Weekly reading – 2nd July 2022

What I wrote last week

How does credit card direct mail process work?

Business

A great podcast episode on Don Valentine and Sequoia Capital. I guarantee that this is way better than Don Valentine’s profile on Wikipedia.

($) Spotify’s Billion-Dollar Bet on Podcasting Has Yet to Pay Off. “Over the next four years, Ostroff spent more than $1 billion on the business, licensing shows, buying production studios, and signing exclusive deals with celebrities, including the Obamas, Kim Kardashian, and Prince Harry and Meghan Markle. Last year, Ostroff’s research and data team asked a question that many at Spotify already knew the answer to: Had any of this spending yielded a major new hit? The team produced a report that basically said no, according to five current and former employees who didn’t want to be named discussing internal business.” A very interesting story on the development of podcasts at Spotify. They used to like Netflix making a lot of shows and movies without anything concrete in return. The new internal structure is now in place to help Spotify better at making shows. I think they may be better off by following the model of HBO and Apple. But as a company that is never actually profitable, Spotify doesn’t have the luxury that Apple or Warner Bros has.

($) The Surprising Reason Your Amazon Searches Are Returning More Confusing Results than Ever. “The problems Amazon took on once it opened up its marketplace to sellers in China have become more evident in recent years. My Wall Street Journal colleagues in 2019 uncovered thousands of banned, unsafe or mislabeled products in Amazon’s catalog, most of which came from China-based sellers. It also became apparent that Amazon sellers were gaming Amazon’s algorithms to get goods listed as high in its search results as possible, and even going so far as to bribe Amazon employees in China to help boost items’ rank. The Amazon spokeswoman says the company spent more than $900 million last year to combat counterfeiting, fraud and other abuse—an effort she says involved 12,000 people. The company stopped more than 2.5 million fraudulent attempts to create new seller accounts, she added, down from over six million the prior year.”

‘Wallets and eyeballs’: how eBay turned the internet into a marketplace. This article is actually an excerpt for an upcoming book calling for the de-privatization of the Internet. It basically calls for another version of the Internet where people would be less motivated to create their own content because capitalism and competition wouldn’t work. I haven’t read the book, so I don’t know how good it is, but it’s still cool to read up on the birth of one of the most important marketplaces we have ever had.

Lessons from an investing legend. Anyone interested in investing should have a read. Everything Peter says is similar to what I have read from some of the greatest investors

($) Inside Didi’s $60 Billion Crash That Changed China Tech Forever. It further solidifies my stance that as long as the current regime stands and it surely looks that way for years to come, I won’t buy Chinese stocks. Didi at its peak was worth $100 billion. Now it’s a shell of its former self because of actions from the government. Worse, the leaders at Didi, all Chinese and with resources to spare, didn’t understand why the government acted the way it did. Then, how could a foreign investor hundreds of miles away?

($) Draymond Green, Podcast Star, Turns an Unsparing Mic on Himself. I listened to Draymond’s podcast a few times and while it does carry a sense of disruption and fresh air, compared to the likes of First Take or Undisputed, I still want to hear more basketball analyses from Draymond. He is an intelligent player and a 4-time champion. He surely is capable of producing basketball breakdowns for casual fans like Kobe once did with Detail. I’d love to hear more about the preparation before games or during off-season. I’d love to hear about the mental struggle of players during injury rehabilitation. Dray has much to offer and I hope he will bring it instead of cat fights and trash talk against the incumbent media. On a side note, after the liquor industry, athletes are marching into the media space. With their fame, connections and insider knowledge, they are greatly positioned to make a splash in this industry.

Other stuff I find interesting

Nigerians are learning to buy now and pay later. “In a country where only 2% of the 106 million adult population have access to bank credit, credit cards are also conspicuously absent, as banks shy away from consumer lending. BNPL is becoming a rising alternative and is set for further growth, as Nigerians embrace digital credit. BNPL thrives in markets with integrated identity systems, consumer credit culture, and decent consumerism, where people are able to pay for not just essential items like food and fuel but are also willing to buy nonessential items like cars and gadgets. However, the Nigerian market struggles with efficient identity systems, over 100 million Nigerians, or a little less than half the population do not have any form of recognized ID. And following the economic slump over the last eight years, many households are barely clinging to whatever funds they have after spending on rent, food, and other necessities. A June 2021 report showed 61% of the country’s adult population suffered “severe financial distress” over the previous 12 months, forcing many to cut down on expenses.”

