Weekly readings – 25th July 2020

What I wrote

Slack filed an antitrust complaint against Microsoft over Teams to the EU. On the surface, I don’t think Slack is going to win the case, if the EU decides to formally launch an investigation. How Microsoft structures their Microsoft 365 offers does give customers a choice to include Teams or not, a counterpunch to the core of Slack’s complaint. I wrote my thoughts here

I also wrote about matcha, how it can beneficial to our health and why it and its accessories are expensive

Business

In investing, when truly exceptional opportunities present themselves, Charlie Munger said: use a shovel, not a teaspoon

Both strategies yield the same result: that foreign affiliate employment increased as a direct response to increasingly stringent restrictions on H-1B visas. This effect is driven on the extensive and intensive margins; firms were more likely to open foreign affiliates in new countries in response, and employment increased at existing foreign affiliates. The effect is strongest among R&D-intensive firms in industries where services could more easily be offshored. The effect was somewhat geographically concentrated: foreign affiliate employment increased both in countries like India and China with large quantities of high-skilled human capital and in countries like Canada with more relaxed high-skilled immigration policies and closer geographic proximity. These empirical results also are supported by interviews with US multinational firms and an immigration lawyer

Source: NPER

How Ben & Jerry’s Perfected the Delicate Recipe for Corporate Activism

A look at how influential Facebook is in Bangladesh

Apple’s report on their sustainability progress

Where banks really make money on IPOs

An investigative piece by WSJ that looks into accusations that Amazon used confidential information accessed through its investment arm to launch competing products.

Shopify Saved Main Street. Next Stop: Taking On Amazon

An interesting piece on what appears to be a change in strategy for Apple TV+. This streaming space is highly competitive. I look forward to how Apple will compete with other heavyweights. On a side note, I really enjoyed Greyhound. You should give it a try

Technology

Giving GPT-3 a Turing Test

A good blog post on the behind-the-scenes technology that changed air travel

A report commissioned by Apple on commission rates of other marketplaces, compared to Apple Store. It’s an interesting study and it’s definitely good to have all the facts in one document. On the surface, Apple Store’s commission rates don’t look outrageous, compared to those of other marketplace platforms. However, the debate doesn’t end only at take rates

What I think is interesting

The Last Hunter Gatherers

A great write-up on beaches in Quy Nhon and Phu Yen in Vietnam. If you visit my country, I highly recommend that you go there. Wonderful beaches, few tourists, and great sea food

For years, African countries have taken loan money for China to improve their infrastructure and economy, in exchange for the use of these countries’ vast reserve of rare metal and resources. Now, a report said that Africa is more aware of the strings attached to loans from China. For a good reason!

Slack’s complaint against Microsoft

Disclaimer: I own Microsoft stocks in my personal portfolio.

Today, Slack filed an antitrust complaint against Microsoft in the EU over Microsoft Teams. Here is what Slack says in their blog

The complaint details Microsoft’s illegal and anti-competitive practice of abusing its market dominance to extinguish competition in breach of European Union competition law. Microsoft has illegally tied its Teams product into its market-dominant Office productivity suite, force installing it for millions, blocking its removal, and hiding the true cost to enterprise customers.

Slack’s objective is to force Microsoft to unbundle Teams from Microsoft Office 365 and sell it as a separate feature. The company reportedly had been discussing legal matters concerning Teams with the US authority for a while (per WSJ), but just decided to launch a formal complaint today. Given what has happened between the EU and big tech companies, it’s not difficult to see why Slack lodged the complaint there. Last year, the EU fined Google almost 1.5 billion euros for abusive practices in online advertising. It is also looking into Apple’s antitrust behavior with App Store rules. In 2004, Microsoft was fined half a billion euros for bundling Windows Media Player into its Windows. Perhaps, Slack is banking on the fact that the precedent and the current events as of late will be favorable to them in this case.

When I read the main part of the complain above, I was a bit surprised. My company is a bank in a highly regulated industry. We use licensed Microsoft Office 365, yet Cisco Jabber, not Teams, is our chat and video application. I don’t have a lot of confidence in our IT department to think that they can go around Microsoft and remove Teams if it’s not allowed by the Seattle-based company. In fact, if you look at how Teams is marketed, you will see that there are options to customers. There are three ways to get Teams: Office 365 Enterprise, Microsoft 365 Business and Microsoft 365 Enterprise. I know it’s not the easiest thing in the world to differentiate between the three, but here are the plans

Figure 1 – Office 365 Enterprise. Source: Microsoft

Figure 2 – Microsoft 365 Business. Source: Microsoft

Figure 3 – Microsoft 365 Enterprise. Source: Microsoft

As you can see from the three figures above, customers have at least one option in each category that allows them to use Microsoft Office 365 without Teams. To be clear, the screenshots above do not capture all features under each plan. It’s plausible that the other features which are not shown can force businesses to choose plans that only come with Teams. As a result, there are two points I want to make:

  • On the surface, the claim that Teams is forced on customers doesn’t seem true. Customers do have a choice to use Teams or not.
  • If Microsoft uses some indirect tactics to force Teams on customers, the onus is on Slack to prove it. However, the fact that companies whose products compete with Microsoft’s such as Slack, Cisco, Zoom, AirTable or Tableau, just to name a few, have a market does seem to me that it’s entirely possible to use non-Microsoft applications in addition to the popular Microsoft Office.

