Weekly reading – 3rd June 2022

Business

The CEO of YouTube Has a Favorite Video and a Plan to Win Over Anyone Watching TV. File this under the “I guess it helps but I prefer you doing something else” cabinet. Building rapport with key creators is important. So is understanding their needs. I am just not sure that whatever the CEO of YouTube is doing is efficient and worth his valuable. I’d love for him to address the inhumane ads load that free users have to endure on mobile devices. If I were Meta, I’d think about a new brand and service whose sole purpose is to compete hard against YouTube. Consumers like myself are ready for a YouTube alternative that treats us better.

Netflix might ruin password sharing for everyone. The streaming service industry is so interesting and unpredictable that I distrust people who say they have it all figured out. Netflix wants to crack down password sharing to increase revenue. Its competitors are undoubtedly following this development to see if they can copy and make some more money. The problem is that this plan may drive away users (shocking!). Netflix already saw it in a few test markets, but unsurprisingly shrugged it off. Another consequence is that viewers will downgrade plans to Basic or even Ads-supported. There are two complications: 1/ will there be enough revenue to fund content in the future; and 2/ will there be content to keep viewers happy? Lower plans mean lower Average Revenue Per User (ARPU). Netflix needs to make the numbers look good to investors and fund content to keep churn low. The company also needs an existing library. The question is whether the likes of Disney or Warner Bros will license content to Netflix. These IP holders need money, but licensing to the biggest competitor will help Netflix retain users. An extremely delicate situation that even folks with privileged information may not know how to navigate. Therefore, I really can’t wait to see how all of this will unfold in the future.

Streaming services are removing tons of movies and shows — it’s not personal, it’s strictly business. A great complementary piece to the one right above about streaming services

What Costco’s Baskets Reveal About Consumer Finances. All signs are pointing to consumers under pressure and a recession. “ While shoppers still love going to Costco—traffic at its stores rose 4.8% globally and memberships grew 7%—they are walking out with smaller receipts. The average daily transaction declined 4.2% as shoppers bought fewer big-ticket discretionary items. Chief Financial Officer Richard Galanti said on Thursday’s earnings call that sales have shifted from beef to poultry and pork, a trend the company historically sees during recessions. Some are even switching to canned products such as chicken and tuna.”

Other stuff I find interesting

Europe is trying to ditch planes for trains. Here’s how that’s going. “Premature, but potential” is what I’d say. Although the new ban by the French government may have limited impact, this is the harbinger of what is going to happen in Europe. There will be more restrictions on flights, but I think that to make public transportation and trains more attractive to citizens, authorities must work to ensure that these means of transportation offer the same utility as flights. Until then, don’t expect flights to go away

Strong leg muscles may be linked with better outcomes after heart attack, study suggests. Another is added to a plethora of studies that say strength training is recommended for lower heart attack risks, especially among older people.

The Surprising Reason that There Are So Many Thai Restaurants in America. It’s a clever scheme from the Thai government to promote Thai culture and cuisine.

The unsung heroes of the Apple Watch are its hidden buttons. This is the best of Apple. Invisible things that are challenging to manufacture yet make the whole user experience stand out.

Stats

Tap-to-Pay brings additional $65 a month in spend from debit card users in the US, Visa executive reveals at Annual J.P. Morgan’s Global Technology, Media and Communications Conference 2023

According to Morning Brew, the next El Niño will cost the global economy $3 trillion through 2029

9.8 million passengers were screened at airports during Memorial Day weekend, according to the TSA

70% of adults in the US coped well financially in 2022, down from 75% in 2021

Business lessons from Apple. Patience & Perseverance.

We’re all told that patience and perseverance play an important role in our life. Well, they do in business too. Today, I’d like to talk quickly about how Apple, a company with unlimited resources, still relies on patience and grit to bring their products and services to life.

