Weekly reading – 7/10/2021

What I wrote last week

I wrote about Clear Secure, which just recently went public

Business

Japan launches bid to regain its semiconductor crown. “Japan’s plans are less about boosting output than about avoiding being caught in the crosshairs of global tensions, notably the fierce competition between the US and China for dominance of future technologies.” It will be hard to play catch-up in the semiconductor industry, but I wouldn’t rule out Japan.

Starting April 22, 2022, Visa will lower interchange rates for Card-Not-Present tokenized transactions and increase rates for some Card-Not-Present untokenized ones. In layman’s terms, it means that merchants will get to keep more money (maximum 10 basis points) if they encourage customers to pay online with mobile wallets such as Apple Pay or PayPal. Nothing spurs actions like incentives.

Universal films will head exclusively to Amazon Prime Video after their run on Peacock. Amazon has been aggressively investing in content on Prime Video. First it secured rights to stream NFL Thursday games starting next year. Then, it bought MGM Studios. Now, it will bring over Universal films after the initial premiere on Peacock. Amazon has been on the record pleased with Prime Video as an acquisition and retention tool for their lucrative Prime customer base. The Prime customer base in the US, since streaming rights are geographically dependent anyway, should be big enough to justify Amazon’s outlay.

FACT SHEET: Executive Order on Promoting Competition in the American Economy. I like what I saw from this Executive Order. I hope that the responsible Departments will soon introduce and implement policies. I, for one, would love to have another Internet provider in my building, in addition to Cox

Didi Tried Balancing Pressure From China and Investors. It Satisfied Neither. “The regulators in Beijing were under the impression Didi would pause its initial public offering while it addressed data-security concerns, according to people familiar with the company’s conversations with regulators. In New York, Didi offered assurances that Beijing had given it the green light, said people close to the listing process.”. It sounds like Didi wasn’t honest and straightforward with investors; which you know is a crime. On a side note, unless somebody lives in China or really understand what goes on in the country, for the life of me, I don’t understand why they will invest in Chinese companies. Just look at Didi and Alibaba as examples.

What I found interesting

The Senator Who Decided to Tell the Truth. I’d have a beer with this Senator. As a GOP politician, he was brave to tell the uncomfortable truth when his constituents didn’t want that truth. Whether you agree with his report, we definitely need more truth-telling and honest people like McBroom

A new road to an inaccessible land. An awesome write-up on the highly remote Wakhan Corridor in Afghanistan. The area looks pristine and beautiful. I love this kind of exploratory pieces that can educate people on places that they would not hear about

Steve Jobs in Kyoto. Just a beautiful story on Steve Jobs. He made the world a better place and was gone too soon. But he is still an inspiration to many now and in the future.

Casualties of Perfection. “If your job is to be creative and think through a tough problem, then time spent wandering around a park or aimlessly lounging on a couch might be your most valuable hours. A little inefficiency is wonderful.”

Hands-on: How to edit PDFs with iPhone and iPad in the iOS 15 Files app

It’s Official. We Can Now Harvest Usable Lithium From Seawater. The science is there. The experiments were tried. I now look forward to the implementation in the real world. If we can get lithium from seawater and inexpensively, that’ll be a major plus for the world

A short movie on Japan

Stats that may interest you

Cleaner air has contributed one-fifth of U.S. maize and soybean yield gains since 1999

Apple stores 8 million TBs on Google Cloud

The number of mobile wallets in use worldwide is expected to reach 4.8 billion in 2025, up from 2.8 billion in 2020

Fincog Overview of BNPL Providers, Ranked by Size
Source: Fintechnews

Though AWS slowed in growth, Amazon didn’t

Amazon continues to amaze me with another blow-out quarter in Q3 FY2020. Their total net sales increased by 37% compared to the same period a year ago, reaching $96 billion, while Operating Income increased by 96% from $3.2 billion in Q3 FY2019 to $6.2 billion this quarter. It’s an extraordinary growth for a company that generated more than $1 billion a day in net sales this quarter. Their gross margin in general didn’t change much from a year ago, but their operating margin increased by almost 200 basis points from 4.5% in Q3 2019 to 6.4% in Q3 FY2020. While the high level margin doesn’t look impressive, the devils are in the details if we look closer at their segments.

If we look at Norther America, International and AWS, all three were profitable this quarter with International, traditionally a money loser, being in the black for the second quarter in a row. AWS continues to be responsible for most of Amazon’s operating income as it carries a sweet 30% operating margin, compared to a meagre low single-digit from the other segments. Interestingly, AWS’s growth was the slowest among the three segments, recorded at 29%, compared to 39% of North America and 37% of International.

Source: Amazon

If we look at the results at a deeper level, specifically at the breakdowns into Online Stores, Physical Stores, AWS, 3rd party marketplace, Advertising and Subscriptions, the only area with negative growth in revenue is Physical Stores. 3rd party marketplace, Advertising and Online Stores notched the biggest growth, in that order, followed by Subscriptions and AWS. Regarding Subscriptions, Amazon reported that Prime now has 150 million subscribers with the service coming to its 20th country in Turkey.