From Microsoft’s side, the company issued this following statement:

We created Teams to combine the ability to collaborate with the ability to connect via video, because that’s what people want. With COVID-19, the market has embraced Teams in record numbers while Slack suffered from its absence of video-conferencing. We’re committed to offering customers not only the best of new innovation, but a wide variety of choice in how they purchase and use the product.

source: Techcrunch

A big advantage that Microsoft has over Slack when selling a competing product is that the former, in most cases, already has an established relationship with customers through Microsoft Office and other products. To sign any customer, Slack has to cultivate the relationship from scratch. The task is even made more difficult when Slack has to convince potential customers to make additional investments, on top of what they already pay for Microsoft applications. Imagine if a company already pays from $5 to $35/month for every one of hundreds of employees to use Microsoft Office, in case Teams is included, there has to be a very good reason why it should incur more expenses to use Slack.

The last publicly revealed figures put Microsoft Teams and Slack at 75 million and 12 million daily active users, respectively. Microsoft revealed that in Q4 FY 2020, there were 69 organizations that had more than 100,000 users of Teams, up from 20 organizations in Q3 FY 2020. In the past, Slack insisted that Microsoft Teams isn’t a true competitor to their product; a claim that I found bewildering. It’s clear that Slack has a big problem at hand and the fact that they are formally complaining about Teams contradicts the previous claim.

I am all for competition as it benefits end users. If Microsoft deployed underhanded tactics during negotiations with companies and it’s not publicly known or if Slack can prove that the dizzying and head-scratching offerings by Microsoft indirectly force customers’ hands, by all means, I do think Microsoft should be held accountable. However, I am not convinced that it’s harmful to the end users that Microsoft can offer value through bundling and establish a direct relationship with customers more easily than Slack. Microsoft has to invest a lot of resources in building and maintaining a lot of other features, not just Teams.

The difference between the 2004 case and this, I suspect, is that Microsoft didn’t give users a choice whether they wanted to install Windows Media Player while they do with Teams, at least on the surface. My guess is that Slack’s complaint won’t go any far, but it’ll be interesting to see how this actually pans out.

What do you think about this complaint from Slack? Let me know in the comment. Have a good day and stay safe!

A bit about matcha, how it can benefit your health and why it’s expensive

I have recently taken up a habit of consuming matcha. It is refreshing in this hot weather to drink an iced latte matcha that mixes plant-based milk such as soy or almond milk with the green matcha powder. Apparently, matcha can be pretty good for your health for several reasons, as follows:

Each food has been measured for their antioxidant capacities, in a unit called ORAC (Oxygen Radical Absorbance Capacity). List of ORAC-rich food items – Source: matcha

It can be expensive

There are two main and popular grades of matcha: ceremonial and culinary. Ceremonial grade is the highest grade of matcha that is made of very young tea leaves and requires a lot more care during the process. Hence, it’s quite expensive. Ceremonial grade matcha reportedly has a delicate flavor and should be used in tea ceremonies only. On the other hand, culinary grade match is cheaper because it reportedly is made of tea leaves that are young, yet older than those used to make ceremonial grade. Culinary grade can be used in baking, cooking and beverages.

To get a sense of how expensive matcha can be, take a look at the listings on Amazon for “matcha green tea powder” keyword

Source: Amazon

I buy my matcha from a local shop called The Tea Smith in Omaha. One ounce of culinary grade matcha from The Tea Smith costs $4.5. There is a cheaper alternative that costs only $2.5 per ounce. It is cheaper because it mixes matcha powder with sugar cane. It baffled me as to why matcha is expensive. I did a little research and apparently, the process of producing matcha is quite laborious and unique. Tea leaves have to be shaded from sunlight a couple of weeks at least before they are picked. After they are picked, they go through several steps of steaming, air-drying and removing stems & old leave parts. In the end, there are only soft particles left, which weighs about 1/10 of the original leaves. The particles are then stone-grounded, using uniquely crafted and carefully maintained stone mills. Each mill produces only one ounce or 30-40 gram of matcha per hour.