($) Norway Was a Pandemic Success. Then It Spent Two Years Studying Its Failures. “Norway’s government had the foresight during the first days of Covid-19 to appoint a panel called the Koronakommisjonen. Its mission was figuring out what the Norwegians did, what they could have done and what they should do. This crisis was barely under way when they began preparing for the next one. The next lesson from the Koronakommisjonen reports is the power of not pretending to know more than you do. Nobody really knew anything early in the pandemic. Anybody claiming otherwise should have known better.”

Mediterranean Diet Reduces Depression In Young Men, Study Says. One of the things I want to try till the end of the year is to try Mediterranean diet

Behind the scenes of Waymo’s worst automated truck crash. I have always believed that we are still a long way from having automated vehicles on the streets. Nothing has made me changed that belief, not even a little bit.

Stats

“Ground beef prices are up 36% from a year ago, while chicken breasts gained by a third”

Klarna is reportedly valued at $6.5 billion, down from $45 billion in 2021. Talk about a new definition of a down round

Source: Self.inc

Weekly reading 18th June 2022

What I wrote last week

Interchange and what influences it

Apple and Major League Soccer

Business

($) What Do Chinese Consumers Want? Walmart Can’t Figure It Out. Almost 30 years in the country and decades of experience in this industry, Walmart seems to lose grip in China. The stores aren’t an appeal that they once were. Walmart doesn’t seem to be able to offer what consumers want. Competitors are fierce. For good measure, the tension between America and China shows no signs of abating. Trouble is awaiting the largest retailer in the world in China.

Elon Musk’s regulatory woes mount as U.S. moves closer to recalling Tesla’s self-driving software. I admire Tesla, Musk and everything they have achieved. But I think it’s dangerous to create marketing materials touting full self-driving abilities when the vehicles are nowhere near that capabilities.

($) FanDuel CEO Amy Howe Wants to Help the Sports-Betting Business Grow Up. An interesting read into the market leader of sports betting. TIL, FanDuel had 70% of all sports betting platforms’ revenue generated in the state of Michigan in 2022 through April. Typically, it’s only about 5% of the amount wagered.

Maybe Bob Chapek Was Right. The tumult at Disney continues with the recent departure of Rice, a senior executive. Outsiders may not know the full story of what went down. Perhaps, Bob Chapek was right. Perhaps, it was just another example of how difficult life at the top is for him. Nonetheless, it really doesn’t matter how fair or unfair the criticisms on him are. The fact is that he is the CEO and the stock went down by almost 50%. Right or wrong, it’s on him and his record. I look forward to seeing whether they will adjust their subscriber target in the long run now that they no longer have the rights to the cricket league in India. Some said that Disney might lose 20 million subscribers in India. Others argue that it’s a blessing in disguise as a subscriber pays like 70 cents over there. Hence, losing a bunch of low-paying subscribers may boost ARPU and profitability, a premium in this market. The market’s reaction to a new target, if any, may influence Chapek’s tenure a lot.

($) Amazon CEO Andy Jassy’s First Year on the Job: Undoing Bezos-Led Overexpansion. A fascinating piece on Amazon that is unquestionably favorable to Andy Jassy and much less so to Jeff Bezos. I find it interesting that Amazon seems to shift the blame from Jassy onto Bezos for recent trouble with excessive fulfillment capacity. The founder and former CEO did make the decision to expand the capacity, but this sort of public admission while he is still the Executive Chairman definitely raised eyebrows.

