and other areas beyond just payment. Ride-hailing apps like Gojek and Grab go into groceries and other categories with higher ticket size. In Africa, M-Pesa forms partnerships to offer services in e-Commerce, travel, health, agriculture and other areas in order to become a Super App. In Latin America, Rappi, which is a Colombia-based Uber-like service with more than 30 million users, adopts the same approach and offers e-Commerce, insurance and loyalty points. In Vietnam, Momo is a formidable and popular wallet. Shortly after launch, Momo partnered with every telecommunications network in the country to enable airtime top-ups as the strategy to acquire users and grow. Since then, the partnerships and Momo’s business have expanded. Nowadays, Momo is everywhere in major cities like Hanoi or Ho Chi Minh City. You can pay for a bowl of soup on the street by asking the merchant for their QR code. Plus, users can buy a lot of things such as online-gaming credits, airline tickets or movie passes.

In the Philippines, in order to provide more utility to users, GCash launched GSave and GInvest to enable savings and investments on its app. The recently launched Maya app follows the same playbook. In India, Paytm is now a functional bank which can broaden its offerings to lending products.

We will undoubtedly continue to see the growth of wallets everywhere in the world. But they are all under pressure to deliver profitability, not just growth. The question then becomes: can they become profitable like incumbent banks faster than banks can gain feature parity?

Other observations

Debit cards have extended their lead as the most used card product, with 94 transactions per capita globally, versus 49 for credit. The share of debit card among overall electronic transactions is highest in Russia (84 percent), followed by Norway, Ireland, and Romania (each roughly two-thirds).

The digitization of commerce and business management has massively expanded opportunities to embed finance in nonfinancial customer experiences. As much as 33 percent of global card spending—50 percent in the US—now takes place online, with a large portion of small and midsize companies in the US relying on software solutions for managing their business.

10 percent of UK adults reported holding, or having held, a crypto asset. The European Central Bank (ECB) has indicated that as many as 10 percent of households in six large EU countries owned digital assets. And roughly one-fifth of respondents to a McKinsey survey—22 percent in India, 20 percent in Brazil, and 14 percent in the US—reported that they held digital assets as part of their financial portfolios 

Globally, between 2018 and 2021, the number of noncash retail payment transactions have increased at a compound annual growth rate of 13 percent; while in emerging markets, that figure is 25 percent. Some of the fastest growth occurred in emerging markets in Africa (Morocco, Nigeria, and South Africa) and Asia. Strong growth is expected to continue in some emerging markets over the next few years, with projected CAGRs of 15 percent between 2021 and 2026.