There is also a Chasen

A Chasen is a whisk specially used to mix matcha powder with water. I bought my whisk for $18.5! I was shocked at the price at first, but would soon understand the reason why after I learned how Chasens are made. Watch the videos below to know how they are created. Trust me, you’ll be blown away by the craftsmanship, patience and incredible talent of the Japanese

This video touches a little bit more on the hachiku bamboos used in the matcha whisks.

In sum, even though regular consumption of matcha can cost a bit, I do think I will continue with this habit in the future, unless there are scientific studies proving that matcha is hazardous to humans. I think given that matcha is linked with a lot of health benefits, it’s a cheap investment into the most valuable asset one can have. Also, as I learned about the art of producing matcha and Chasen, my already big admiration and respect for the Japanese craftsmanship and culture only grew bigger.

Let me know what you think about matcha. Stay safe and have a nice weekend!

Weekly readings – 18th July 2020

What I wrote

Uber’s latest chess moves

An interview with AirBnb CEO Brian Chesky on the future of his company and travel

What I think of a potential Twitter subscription feature

A groundbreaking and disheartening study on violence against women in Vietnam

Chris Evans started a project to facilitate communication between voters and elected officials. It’s called A Starting Point

Business

Kroger conducted a test in which they moved plant-based meat into the meat section at some select stores. The test proved that the move lifted sales of plant-based meat. This is great news for suppliers such as Beyond Meat and environmentalists.

In the past, I was somewhat bearish on Netflix’s prospect, but I have grown more bullish over the past year. The high retention figure below bolsters the new position

Source: Second Measure

Lidl’s entering the Long Island market caused competitors to reduce item prices by 8% to 15%. It’s worth noting that Lidl commissioned the study, but it was independently conducted.

Amazon is formidable in online grocery. The company leads many aspects in the latest study on consumer satisfaction with online grocery services.

Technology

US Netflix Subscribers Watch 3.2 Hours and Use 9.6 GB of Data Per Day

This company presents an interesting concept when it comes to encryption. Slack-rival Element wins largest ever collaborative software deal

A government’s role in stimulating demand and widespread adoption of next generation products is at play here. Europeans get substantial subsidies for electric cars from their government

How SHA-2 Works Step-By-Step (SHA-256)

What I think is interesting

According to JP Morgan, 19% of eCommerce transaction value in Vietnam in 2019 was through digital wallets while 34% was through debit and credit cards

How Parmesan cheese is made and how you can identify the real Parmesan cheese. Fascinating stuff

I didn’t know there is a company that has an exclusive deal with airlines to buy lost luggage

‘Absolutely No Mercy’: Leaked Files Expose How China Organized Mass Detentions of Muslims

Scale and Loyalty are more important online than offline

The competition for immigrants will heat up soon as women are giving birth less, especially in developed countries

Graph of number of children women have
Source: BBC

A starting point – where you start getting to know your elected officials

I came across this project whose one of the founders should be familiar enough to you – Captain America himself Chris Evans. A Starting Point (ASP) is created in order to “create a bipartisan channel of communication and connectivity between Americans and their elected officials with the goal of creating a more informed electorate“. Elected officials, whether they are Governors, Senators, Congresspeople or state officials, can use this platform to communicate their thoughts, demystify some complex issues or debate with colleagues with different ideologies. On my count, there are approximately 150 contributors already on the site on various levels and from both parties. Below are a few key features of ASP

StartingPoints

In this section, you’ll find some popular questions that can help viewers understand a little bit better some complex issues. In each question, you’ll hear from several officials from both sides of the aisle articulating their thoughts and explaining their answers to the questions.

Figure 1 – Source: A Starting Point
Figure 2 – Source: A Starting Point
Figure 3 – Source: A Starting Point

CounterPoints

In this section, you’ll listen to two officials, each from a different party, debating in one-minute videos on an issue. There are back-and-forth arguments followed by closing remarks.

Figure 4 – Source: A Starting Point

DailyPoints

This section is an open forum that allows officials to connect with their constituents on a daily basis about all kinds of topics in one-minute-long videos. Some Democrats already talked about the importance of masks on this section.

Figure 5 – Source: A Starting Point

IntroPoints

On this sub-section, you’ll learn a little bit about the background of these officials, such as what inspired them to go into politics?

Figure 6 – Source: A Starting Point

My thoughts on this project

I think it’s a great idea. I used to work for an IT company in Omaha, Nebraska. Once, I talked to a couple of my American colleagues and to my surprise, they said that they didn’t actually know much about the elected officials in their districts or state. I bet it’s not uncommon. Our daily hustle and distractions don’t leave us much time into knowing about prospect or current officials; which is a shame, but understandable. The problem is that who we vote for matters a lot in our life. Not only can officials represent us on a state and national level, but they pass legislations that directly and significantly influence our life. Hence, being informed of what the officials are about and what stance they have on certain issues is hugely important in elections. And this project is clearly helping constituents across the country with that.