($) One Grocer Wanted to Give Up Plastic. It Got Rotting Bananas. “When one of the best-known supermarket chains in the U.K. decided to remove plastic from its products, it hadn’t anticipated a spike in shoplifting. The zero-plastic drive also produced a series of unintended consequences that demonstrate how difficult it is for any company to shed plastic packaging entirely. When Iceland wrapped bananas in paper bands instead of plastic bags, the fruit rotted more quickly or snapped off. When it packed bread in opaque paper bags, sales fell as shoppers balked at buying something they couldn’t see. When it punched holes in paper bags filled with potatoes to make the contents more visible, the bags ripped. Bacon that isn’t wrapped in plastic quickly discolors, salad leaves wilt and unwrapped cucumbers rot more quickly.

Other stuff I find interesting

($) Biden Administration to Pursue Rule Requiring Less Nicotine in U.S. Cigarettes. FDA estimates that tobacco use costs the country $300 billion in direct healthcare expenses and lost productivity. A study published on the New England Journal of Medicine estimates that lower nicotine level will lead to 5 million additional adult smokers to quit smoking. If mandating a lower nicotine level in cigarettes results in fewer smokers and lower economic damages, FDA should press ahead and exercise their authority, knowing that the tobacco industry will take legal actions to protect their own interests

Downtown S.F. on the brink: It’s worse than it looks. The article goes into why remote work drives folks away from San Francisco and the downstream effects that such a migration can have on the city. I spent a few days in San Francisco last month. At no time did I ever feel safe due to the homeless folks on the streets. My team and I went around a bit by Uber and agreed that some areas were just too sketchy to live. Drivers there were just unbelievable. We had to report one Lyft driver because he literally scared us to death with his reckless driving. The living expense is so high there. One croissant and a small cup of coffee cost me $12, easily double what I’d pay in Omaha. It’s no wonder that white-collar workers moved away whenever they had a chance. When the engine that generates your city’s economy is leaving, it’s a serious challenge that demands different thinking.

Exclusive: inside Apple’s iOS 16 remake of the iPhone’s iconic Lock Screen. One thing you’ll notice from this piece is that the road to this Lock Screen feature started a while ago with work on its neural engine, chip and personalization effort on the Home Screen in iOS14. That’s typical of Apple. Have a product roadmap, put the pieces together and release only the things that work.

Opening a Restaurant in Boston Takes 92 Steps, 22 Forms, 17 Office Visits, and $5,554 in 12 Fees. Why? “The American Dream is besaddled by byzantine regulations. As the report shows, for example, opening a restaurant in Boston is a 92-step process. In Detroit, it’s 77 steps. In Atlanta, it’s 76. The report goes into great detail. That 92-step process to open a restaurant in Boston requires that 22 forms be completed, 17 in-person visits be made to government offices, 12 fees be paid, and nine government agencies be involved, at a total cost in government fees of $5,554. Opening a restaurant in San Francisco requires that 17 government fees be paid at a total cost of $22,648.” Indeed, why?

Stats

There were 31 million cigarette smokers in the US in 2020

1.5 billion users watch YouTube’s TikTok clone every month

14% of the U.S. population lives within rural communities

Weekly reading – 4th June 2022

What I wrote last week

Book Review: Trillion Dollar Triage

How Walmart Is Betting On Stores To Catch Amazon In E-Commerce

Business

Amazon Briefing: One year into Andy Jassy’s tenure, sellers see subtle strategic shifts. Under Bezos, Amazon was maniacal about being consumer-oriented. Using the iron grip on consumers, especially Prime members, Amazon managed to exert their bargaining power on merchants. According to the article, there are already subtle changes under Jassy regarding how to work with merchants. Merchants have more dialogue with senior folks from Amazon, but they are expected to spend more on ads and prove their unit economics value to Amazon. The push to grow ads revenue may have one important downstream effect: if shoppers are bombarded with sponsored items instead of what are best for them, there is no telling how that could damage Amazon and loosen their grip on prized Prime members