Apple Watch

Apple introduced the first Apple Watch in April 2015. At launch, the product faced plenty of skepticisms over its value propositions, as well as criticisms regarding various features. Although Apple did deserve some of those negative sentiments, the company continued to work hard on all aspects of Apple Watch over the last eight years and ultimately transformed it. The battery life is at least 24 hours on one charge now. The software is significantly better. The interface looks bigger. More importantly, they pivoted Apple Watch to focus on consumer health and safety. Positioning the Watch as a health monitoring gadget unlocked two important benefits to Apple. First, the target population includes not only young tech-savvy consumers, but also health-conscious elderly citizens. Per WSJ:

Wearable devices for tracking health and fitness are the hottest technology among older adults, according to leaders at several aging-tech organizations and companies. The AARP says 28% of older Americans own a wearable and 77% of those people use it daily.

Trish Macvaugh, a 76-year-old Willow Valley resident, began swimming competitively three years ago. She uses her Apple Watch Series 6 to log her heart rate and more particular stats, too. There’s her “swolf” score, the number of strokes taken plus the time it takes to swim a certain length, and her “VO2 max,” the maximum amount of oxygen she takes in during intense exercise.

For tech advice, she turns to fellow resident Susan Culbertson, a 76-year-old retired computer-software trainer. Last fall, Ms. Culbertson created classes at Willow Valley to teach others how to use Apple products. The classes have gotten so popular, they’ve occasionally run out of seats for people in the conference room where they take place.

Second, the pivot elevated Apple Watch to a whole new level that folks no longer consider it a simple device that sends notifications. Think about it this way: No other product on the market has the positioning that Apple Watch has – a high-end timepiece that also provides excellent health monitoring services and comes with an ecosystem. That little market niche is enough to generate billions of dollars in annual revenue for the company.

While Apple Watch is undoubtedly a resounding success, Apple did NOT strike gold at its first try. It took years and a lot of hard work behind the scenes to get there. Even for the most valuable company in the US with unfathomable resources at its disposal.

Apple Maps

Would you believe it if I told you this was Apple Maps in 2012?

Source: The Verge

The embarrassing episode was so disastrous that Apple had to issue a rare public apology. Back then, a lot of people cast serious doubt over the outlook of Apple Maps and whether it could be a competitive alternative to Google Maps. Frankly, after such a horrible display by Apple despite having limitless resources, I don’t blame the critics. I’d have the same reservation.

Nonetheless, Apple Maps today is a vastly improved version compared to its predecessor. The service is so good now that the website Tom’s Guide found it to be superior to Google Maps in Interface, Map Design and especially privacy while being competitive in other aspects. I have been using exclusively Apple Maps since 2019 and had no trouble with it. While my wife and I were in Washington DC last month, we used Apple Maps to navigate and use the public transportation without any hiccup.

Apple Maps has a long way to go before catching up with Google Maps. And I doubt that it ever will. Simply because Apple doesn’t collect data like Google does and Apple Maps is only available on iOS devices. With that being said, being where Apple Maps is now can be considered a success. A success that overcame a nasty public embarrassment and took years to arrive.

Apple Pay

Apple Pay came to the market in 2014, even though work on the service started about a year before that. Nine years later, here is where Apple Pay stands:

  • It makes up 6% of in-store purchases
  • A lot of merchants select Apple Pay as a checkout option due to its seamless experience, fraud protection and popularity.
  • It’s available in 76 countries all over the world

iOS devices are present in almost every country in the world, but Apple Pay is only in about one-thirds of the world. Even that already makes the service arguably the most popular digital wallet out there. Such a success, though, didn’t come over night. There are regulations involved in this type of payment services. There are technical issues that must be solved. Plus, you can’t convince merchants to put Apple Pay on the checkout if it isn’t used by consumers. And consumers won’t develop a habit of using it unless it’s on a lot of merchants’ checkout. Success looks easy, but the work behind it takes more than just a household brand name and ads.

If a company like Apple still needs to grind for success, I don’t see how it should be different for smaller businesses or individuals like us.

Another Superpower of Apple – Pricing Strategy

You’ll be hard-pressed to find a market in which customer preference is homogeneous. People and companies have different wants and needs. Such ​heterogeneity is a powerful force driving a company’s product and pricing strategy. A “one-size-fits-all” approach is bound to fail, but on the other hand, it’s exceedingly difficult to get the right product to market at the right price. Price a product too low and a business will leave money on the table. Price it too high and competitors will swoop in to take market share. Successful businesses are those that manage to meet diverse customer needs with different products at varied price points. Apple is among the best in the world at that.