I think short videos are a good choice to deliver content. The limitation on length of videos forces officials to be concise in their delivery and not to digress. Policies are not sexy. People tend not to spend a lot of time on long videos on policies. Therefore, short videos can be more appealing. However, there is also a drawback. Most issues are pretty complex. Short form videos may unintentionally lead to generalization and omission of important nuances.

It is essential that voters are as informed and have a balanced view as much as possible on issues. An appearance by an official on a news channel doesn’t come with counterpoints from the other side. There are debates on the House and Senate floors, but who will watch those debates that can last for hours? Having different viewpoints on one issue in one place is beneficial to voters who want to learn more about pressing issues. Throughout its website, I think ASP wants to accomplish that. Either StartingPoints or CounterPoints, you can see Democrats and Republicans present their thoughts and ideas. As a result, viewers can take away different points of view and leave with a balanced dose of information.

Even though this is a good starting point, pun intended, there are challenges. First of all, there are A LOT of big topics that are not covered on this website. Under each existing topics, there are a lot more questions to be asked and discussed. Chris Evans and his team still have a long way to go, but everything has to start somewhere and the website has been live for only a couple of days. So, I wanna give them the benefit of the doubt and think that they’ll make the content richer.

Secondly, ASP needs to build an audience in order to get politicians speak their minds more. Nowadays, politicians have multiple channels through which they reach constituents such as news channels, op-eds, social networks or their own websites. The only way that they will generate content for ASP is that their constituents frequent the website, giving politicians a reason to spend time on content for ASP. The star power of Chris Evans will initially bring traffic, but the site cannot rely on Chris forever. It has to grow organically.

The next challenge that I can think of will be content moderation. At some point in the future, what if some politicians deliberately made false claims and post their videos on ASP, what would the site do? Taking the videos down would result in accusation of hampering free speech while leaving them intact would lead to voters being misled. In a nutshell, ASP would run into the same trouble that Twitter or Facebook is facing now and I don’t think they want that. ASP needs to build a culture that fosters communication only in good faith by officials.

Lastly, and this is why I think the website is aptly named “A Starting Point”, even though we can benefit from this project, we still need to do our homework. The information presented on ASP is just the beginning. It falls on each of us to do further investigation and keep these politicians honest. Let me give you an example. If you listen to Republican officials talk about the Tax Cut in 2017, they reason that they passed the law in order to create jobs through tax incentives given to businesses. Well, although there may be more jobs created, we have to ask: what kind of jobs are we talking about? More waiting jobs at restaurants for college graduates aren’t what we have in mind, aren’t they? Or $7-per-hour jobs don’t necessarily solve entirely our issues, do they? Plus, at the time of unprecedented economic expansion at the time in 2017, wasn’t there anything else to encourage job creation other than a giant tax cut for the rich and corporations?

In sum, ASP started to do their part in bringing elected officials from both sides of the aisle and voters together and we need to start doing ours as well. The job of understanding pressing issues should not only fall onto ASP. There is only so much they can do. As mentioned above, I think Chris and his team will do more to keep this project running well. We have big elections coming up till the end of the year. You have seen what is going on in the country. Your votes matter. They are the most powerful weapon in each voter’s arsenal. Use it well. Get informed. I appreciate what Chris and his team did. Have a great weekend and stay safe!

Violence against women in Vietnam

Vietnam has progressed a lot for the last few decades, both economically and socially. Nonetheless, there are still major issues that we have to face and violence against women is one of them. A recently published study shed light on this particular issue and some of the findings are both horrifying and embarrassing to me. I want to share them here because I believe in the transparency and in the fact that we can’t advance as a nation without looking squarely at our problems.

What is this study about? How was it organized?

The 2019 study consists of three parts: the quantitative study; the qualitative study; and economic costing of violence against women.

The quantitative component of the study (the “survey”) was conducted by the General Statistics Office at the request of the Ministry of Labour, Invalids and Social Affairs (MOLISA). This included reviewing and testing questionnaires, interviewer training, fieldwork and data processing. The quantitative study is a household survey covering all six regions of Viet Nam and is nationally representative. A multistage sample design was used to select a sample of 6,000 households. A total of 5,976 women aged between 15 and 64 completed a face-to-face interview with a trained female interviewer.The qualitative component of the study was conducted by the Centre for Creative Initiatives in Health and Population (CCIHP).

The qualitative study aimed to: provide a context for violence against women by intimate partners; triangulate the quantitative results; gain insights and explanations for quantitative data that are unexplained; and explore related issues that by their nature could not be studied through a quantitative survey. Data was gathered through in-depth interviews, key informant interviews and focus-group discussions. A total of 269 participants, including women with disabilities and from ethnic minorities, as well as 11 key informants, provided information and shared their experiences for the qualitative research.