The first act of the streaming wars saga is over — Netflix’s fall from grace has ushered in the pivotal second act. The first phase is to establish presence. Now, all these streamers need to figure out some tough questions. First, how can they make money while spending a lot of money on content? Streaming is an arms race. You need great content all the time to acquire and retain subscribers. But investors’ patience is wearing thin. They want to see profits. Hence, streamers have a tough balancing act on hands. Secondly, ads or no ads? Disney+ and Netflix are planning to go live with ads-supported plans later this year. However, ads is not a trivial business. There is also a question of consumer experience. Additionally, expanding internationally or not expanding? An international expansion requires extra investments in marketing and content. If you go to India without local content at a dirt cheap price, you won’t win the battle. But this goes back to the first question. If a streamer spends too much on content and marketing, how can it turn profits? All in all, such an interesting space to keep an eye on

Facing Inflation-Weary Shoppers, Grocers Fight Price Increases. As inflation keeps rising, consumers turn to private labels instead of more expensive national brands. Private labels give grocers a higher margin, but the key here is to keep customers happy while resisting the pressure from vendors. Those who can make shoppers happy in tough times like this may get the permanent business in the long run. For me, Aldi has been my go-to grocer for a long time with their highly competitive grocery prices.

Bull Market Rhymes. “I don’t think investors are actually forgetful.  Rather, knowledge of history and the appropriateness of prudence sit on one side of the balance, and the dream of getting rich sits on the other.  The latter always wins.  Memory, prudence, realism, and risk aversion would only get in the way of that dream.  For this reason, reasonable concerns are regularly dismissed when bull markets get going. “

Spotify Podcasters Are Making $18,000 a Month With Nothing But White Noise. Who would have thought that white noise could be a lucrative podcast category?

Other stuff I find interesting

Sun-Starved Sweden Turns to Solar to Fill Power Void. It’s intriguing that Sweden shut down two nuclear plants and relies on solar power for electricity despite lacking sunlight for a long period of time in a year.

While Electric Vehicles Proliferate, Charging Stations Lag Behind. There are 93,000 public charging stations in the country, but it’s estimated that we need 1.2 million more. That’s how much we are lagging behind. The governments, local or federal, need to take a lead in this and perhaps losses too in the beginning to encourage more purchase and usage of electric vehicles.

90% of Women in India Are Shut Out of the Workforce. I have to say that this is an eye-opening yet disappointing read. I 100% support gender equality. To me, there is absolutely no reason why female can’t work or receive the same level of treatment as men do. Hence, it’s insane to think that only 10% of women in a country with 1.3 billion people in population are working. How much more productivity could be unlocked if women could work?

AC Milan’s ‘Mind Room’: The story behind an innovative psychology lab. Fascinating!

Here’s why you shouldn’t miss ‘bột chiên’ while in Ho Chi Minh City. It’s one of my all-time favorite dishes in Vietnam and Saigon. You don’t experience the local cuisine until you try it

Stats

Disney+ Hotstar Hits 5 Million Subscribers in Indonesia

App Store stopped nearly $1.5 billion in fraudulent transactions in 2021

Safari reached one billion worldwide users

Source: Federal Reserve Bank of San Francisco

CNBC: How Walmart Is Betting Big On Stores To Catch Amazon In E-commerce

CNBC has a new clip that focuses on the e-commerce battle between Walmart and Amazon. Have a listen and I’ll share my thoughts below.

There is a lot to unpack here. From my point of view, this is a great business case study with each company having its own advantages. Let’s start with Walmart.

Walmart undoubtedly made progress on the e-commerce front and the pandemic was, ironically, a welcome booster. There are several factors in favor of the iconic supermarket brand. The first is that merchants want to diversity distribution to reduce reliance on Amazon and Walmart is currently a great alternative. Lesser competition alleviates the price pressure on merchants’ shoulders and they can have a better margin on Walmart’s online store. While this factor holds, I don’t imagine that Walmart wants to maintain it in the future. The company definitely wants to attract more merchants to its online store front as the more choices it has, the more valuable as a shopping destination it will become to shoppers. Hence, this so-called advantage is unlikely to persist.