Believe it or not, Apple has a complex portfolio of products. Every model has multiple configurations sold at different prices. For the sake of simplicity, I catalogued only the lowest price point of each model of five major product lines: iPhone, Mac, iPad, Apple Watch and AirPods. Furthermore, I included only the current models that Apple sells on its official store at Apple.com and excluded all the refurbished versions. Here is what the pricing schemes look like:

Apple's Pricing Schemes For Major Products
Figure 1 – Apple’s Pricing Schemes For Major Products

Obviously, Apple doesn’t adopt the one-size-fits-all approach. Every product line has several variations. There is an entry-level option that satisfies the basic needs of customers who do not wish to splurge a big amount on a gadget. Take iPhone SE as an example. It has Touch ID instead of the more trendy Face ID as an authentication feature. It comes with Bionic A15 instead of the latest A16 chip. There are several other compromises, but compared to iPhone 5 or even 6 a few years ago, I bet the current SE is still a much better phone. Since the iPhone SE features must already satisfy the needs of low spenders, why would Apple need to add more unwanted features and price itself out of this customer segment?

On the other side of the spectrum, the most sophisticated users have niche preferences and are willing to pay for products that can deliver accordingly. Mac Pro is a too powerful and too expensive computer if you just want to use it for Web surfing and Office 365. However, it would be a great choice for those who need a lot of computing power for their professions. Apple Watch Ultra costs more than a Mac Mini. It’s too expensive for someone like me who just wants a smartwatch for daily exercises. But for fans of extreme sports, it’s the perfect companion.

In addition, Apple has offers to the “middle class” segment that has a bit more sophisticated needs yet does not wish to pay a lot. Like myself. This pricing strategy enables Apple to appeal to more customer segments and sells more hardware. To them, the most challenging task is to get a customer to join the ecosystem. Once someone gets in, chances are that they will stay for a long time and be primed for Apple to monetize through a myriad of services.

There is also an “anchor pricing” effect stemming from having different tiers. The point is to make your main product stand out by offering lesser alternatives. Let me explain. With $599, users can have a brand new iPhone 12 with the A14 chip. However, they will be tempted to think: if I pay just $100 more, I can have a more powerful chip (A15), theoretically a couple of more hours of battery and some camera features that I may use once in a while. Some may take it further and ponder that because iPhone 14 is $100 more expensive than iPhone 13 yet it has one more GPU, Emergency SOS via satellites, crash detection and several more camera features, is it worth to go all the way? This anchoring effect is even more obvious between iPhone 14 and the Pro versions. The gap between iPhone 14 and iPhone 14 Pro is $200, but the latter has a more advanced chip (A16), a better camera and some software features that Apple really pushes such as always-on display, Dynamic Island & Promotion Technology. I can see why users will be tempted to shell out more money for the Pro versions. In fact, there is already report on high demand for iPhone 14 Pro. I think Apple will continue to use this anchor pricing effect and bring their best updates to the Pro lineup in the future. This way, they can get a higher share of consumer wallet and maximize their top and bottom line.

But such an elaborate pricing strategy doesn’t come cheap. It requires a lot of collaboration, planning and smooth operation from the internal teams. Think of the work that the supply chain team must do to secure the needed parts. Or the planning and execution that the engineering team has to offer so that all products work as intended and carry the right appeal. I bet it’s also very challenging for the revenue management folks at Apple to analyze data and make forecasts. But hey, nothing worth having comes easy, right?

Admittedly, I don’t have any sales data on specific products. However, Apple has seen an increasingly bigger installed base, more paid subscriptions and record revenue. That goes to show that the work Apple puts in has paid dividends.

Apple's Revenue Growth
Figure 2 – Apple’s Revenue Growth
Apple's Paid Subscriptions
Figure 3 – Apple’s Paid Subscriptions

Weekly reading – 11th December 2021

Good reads on Business

What the Tech? The Apple Watch’s Straps Are More Than Just a Finishing Touch. “For us, the band is not at all about technology — each band expresses our love for materials, craft, and the process of making.” When we look at the Apple Watch, we may wonder how obvious the band looks. But I believe that a lot of research and technology went into bringing the band and Watch together into beings. We are used to having the tail of the band stick out on normal watches. On the other hand, the Apple Watch tucks the tail under the band itself. Even that little detail is worth commanding.