Lastly, the study component on economic costing of violence against women was carried out by UNFPA Viet Nam in cooperation with several local and international consultants.UNFPA Viet Nam managed the overall process with technical assistance from the kNOwVAWdata Initiative (a partnership between the UNFPA Asia and the Pacific Regional Office and the Australian Government). The entire study was technically and financially supported by the Government of Australia through the Department of Foreign Affairs and Trade (DFAT) and UNFPA.

Source: United Nations Population Fund

At least 6 out of 10 women in Vietnam experienced violence at least once in their life time. More than 3 out of 10 experienced violence in the last 12 months

Figure 1 – Source: United Nations Population Fund

More than 1 out of 4 women in Vietnam agreed with this statement: “A good wife obeys her husband even if she disagrees”

Figure 2 – Source: United Nations Population Fund

More than half of the women in Vietnam think that there are good reasons for their husbands/partners to hit them

Figure 3 – Source: United Nations Population Fund

Half of the women who experienced violence didn’t tell anyone about it

Figure 4 – Source: United Nations Population Fund

More than 30% of working women experienced violence in their lifetime, a disturbing figure that signals even employment and some economic independence cannot save women

Figure 5 – Source: United Nations Population Fund

Compared to 2010, drunkenness became a more common trigger of physical violence against women in Vietnam

Figure 6 – Source: United Nations Population Fund

As a Vietnamese guy, I am really ashamed and embarrassed when I read this report. We still have so much to go as a nation. I don’t really care what the percentages are for other countries. This is not a competition. We have to be better than this. At least, I would love to see a few things:

  • There needs to be education to women on their rights. They don’t have to think that there are good reasons to be hit or that they have to obey to be called “a good wife”
  • We also must educate the men that it’s uncivil, reprehensible and awful to exert violence on women
  • As a society, we need to have a shaming culture on violence against women and call out terrible cases
  • There must be more organizations or groups that can protect women’s rights

What if Twitter has a subscription service?

What is Twitter? What’s the appeal?

Twitter is a platform for knowledge and interests. It allows you to do two things very well: 1/ be updated on what happens immediately and 2/ have access to experts in various areas. Anything that happens in life breaks first on Twitter. Not on Facebook. Not on Instagram. Not on LinkedIn. Secondly, you are more likely to communicate with folks that you wouldn’t know about or be able to talk to in real life. Take the tweet below as an example. Somebody had a question for three CEOs of three rocket companies, including Elon Musk – one of the richest men on Earth. All three responded. How likely would you get the same outcome with cold calls and emails?

Figure 1

The unique appeal of Twitter brings it a lot of royal fans and powerful users who are more than willing to share perspectives and expertise for free on the platform. That’s the level of user engagement and culture that other networks strive to have. Personally, I was late to Twitter. I have been using the platform since I came to the US and boy, did I wish I had started earlier. I have learned so much about business, strategy, fin tech, personal finance and much more from friends and strangers on Twitter.

How does Twitter make money? Since the site is free to all users, Twitter generates most of its revenue through ads. Revenue in Q1 2020 was $808 million with 84% of the pile coming from advertising. While revenue is on an upward trend, it comes with a lot of baggage. Twitter has been on the receiving end of several controversies related to the struggle to balance Free Speech and user safety. Despite bringing a significant amount of money, political ads is highly controversial, especially when this is an election year, when the country is more divided than ever and when politicians are distributing acutely questionable information.

Figure 2 – Source: Twitter

Twitter subscription?

Somebody with eagle eyes on Twitter noticed this job posting by the social network that specifically mentioned a subscription service. The idea of a Twitter subscription isn’t new. It has been around for a while and it heats up again when the job ad was spotted. It makes sense for Twitter to launch a subscription.

Figure 3

1/ Another source of revenue will help the platform less rely on advertising money and reduce the risk of such over-reliance. To be clear, I don’t think Twitter will introduce its own subscription as a gateway to force users to pay to use the service. The whole appeal of Twitter to advertisers is access to potential customers. A Twitter-owned subscription would drive users away and put those lucrative ads dollars in jeopardy. Instead, it’s more like a subscription for powerful influencers whose content is valuable enough to make readers pay to read. As of Q1 2020, Twitter has 166 million daily active users. Even a fraction of that base has subscriptions and Twitter shares a piece of that money, it can still be a significant sum over time. Take this user as an example. His tweets that come from his background of national security are only available to people who pay him $10/month. I do think this is the model that Twitter may have in mind.