Internationally, the number of Prime members who stream Prime Video grew by more than 80% year-over-year in the third quarter, and international customers more than doubled the hours of content they watched on Prime Video compared to last year.

Source: Amazon Q3 FY 2020

Even though Amazon is the master of operating at scale, innovating and squeezing efficiency from every step, I do think the expansion of Prime internationally helps with the increased performance of the International segment which has been profitable in two consecutive quarters. Of course, the decision makers at Amazon have data to see which markets can be improved by launching a high-margin subscription that makes customers stick around longer and shop more. So I wouldn’t surprised if Prime played a role in bolstering the profitability of Amazon’s International segment. So far, there are only 20 countries where Amazon Prime is available. When that number gets bigger, I predict that Amazon will be even bigger and more profitable than it already is; which is both admirable and scary.

When it comes to Amazon, advertising is unlikely the top 3 or 5 services that come to mind. Nonetheless, the segment brought in almost $5.4 billion this quarter, at the growth rate of a whopping 51%. To put that in consideration, neither Pinterest, Twitter nor Snapchat recorded even $1 billion in revenue in the most recent quarter (all of these companies reported results this month). Even Microsoft’s search advertising revenue this quarter was at only $1.8 billion, down from about $2 billion from the year before. As Amazon has an excellent relationship with customers (in general) and customers, when searching, already have intention to buy, this advertising business will not stop here. In fact, I do think it will continue to grow nicely in the future. A short while ago, I wrote about Amazon Shopper Panel, a new initiative by Amazon. The service will compensate shoppers if they send the company 10 eligible non-Amazon at-store receipts every month. This initiative, if done well, will empower Amazon with an unparalleled understanding of consumers, down to even the line items of a receipt. This understanding will bolster their advertising machine even more.

Source: Amazon

Amazon admitted that 2020 has been a big year for capital investments. The company aims to grow its fulfillment and logistics network by 50%, plowing around $12-13 billion in CAPEX this quarter or over $30 billion so far in 2020. That is an extraordinary amount of money allocated in growing assets. Not many companies even have that kind of numbers in revenue, let alone CAPEX. On top of that, Amazon reported that its shipping costs reached $15 billion this quarter. Fulfillment and shipping are hard as they are resource-intensive and require a mastery in operations to achieve the necessary efficiency. Any competitor that wishes to challenge Amazon needs to have a pocket deep enough to absorb these expenses; which constitutes a competitive advantage for the biggest e-Commerce player in the US. In the end, how many companies in the world could claim they generated $55 billion in trailing 12-month (TTM) Operating Cash Flow or $29 billion in trailing 12-month free cash flow?

In short, the business looks to be in a fantastic shape with amazing growth at a massive scale. Plus, there is plenty of room to grow for Amazon in the future with International expansion, Prime in more markets and advertising. Jeff Bezos is now a $200 billion man. I won’t be surprised if he reaches $300 billion in net worth in the future.

Interesting documentaries to widen your horizon

I have watched a few interesting documentaries during this long weekend and I want to share with you what I think of them.

Gobekli Tepe

This documentary is called “The Cradle of the Gods” on Disney Plus. It’s about an ancient site in Turkey called Gobekli Tepe. The discovery of Gobekli Tepe, according to the documentary, turned what we thought we understood about human history and civilizations on its head. Before this discovery, we thought agriculture was the catalyst for religion and arts. Once people settled down and had more food produced and stored, they could finally have time and security to think about and develop religion.

Not in the case of Gobekli Tepe. The site consists of many structures on top of a steep hill that are made of stones weighing dozens or hundreds of tons. What makes Gobekli Tepe interesting is that scientists estimate the structures were made around the end of the last Ice Age, when humans were still hunters and gatherers, and there was no language, metal tools or even wheels to help move supremely heavy stones up the hill. Yet, the structures were still miraculously built. Scientists’ theory for why people, thousands of years ago, went through all that trouble to build the structure is that they want to have a place to celebrate their belief: humans are superior to savage animals. Such a belief banded hunters and gatherers together to achieve a monumental feat. Later, they settled on the lands at the bottom of the hill and started their journey towards agriculture and an early stage of civilization.

The theory proposed by scientists who discovered Gobekli Tepe meant that religion came before agriculture, not the other way around, at least in this case. I think it’s a fascinating documentary. Fortunately, it seems you can watch it on YouTube in full here:

The Lost City of Machu Picchu

Another documentary on Disney Plus is called “The Lost City of Machu Picchu”, featuring arguably the most intact archaeological site of the Inca. The Inca rule in South America in the 1400s and 1500s lasted only 100 years and was full of mysteries before it was brutally ended by the Spanish conquerors. The Spaniards destroyed every Inca city that they invaded, yet somehow Machu Picchu wasn’t discovered and fortunately survived. More than 100 years ago, an explorer named Hiram Bingham came across Machu Picchu and wrote a piece published on National Geographic about what he thought was the purpose of Machu Picchu.