A couple of good posts on Visa here and here. If you aren’t familiar with what the company whose logo is on your debit or credit card does, have a read.

Web3 is Bullshit. The article is as provocative as the headline. I do; however, agree with some of the points the author made, regarding cryptocurrencies.

Ride-Hailing: Is It Sustainable? A good essay arguing that ride-hailing is a sustainable business and the likes of Uber and Lyft have untapped pricing power. I wrote quite a couple of pieces on Uber, you can check out here: Uber acquired Drizly and Postmates, Uber Q3 FY2021 earnings

Amazon is making its own containers and bypassing supply chain chaos with chartered ships and long-haul planes. “Who else would think of putting something going into an obscure port in Washington, and then trucking it down to L.A.? Most people are thinking, well, just bring the ship into L.A. But then you’re experiencing those two-week and three-weeks delay. So Amazon’s really taken advantage of some of the niche strategies I believe that the market needs to employ”

Kohl’s Urged to Consider Sale by Activist Investor. Engine Capital estimated that Kohl’s eCommerce business can be worth around $13 billion. My question concerns whether that estimate factors in the value of the physical stores. Walmart, Target and Best Buy know the importance of using stores to enhance customer experience and fulfill online orders. If Engine Capital or other activist investors want to separate the online business from physical stores, how do they think the online business alone would fare against the likes of Amazon?

Scaling to $100 Million. ARR and Margin. ARR and Margin.

Stuff that I found interesting

Flutter allows developers to build apps for mobile, web and desktop from a single code base

Climate change: Is ‘blue hydrogen’ Japan’s answer to coal? Any disaster that costs lives is tragic, but I can’t help thinking that the switch back from nuclear to coal is massively disappointing

Grapefruit Is One of the Weirdest Fruits on the Planet. An interesting article on grapefruit. “Because those base fruits are all native to Asia, the vast majority of hybrid citrus fruits are also from Asia. Grapefruit, however, is not. In fact, the grapefruit was first found a world away, in Barbados, probably in the mid-1600s. In 1664, a Dutch physician named Wouter Schouden visited Barbados and described the citrus he sampled there as “tasting like unripe grapes.” In 1814, John Lunan, a British plantation and slave owner from Jamaica, reported that this fruit was named “on account of its resemblance in flavour to the grape. A Frenchman named Odet Philippe is generally credited with bringing the grapefruit to the American mainland, in the 1820s. He was the first permanent European settler in Pinellas County, Florida, where modern-day St. Petersburg* lies.”

The Many Worlds of Enough. “Ambition is largely driven by self-actualization, or the desire to become a more capable person. And when this happens, it’s only natural that good outcomes arise. You’ll witness bumps in your reputation, be offered higher salaries, and so on. But these things happen as a byproduct of your ambition, and not because these outcomes were your primary desires. Greed, however, is when those outcomes become your primary desires. When prestige, praise, and power are the reasons why you are ambitious, that’s no longer driven by self-actualization. That’s when you lust for everything that is external to you. It’s rather difficult to know where this point is, as the boundary between ambition and greed can be blurry. But for the most part, you’ve entered the domain of greed when you no longer pursue an endeavor because you’re curious about it. It’s when the coldness of utility replaces the warmth of curiosity.”

The $11-billion Webb telescope aims to probe the early Universe. If everything goes as planned, the Webb telescope will be 1.5 million kilometers away from Earth. 1.5 MILLION kilometers. Science and technology are just amazing.