Figure 4 – Source: Premosocial

2/ A lot of writers whose content is hosted on other sites use Twitter to advertise and reach out to target audience. For instance, if you have expertise in one specific area and usually blog about it, Twitter is a great source of like-minded audience who is likely to like and pay for your content. In that case, Twitter offers quality traffic, but no share of revenue. As a micro blogging site itself where folks write down thoughts and construct impressively long threads, Twitter may wonder why they don’t host the content, facilitate the subscriptions itself and get paid in the process.

What are the implications of a Twitter subscription?

Engagement

At first, I was concerned about what a subscription service would do the engagement on Twitter. The user culture on Twitter is the culture of selfless sharing. Experts share their knowledge and perspectives without compensation. If the majority of experts in one specific area hid all their great content behind pay walls, that would adversely affect the user culture that Twitter painstakingly built. It takes a long time to build a culture, yet it’s pretty darn fast to ruin one.

A counterpoint to the argument above uses precisely the same user culture element. It is possible that despite the presence of a subscription and financial temptation, power users on Twitter just keep offering their content for free. Even if some decided to restrict access to their content, the vibrant activity on Twitter might not be affected much.

Figure 5

Figure above demonstrates what I consider a potentially basic dynamic on subscription-equipped Twitter. On the left hand side, we have casual users who consumer content and produce on a personal basis. On the right hand side, we have influencers who have authority, brand names and appeal to attract subscriptions. Influencers can have two types of content. One is available for free to the public while the other is only to paid subscribers.

Let’s say Influencer A is famous and upon the introduction of the subscription option, starts to tweet his valuable content behind a paywall. Even though some hardcore fans are willing to pay to read his/her content, the overall engagement will likely go down. It creates an opportunity for Influencer B, who is new and wants to build his/her credibility by tweeting out more to the public or Influencer C, who decides to strive the balance of making subscriptions worthwhile and interacting with the public.

In short, I think there is a likelihood that the subscriptions would not drive users away. There is enough supply for valuable content in any given area to satisfy the demand.

Investments in new features

Building out a subscription for users would likely necessitate big changes to the product. I don’t know about other users, but I don’t particularly enjoy tweet storms. It’s tiring to read a long thread. To facilitate the production of content, Twitter may have to build out features to allow long-term writing, and enable Influencers to manage subscribers, payments and their emails. All require investments and allocation of resources, but there is a huge upside in my opinion.

In sum, I am excited about a potential subscription feature on Twitter. Great minds should be rewarded and so should Twitter for building a great product and user culture. The world is getting increasingly more complicated and noisy. There is always a place for people who can help others make more sense of the world and understand concepts better. Internet is a great way to build up credibility and receive feedback. Twitter, as a platform of interests and knowledge, is well-positioned to take advantage of that trend. You have seen the popularity of blogs, newsletter and platforms like Substack. Twitter can follow their examples while retaining their unique value propositions. Though it’s legitimate to be concerned about the engagement of Twitter once subscriptions are available, I do think the platform has built a strong enough relationship with its users that such a concern won’t materialize.

What do you think about a Twitter with subscriptions? Let me know if you agree or disagree with my thoughts above. Stay safe and have a good day!

AirBnb CEO on how Covid-19 changed travel and what is going on with the company

AirBnb CEO Brian Chesky had an interview with Bloomberg two days ago. First of all, I think Brian seemed very real and genuine in this interview. Watching him speak didn’t give me a sense that he was a robot reading script or a politician giving all kinds of lip services or false hope. For example, he admitted to being unfocused in the past, working on too many things at AirBnb at the same time. He also publicly committed to publishing data on diversity at AirBnb one year from now. That kind of genuineness and down-to-Earth attitude are refreshing to see. He talked about his commitment to diversity & equality, how he thinks about IPO this year, what mistake he made while running AirBnb, Online Experience, how Covid-19 changed travel behavior and so on. But I will only discuss two topics as follows:

How Covid-19 changed travel

While many people said that travel pre-Covid as we knew it is forever gone and we will never see it again, I am much less certain on that. Humans are quick to forget. Once we have the vaccine or have this virus under control, no matter how many years that will take, I think we can get back to where we were travel-behavior-wise. Things tend to be cyclical, you know. Nonetheless, Brian talked about what he has seen in terms of behavioral changes of travelers:

  • Business travel will take a lot longer to recover
  • EU has recovered solidly from the pandemic. Asia started the recovery path. Latin America hasn’t recovered much. He said that the US “has been really really strong” and it “has seen a temporary recovery”. I am not quite sure how to think about it. The US has repeatedly seen a new high on the number of cases in a day for quite a while now. Even if a portion of the population traveled, what would that do to the full recovery? Would take delay the recovery much longer?
  • Less interest in travel to urban areas with dense population and in cross-border travel
  • Travel will be more local

For the foreseeable future, there will be major changes in how businesses operate in the tourism industry. Attractions will have to take into account social distancing when designing tours. Travel agencies will have to arrange transportation for small groups only and avoid trips to crowded places. Hotels or AirBnb hosts will have to increase the hygiene level and how to communicate that to travelers.