The second advantage on Walmart’s side is its network of more than 4,000 stores in the US. These stores can serve as revenue centers as well as distribution hubs for online orders. Think about it this way. The cost of building a store is fixed. The more products are cycled through that store, the more money Walmart makes. Plus, because stores are scattered throughout the US, they can deliver online orders to consumers much faster than by mail. Faster deliveries make customers happier. Although Amazon has its own network of fulfillment centers, they are different from Walmart stores in that they exist to fulfill orders and do no generate any revenue on the side. The e-commerce behemoth has been building out its cashierless stores across the US, but there are a few concerns that make it difficult for me to envision Amazon closing the gap in this area:

  • Would the Amazon Go stores be big enough to help fulfill online order?
  • If they get big enough, what does that mean for all fulfillment centers that Amazon painstakingly built?
  • How long would it take for Amazon to deliver orders from Amazon Go?

Then, there is grocery. It is a low-margin and tricky-to-handle category as many items are perishable, but it’s a staple that every household needs regularly. Consumers want good groceries at affordable prices and, on top of that, convenience. They can order groceries on Walmart.com and pick them up at the closest stores. Isn’t it better than to wait 2 days for an Amazon delivery? In the video clip, you can see Walmart has a program that brings grocery orders straight to customers’ fridge. To some customers, that’s just magic. While shoppers can technically place an order online and pick it up at Whole Foods, their bill will be a lot higher than at Walmart. The Arkansas-based company has always been the leader in this low-margin category with its unrivaled scale. In tough economic times like right now, consumers even want to keep their grocery bills as low as possible. If consumer preferences towards private labels change for the better in the future, it will play to Walmart’s hands even more. I don’t imagine that Amazon will catch up on this front any time soon.

Last but not least, fuel! Americans love to drive and to drive, they need fuel. This is another way that Walmart and its network of stores, including Sam’s Club, can build a relationship with customers. It’s not surprising that Walmart+ customers can get a few cents off per gallon at participating gas pumps. Unless Amazon invents a way to fill a gas tank digitally, they will have to establish physical presence like Walmart to negate this advantage that its rival has.

But it’s not all rosy for Walmart. Amazon is still the go-to destination when it comes to e-Commerce. Walmart’s desperation to catch up is evidenced by its acceptance of merchants that were kicked out by Amazon because they tried to defraud customers with fake reviews. Yes, it’s great that some merchants flock to Walmart since there is less competition. Nonetheless, who is to say that when Walmart scales its online front and boards more sellers, the existing merchants still feel the same way? When all other factors are equal and the deciding element for merchants is which platform will bring the most revenue, can Walmart attract sellers the same way as Amazon does? Will sellers be motivated enough to manage their presence on two online stores?

Additionally, what about consumers? Amazon routinely adds benefits to Prime membership to keep a firm hold of its most coveted clientele. Soon, Prime subscribers will be able to watch NFL live. Its Prime video collection with hits such as Jack Reacher, The Tomorrow Wars and Jack Ryan, I believe, already draws interest from consumers. There are also Prime Day, Amazon Music, Prescription Delivery etc…Once consumers are hooked on a Prime membership, it’s unlikely that they will go somewhere else to shop. The question to Walmart is whether they can make Walmart+ as good as Prime. Since we haven’t heard any official statistics on the number of Walmart+ subscribers, the jury is still out on how good this loyalty program is. Still, I don’t think it can be considered an equal of Prime any time soon.

All in all, this rivalry is exciting to follow. The companies seem to follow different paths towards domination and for now, I don’t know which one will come out on top and if this is even a winner-takes-all situation at all. For instance, I’d give advantage to Walmart in grocery items and to Amazon in non-grocery items. Consumers may as well get groceries from Walmart and buy everything else from Amazon. Both will have some success taking share from the other, but each will maintain its stronghold. That’s definitely a possibility.