Why U.S. Infrastructure Costs So Much. “Mile for mile, studies show the U.S. spends more than all but five other countries in the world on public transit, and more on roads than any other country that discloses spending data. In 2013, Portland’s 7-mile Milwaukie light rail extension cost more than $200 million per mile, as much as a full subway system would cost in many European cities. The first phase of the Second Avenue Subway in Manhattan, the most expensive subway project in the world, cost $2.5 billion per mile, nearly five times the cost of a similar extension in Paris. Spending swelled across three problem areas: over-design, inefficient project management and misaligned politics”

Stats

Global Logistics and Supply Chain is a $11 trillion market

Lieferando has…99% of Germany’s food delivery market

YouTube removed 2.2 million videos that violated copyrights between January and June 2021

Consumers are expected to spend $133 billion on apps in 2021. The App Store continues to dominate Google Play

Remittances to Vietnam in 2021 are projected to hit $18.1 billion

Weekly reading – 4th December 2021

What I wrote last week

I shared my research on real-time payments

Good reads on Business

Glass bottle shortage leaves US distillers high and dry. The supply chain challenges still persist. While the demand for spirits and wines in the U.S continues to be strong, the task of finding glass bottles becomes more challenging and expensive. One glass supplier considers more than quadrupled the price of a container. That kind of price increase will make your next bottle fairly more pricey.

The new memo by Howard Marks: The Winds of Change. Howard touches on many topics from politics, regulations to macro economics. Have a read and if you have time, read his other memos too.

The Rising Tide of Semiconductor Cost. The technological advances we made in chip design and production are not going to make chips cheaper any time soon.

Amazon Builds Out Network to Speed Delivery, Handle Holiday Crunch. “As of mid-November, more than 98% of parcels that arrived at Amazon’s delivery centers, which typically are in close proximity to packages’ final destinations, were being delivered the next day, according to estimates from research firm ShipMatrix Inc. At the same time, some items like household products and sporting goods were showing delivery windows of a few days, ShipMatrix said, emphasizing Amazon’s message to shop early.” As Amazon continues to invest aggressively in its warehouse and delivery network, it’s more likely that the company will raise the bar, making the next day or same day delivery a norm. When that happens, other retailers will have a hard time catching up. Replicating the same recipe requires a lot of capital, time and expertise. I think the more Amazon succeeds in raising the bar, the better the market will be for delivery services like Instacart, Uber or DoorDash

Ghost Kitchens Are Proving to Be a Messy Business, as Reef Global Shows. “Since the summer, local officials in New York City, Houston, Detroit and Chicago have suspended operations at some or all of Reef’s fleets of trailers for violating regulations, totaling more than 25 closures. Many of the suspensions were for kitchens that were operating without permits, while others were for failing to tow the trailers to a central commissary every day, a requirement for food trucks in many cities. Utility hookups routinely take months longer than expected, requiring expensive generators and water deliveries, according to former Reef managers. Food waste is a consistent problem, as is a broader labor shortage in the food-service sector that has sent its cooks’ wages soaring.

Payments are eating the world. A very interesting report by JPMorgan Chase on the state of payments

Oct 2021: U.S. Online Grocery Sales Stabilize at $8.1 Billion. This study of online grocery sales in the U.S is interesting. It claims that 50% of U.S households bought groceries online. The average order placed by an active customer is 2.6 per month and the average value for order is $70. That’s almost $200 in online groceries, more than what I expected.

Amazon charges sellers fees that are high enough to offset losses from Prime, a new report says. Amazon can exert this much control over sellers because it can bring consumers to the table. Sellers may not be pleased with how Amazon squeezes them, but if they want to rely on the eCommerce platform for reach and sales, they have to deal with its shenanigans too.

Stuff that I found interesting

How the Ancient Romans Went to the Bathroom. “Despite the lack of toilet paper, toilet-goers did wipe. That’s what the mysterious shallow gutter was for. The Romans cleaned their behinds with sea sponges attached to a stick, and the gutter supplied clean flowing water to dip the sponges in. This soft, gentle tool was called a tersorium, which literally meant “a wiping thing.”

Stats

A new paper estimates that 67% – 76% of new Covid infections in Germany in October 2021 came from the unvaccinated

Shopify merchants around the world recorded $2.9 billion in Black Friday sales

Black Friday 2021 sales in the U.S dropped from $9 billion in 2020 to $8.9 billion this year

Cyber Monday online sales in the U.S hit $7.1 billion in 2021, down from $10.8 billion last year

More than 17 million UK customers have now used a buy now pay later 

The U.S generates 42 million metric ton in trash a year, more than all EU nations combined

Weekly reading – 13th February 2021

What I wrote last week

I reviewed Exercised: Why Something We Never Evolved To Do Is Healthy And Rewarding, a book that talks about how important exercise is from a Human Evolution and Anthropology perspective