If you look at countries whose tourism plays a huge part in the overall economy such as France or Italy, they were decimated by the pandemic. However, they have recovered since and started to take on tourists. The picture is very different for the US. Not only does nobody want to travel here at this time, unless they absolutely have to, but the people living here are now banned from visiting Europe. The lack of commitment to take on short-term losses for future prospects and, by extension, the absolutely atrocious handling of this pandemic are setting this country back months in recovery and perhaps even longer for the US tourism industry.

Online Experiences

AirBnb launched Online Experiences in April 2020 due to the pandemic. The service allows hosts to craft a unique experience online for a small group of guests. After reservations are confirmed, guests receive a Zoom invitation through which they can live participate in the Experience. For instance, you can book to learn how to cook with this Michelin chef from Italy in a live stream session along with 9 other people around the globe without leaving your home. All you need to do is to make a reservation, prepare ingredients beforehand and join the Zoom session.

Source: AirBnb

Brian Chesky said that it is the fastest growing product of AirBnb, even though he didn’t specify whether it’s the fastest growing product ever or it’s just during the pandemic. He did reveal that the service has had 400 Experiences listed so far and generated $1 million in bookings.

AirBnb is quick to improvise and pivot during this pandemic that severely affects travel. I can see some value in this service. Firstly, for folks who feel lonely during this crisis (and there are a lot of them), this is a great and inexpensive way to meet new people and learn something useful without enduring more risks. The live stream format is key because if this were an on-demand video clip like what we have with streamers like Netflix, it wouldn’t work. There needs to be a real and tailored human interaction. That’s why I think it makes sense to limit the number of participants to maximize the interaction with each person.

Secondly, take Vietnam as an example. Our borders have been closed for months. Hosts can take advantage of this opportunity to offer local tours or experiences and gain revenue that wouldn’t have been possible otherwise.

Regarding the future prospect of this service, I am not convinced yet. Covid-19 necessitates online interaction. However, when this blows over, though it may take some time, how much will people still prefer online interaction and how much time will they have for these experiences? There are many other services that can offer similar online lessons. Once people are free to leave home, they no longer need some strangers on the Internet to bond with to alleviate the loneliness as there are countless distractions. I don’t have any data, but that $1 million bookings in 3 months globally seems a bit soft. Furthermore, the live stream nature and the small group requirement of this service don’t necessarily let host scale their revenue. They are constrained by their time, being the presenter physically and the number of participants. Hence, I suspect that revenue from Online Experiences may just shift to Experiences post-Covid.

In sum, it will be interesting to see what the future holds for the tourism industry and AirBnb, in particular. The pandemic threw its plan to go public in the trash bin and significantly altered its business. If you are interested in the company, have a listen to Brian’s talk. Once again, I really like his down-to-Earth tone and genuineness.

Uber’s latest chess moves

In the last few days, Uber made two major announcements: 1/ they bought Postmates for more than $2.6 billion and 2/ they are entering the grocery delivery market. In this post, I’ll lay out my thoughts on the two moves.

Uber Then vs Uber Now

In the early days, growth at all costs was Uber’s mantra. The company tried to grow fast and aggressively in many markets around the globe, with just one service: ride hailing. Even though it made the brand a household name and raised a lot of hype for the company before its IPO, there were major problems with that strategy:

  • Uber had to subsidize rides a lot to attract drivers and users. Consequently, the company burned a lot of money, especially in markets where Uber didn’t have advantage over local competitors
  • There was no stickiness with riders who could change services on a whim. Acquiring customers is one thing. Keeping them loyal is a totally different matter.

After the current CEO, Dara Khosrowshahi, took over from its co-founder, there was a shift in strategy. Instead of stretching itself too thin in many markets and bleeding cash, Uber scaled back in markets where it was not a market leader. Uber sold its operations in South East Asia and Russia to its competitors while exiting some markets altogether.

Over time, Uber has tried to deepen its relationship with customers and expand its revenue stream by offering other services such as Uber Eats, Uber Freight, Uber Bikes, Uber Elevate, Uber Business, Uber Rewards, Uber Cash and an unnamed grocery delivery. Uber’s ambition, in their own words, is “bringing you closer to the things you need, all in one place“.

Despite the change in strategy and introduction of more services, profitability has still eluded Uber. In Q1 2020, Uber reported a net loss of more than $2.9 billion. Those numbers already included the performance of two strong months in January and February, and they were achieved even before the pandemic entered its most critical phase. While Covid-19 boosted Uber Eats business as revenue for the segment in Q1 2020 increased by 53% and Q2 bookings grew by 100% YoY, it thoroughly decimated the ride business which is the only profitable segment in Uber’s operation. The situation was dire enough to force a layoff of 14% of its workforce. But the show must go on and Uber had to find a way to generate revenue and keep the lights on.