Weekly reading – 7th May 2022

What I wrote last week

Apple’s Q2 FY2022 results

Book Review: Just Keep Buying

Business

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

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

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

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

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

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

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

Other stuff I found interesting

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

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

Stats

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

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

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

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

US reaches 1 million Covid deaths

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

Thoughts on Buy With Prime

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

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

Buy With Prime. Source: Amazon

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

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

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

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

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

Weekly reading – 23rd April 2022

Business

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

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

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

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

Kroger Is Building a Grocery Ecosystem for the Future

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

An interesting write-up on Divvy

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

Other stuff I find interesting

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

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

Web scraping is legal

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

Stats

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

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

Grocery store sales up over 9% for March

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

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

Weekly reading – 9th April 2022

Business

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

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

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

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

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

Other stuff I found interesting

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

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

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

Stats

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

March Madness Final drew 18.1 million viewers

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

Advertising employment gained 3,200 jobs in March 2022

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

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

Weekly reading – 19th March 2022

Business

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

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

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

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

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

Other stuff I find interesting

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

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

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

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

Stats

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

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

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

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

Weekly reading – 4th February 2022

What I wrote last week

Apple’s financials through charts

Amazon’s financials through charts

Business

Hungarian Refugee Founded Car-Parts Maker Linamar in Canada. An amazing entrepreneurship story from an immigrant who slept on train station benches and had only a few dollars to himself. The so-called American Dream is not exclusive to America. It can happen anywhere if people have the will

Losses Mount for Startups Racing to Deliver Groceries Fast and Cheap. Food or grocery delivery market is competitive and cut-throat. If you don’t have the scale, you’ll have to spend lavishly in the beginning to acquire merchants and users. Hence, every order is a money loser. Surely, new comers add to competition for the incumbents, but how long the new comers can persist and compete is another matter

Why Japanese Businesses Are So Good at Surviving Crises. “Many companies are stuck in short-termism, focusing on a strategic plan for five years,” he says. “But a lot of Japanese companies think about 100 or 200 years from now and envision the kind of future they want to create. During the tsunami disaster, the key mindset of executives was: We have to empathize with others. And companies ought to do the same thing now, during the current crisis, empathizing with those who are suffering and trying to figure out how to help.”

Google Is Searching for a Way to Win the Cloud. It’s mind-blowing to me that Google has been spending much of the last three years on bolstering its reliability, yet there were still issues. It goes to show how difficult it is to build a service such as AWS, Azure or GCP.

Inside Spotify’s Joe Rogan Crisis. After Twitter, Facebook and Google, Spotify is another organization that has an unenviable task of dealing with content moderation. The Joe Rogan show is hugely popular and draws eyeballs which equate to money for Spotify. However, that puts Spotify in a bind because his controversial content is opposed by some employees and influential artists. Facebook, for example, has poured literally billions of dollars over the years into content moderation. I wonder how much the urge to strike a balance of business and, let’s say, civic responsibility will cost Spotify. More important, whether they will be able to strike that balance at all

Other stuff that I find interesting

Cracking a $2 million crypto wallet. A fascinating story with a happy ending. I was too close to losing my cryptos once. Luckily, I remembered my password and did my utmost to ensure that I won’t be in the same situation again. At least that’s what I think.

Scientists Are Racing to Understand the Fury of Tonga’s Volcano. 10 million tons of TNT are just unfathomable to me. It’s amazing what Mother Nature can do. We are just too small and there are a lot to learn. This volcano eruption is one example

Inside Operation Warp Speed: A New Model for Industrial Policy. Whether you agree or disagree with the previous administration’s policies and ideology, the fact remains that Operation Warp Speed helped bring the much needed vaccines to the world. For that, it’s a success

Rafael Nadal: The ‘tough love’ that shaped a 21-time Grand Slam champion. The man with the most Grand Slams in history started his journey under a strict mentorship from his own uncle who taught Nadal the value of hard work and discipline.

Stats

Amazon bought 20% of all clean-energy purchases by global corporations in 2021

FTC reported that $770 million was lost to frauds initiated on social media in 2021

There were 9 million credit card non-prime originations in Q3 2021, up 75% YoY

“Of the mass shootings that took place from 1966 to 2019, 20% occurred in the last five years studied”