The importance of owning a relationship with your customers

I talked about Uber as a business and its acquisition of Drizly

Business

An interesting piece on the CEO of Adobe and his relationship with fellow CEOs

An interview with the richest man in Japan

A very interesting piece on the threat that Canva and Fima pose to Adobe

An interesting post on the culture of writing memos at Amazon

Bloomberg has a piece on how Tim Cook built his own version of Apple. Tim Cook’s version isn’t bad at all as the company is now worth $2.3 trillion

How Facebook is doubling down on Marketplace

What I found interesting

A story on Yuta Watanabe, a Japanese basketball player who is having a season in the NBA

According to a new study, Apple Watch can help identify Covid-19 symptoms

Interesting stats

Contactless payments are expected to grow by 6-8% after Covid

40% of consumers in the US that used a “Buy Now, Pay Later” service missed at least one payment

The App Store saw more than $10 billion in consumer spending in 2020

Apple Watch is reportedly worn on 100 million wrists

Weekly readings – 7th August 2020

What I wrote last week

Uber’s latest quarter

Apple’s acquisition of this promising fintech startup from Canada

Business

Inside Netflix’s Quest to Become a Global TV Giant

US citizens increasingly moved to Canada through its Express Entry program

Content creators on YouTube that no longer rely on advertising dollars on the platform grew 40% between Jan and May 2020

Why Microsoft wants Tiktok

A sensible piece on Amazon, its private label and the antitrust issue that it has to deal with

Eugene Wei’s latest essay is on TikTok and it’s good

ARK’s latest white paper on SaaS

How Tim Cook has molded Apple into his own version, not Steve Jobs’

Technology

Apple secured a new patent that could equip Apple Watch with odor sensor technology

What’s the Big Deal About Revit? Understanding the Role of Autodesk Revit in Architecture, Engineering, and Construction

Other stuff that I think is interesting

Inside look at CloudKitchens

Bill Gates’ conversation on Covid-19

Weekly readings – 9th May 2020

The decline in trust in governments shows no signs of abating. Everywhere you look, there is suspicion that measures taken by governments to combat Covid-19 will soon be used for mass surveillance afterwards. India is no exception. For A Billion Indians, The Government’s Voluntary Contact Tracing App Might Actually Be Mandatory

The pandemic doesn’t seem to affect spending on cloud infrastructure badly

The man feeding a remote Alaska town with a Costco card and a ship

Apple Watch detecting coronary ischaemia during chest pain episodes or an apple a day may keep myocardial infarction away

VP of Amazon resigned to protest the firing of workers who spoke out on the working conditions at Amazon warehouses

Looking Back on Four Years at The Times, in the words of their former CTO

Amazon pulled no punches in its public blog post on Microsoft regarding the JEDI dispute

Spotify should pay musicians more? Let’s talk more about how

Weekly readings – 2nd May 2020

While the world is struggling with the pandemic, some politicians took advantage of the situation to consolidate their power

America is wasting a lot of space on parking slots

68 Bits of Unsolicited Advice

Techcrunch’s profile of Flexport’s CEO

Seattle’s Leaders Let Scientists Take the Lead. New York’s Did Not

Taking a virtual tour inside a Pharaoh’s tomb

Weekly readings – 9th November 2019

Three Big Things: The Most Important Forces Shaping the World

Venture Capital Pioneer Kept Entrepreneurs’ Egos in Check

Microsoft Japan’s experiment with 3-day weekend boosts worker productivity by 40 percent

The father of the modern frozen food industry

Nokia’s collapse turned a sleepy town in Finland into an internet wonderland

Apple TV, Apple TV, Apple TV, and Apple TV+. I have to say Apple could and should have done better with all these silly names

Apple Watch Forced Fitbit to Sell Itself

Remember the Uber self-driving car that killed a woman crossing the street? The AI had no clue about jaywalkers

How Google Edged Out Rivals and Built the World’s Dominant Ad Machine: A Visual Guide

AirPods Pro review – within earshot of perfection

Less than Half of Google Searches Now Result in a Click

A deep dive into Internet censorship in Russia

Bob Iger Takes the Gloves Off for Disney’s Streaming Debut