How will these moves help Uber?

Postmates is an on-demand delivery service founded in 2011. Here is how the company described itself: “Able to deliver anything from anywhere, Postmates is the food delivery, grocery delivery, whatever-you-can-think-of delivery app to bring what you crave right to your door”. Essentially, Postmates generates revenue by charging a percentage of an order’s value as well as a fixed delivery fee to customers, and by taking a small fee from merchants who want access to an expanded customer base.

The acquisition of Postmates gives Uber an immediate boost in terms of market share. By absorbing 8% market share from the acquired, Uber will become the #2 player in food delivery market with 37% market share, behind the leader Doordash. Plus, Postmates’ strong presence in the lucrative Southwest area of the US gives Uber access to an important market with reduced competition. While the deal may look forced by the current pandemic, I think there is more to it, than just consolidating the market, cost synergy or reducing competition.

The CEO of Postmates said in 2015: “The idea behind Postmates is what if you can use the city as a warehouse”. Last-mile delivery is notoriously difficult and expensive for brick-and-mortars to master. While they can certainly work with Amazon, there is always fear that the Seattle-based company can turn around and develop its own competing private label products. Uber can be an enticing alternative as it is unlikely that the ride hailing app will develop its own products to compete with retailers. Instead, Uber can be a last-mile delivery partner to brands without having to build warehouses itself, leveraging the drivers in its network. That’s a potentially huge opportunity. Even though Uber may use its own infrastructure and resources to build something similar to Postmates, why wasting valuable time when they can gain the necessary skillset quicker with an acquisition?

This transaction brings together Uber’s global Rides and Eats platform with Postmates’ distinctive delivery business in the U.S. Postmates is highly complementary to Uber Eats, with differentiated geographic focus areas and customer demographics, and Postmates’ strong relationships with small- and medium-sized restaurants, particularly local favorites that draw customers to the Postmates brand. Additionally, Postmates has been an early pioneer of “delivery-as-a-service,” which complements Uber’s growing efforts in the delivery of groceries, essentials, and other goods.

Source: Uber

This is also a play to create stickiness with customers. Imagine this scenario: you are about to leave work for home. You order an Uber and while you’re waiting for your ride or while you are already in the car, you open Uber app and have your grocery or a new appliance ordered and delivered to your home. These transactions will help accrue cash back in your Uber Cash, which can later be used in the future for more services. By offering multiple choices and services under one app, Uber does two things: 1/ make competitors that offer few choices like Lyft less attractive and 2/ allow customers the convenience of not having to open multiple apps.

Furthermore, it can be a boon to drivers as well. To facilitate all the delivery services it wants, Uber needs drivers. Drivers have limited resources in the number of hours in a day and just one vehicle to drive. Hence, they will prefer working with a partner who can help them maximize revenue as much as possible. With a variety of delivery opportunities, Uber can sell drivers on that promise. In the future where Uber does indeed become an on-demand delivery platform, if a driver is without a Ride customer, he or she can either deliver food, grocery or basically an item ordered by another customer. Minimizing dead time and maximizing income can be an attractive value proposition to drivers.

It’s not an all rosy prospect

Uber’s ambition is without challenges. Take grocery delivery as an example. Heavyweights such as Walmart, Amazon or Target all invest in their delivery capabilities. It will not be easy or cheap to enter a highly competitive field with these behemoths. While these strategic initiatives may make sense to me, I do think Uber may not be any closer to profitability. In fact, they may even suffer more losses in the short term.

Postmates had its own controversies with lawmakers and its own workers in the past. The future “delivery-as-a-service” vision of Uber doesn’t change the core model. It uses the same model and expands the scope. As a result, run-ins with gig workers and lawmakers will likely happen more often in the future.

Weekly readings – 11th July 2020

What I wrote last week

I wrote a bit about the challenges of corporations in addressing different stakeholders’ needs

Here is a what I wrote about the company behind FICO score

My thoughts on the latest suspension of H1B visas till the end of the year, a self-inflicting move by the US

Business

How I grew my Shopify micro-SaaS to $25k MRR and 20k users in 14 months

A very good analysis on Twitter, discussing the company’s valuable network and challenges

Exclusive: Inside Uber’s billion-dollar bet to deliver food, people, and everything else

Technology

The Post-Covid-19 Agenda for Technology and Media Companies.

What I think is interesting

How to understand things

Charlie Munger: Turning $2 Million Into $2 Trillion

Peter Kaufman on The Multidisciplinary Approach to Thinking: Transcript

In Praise of Idleness

Growth without goals

Money Is the Megaphone of Identity