What the scientists in this documentary found out; however, largely debunked Bingham’s theory. Moreover, they went in details on what builders did several hundred years ago to construct this monumental site. Machu Picchu was built on a treacherous ground. First of all, it’s on top of a mountain ridge; which poses a tremendous challenge in bringing heavy stones up from quarry sites nearby. Secondly and more importantly, Machu Picchu site has a lot of rain during the year. Without a sophisticated drainage system, the soil would have been eroded and the stones would have been washed away. By digging into the ground at Machu Picchu, the scientists learned about a magnificent construction feat by the Inca builders that not only effectively carries rain water away from the site and keep the soil from being eroded, but also directs drinkable water throughout the small city for allegedly a thousand inhabitants.

It blows my mind to watch the documentary and see how the Inca people made such an engineering and architecture achievement without sophisticated tools that we have nowadays. If you are interested in the Inca and Macu Picchu, you should check it out

Renovation
Source: The Habitatilist

All or Nothing on Tottenham

If you are a football/soccer fan, you’ll likely enjoy this one. The documentary chronicled the last season at Tottenham Hotspur, one of the biggest clubs in London and England in general. The Amazon Prime crew was given exclusive access to the players, the coaches, the manager, the Head of Recruitment, the staff, the Chairman and so on. They even secured permission to be present in some of the most sensitive conversations at a football club. For instance, viewers could see the conversation between Chairman Daniel Levy and Manager Jose Mourinho on Christian Eriksen, who had had only a few months on his contract and been on his way out of the club. Audience could also listen to a candid exchange between the manager and Dany Rose, who had been at the club for 12 years and demanded to play or he would prefer to leave; which he did.

There are a few things that fascinate me. First, the filming crew had to be very aware of the situations they were in. Imagine that as a manager, you were about to have a tough conversation with your players during half time and your team was down. I can imagine having someone else film the whole thing could be very irritating. Hence, the ability to blend in situations without being a disruption or annoyance is pretty admirable.

Second, as I mentioned above, the crew recorded some highly confidential and sensitive conversations at the club. There must have been a great deal of trust and professionalism between the club and the production crew. Otherwise, the whole thing would have been a catastrophe. Imagine what would have happened if the names of starting players for an important match had been leaked or transfer issues had been improperly disclosed to the press.

Third, the documentary, which has new episodes every week, pulls the curtain on what goes on behind the scenes at a football club: how they are treated physically, the training, the process before a match, the team hurdle, the psychological change, the struggle with injuries and so on. For me as a football fan, I am highly fascinated what I have seen so far. It’s available on Amazon Prime, you really should check it out.

Weekly Readings – 10th August 2019

How Facebook failed to break into hardware: The untold story of Building 8

Athleisure, barre and kale: the tyranny of the ideal woman

The making of Amazon Prime, the internet’s most successful and devastating membership program

16 Sales Contract Clauses to Balance Risk and Reward

The Athletic Sports News Site Hits 500,000 Subscribers

A Quarter of Humanity Faces Looming Water Crises

No-Code Website Builder Webflow Went From Near Bankruptcy To A $72 Million Series A Funding Round. Such passion and resilience. Quite pricey if you just want to build a blog

Weekly readings 4th May 2019

The Airbnb Invasion of Barcelona. A look at how tourism-related problems got out of hand at one of the hottest destinations in the world, Barcelona.

Netflix Fights to Keep Its Most Watched Shows: ‘Friends’ and ‘The Office’. It’s amazing that “Friends” and “The Office” make up of 5% of the total watching minutes on Netflix and yet the streaming service doesn’t own the rights to those IPs.

The bitter truth behind the Nutella economy. If you care about the ethical aspect of business, you may want to read about this. I understand that there are a lot of products or services that we use everyday come from organizations with a record of questionable ethical practices. However, given that Nutella is pretty popular around the world and in America, you may want to know a bit more about it. And it’s not good for your health!

IHG Sees Room for Improvement in Hotel Revenue Management. The article discusses mainly the attribute-based booking trend in the hospitality industry. Attribute-based booking refers to the model that allows guests to choose from a room level such as number of beds, view and room type to amenities inside the room. Everything is a la carte. It can create the maximum personalization and excitement for guests, but it will require a totally different operations from inventory, marketing to housekeeping and revenue management.

The Most Valuable Company (for Now) Is Having a Nadellaissance. A great coverage on how Nadella revived Microsoft. I really like his no-nonsense style that was shown when he refused to celebrate the $1 trillion valuation.

The fight for the bundle is the war for the future of TV. A nice piece on the state of TV

The making of Amazon Prime, the internet’s most successful and devastating membership program. I found it interesting to read stories on how Prime came into beings. The stories show how great Bezos’ business acumen is