Tag: Apple

Weekly readings

Weekly reading – 11th March 2023

by MQDuongLeave a Comment on Weekly reading – 11th March 2023

What I wrote last week

Book review: Twelve years of turbulence

Business

Google execs tell employees in testy all-hands meeting that Bard A.I. isn’t just about search. Leadership is about providing vision and belief. If you are paid to think of big pictures, instead of doing the dirty work every day, wouldn’t it be disappointing to provide ambiguity and inconsistent answers to a high-profile product like Bard? I get that it’s difficult to know what to do with an experiment like Bard. But a rushed announcement, followed by ambiguity and a botched demo, erodes trust in the leadership of Google.

Buffett ❤️ Apple: Case Study. I often see folks go out of their ways to be contrarian and find whatever reasons they can to justify buying other stocks than Apple. But as Buffett said: you get paid to be right, why wouldn’t anyone consider Apple as an investment? I am not saying that it’s THE best investment choice out there as any given time. I am saying that Apple and the boring index fund are a lot better than many stocks out there.

($) How Chili’s Is Prepping for Tough Times, Starting With the Fries. The article offered a couple of good examples on what CEOs can do to increase productivity and save costs. Chili’s CEO considered the practice of counting shrimps a time-waster. By ending that practice, the company estimated cost savings at $6 million a year. The changes made at Chili’s restaurants aren’t popular with everybody, proven by comments cited in the article. However, the stock price rebounded handsomely this year and same-store sales increased despite declining traffic. At least there is that.

Amazon’s big dreams for Alexa fall short. Alexa is an interesting innovation in that it enabled the birth of many smart devices; which offers value to consumers (I am one of those), while lacking a way to monetize its value. Amazon has not been able to prove that Alex is additive to sales on its platform and I am not surprised. How many shoppers call Alexa when they want to discover something? If it’s a routine purchase, there is already Subscribe and Save. I don’t believe that Amazon staff lacks the effort to prove Alexa’s worth. I do believe that they couldn’t find it because there likely isn’t any

Business Breakdowns on Wise. A really interesting Business Breakdowns episode on Wise. Wise is my go-to platform whenever I want to send money back home to Vietnam. There are two factors that affect the net amount that my family receives: exchange rates and platform fees. Accounting for these factors, Wise usually beats other alternatives such as Xoom or Western Union. Hence, it’s really fascinating to learn about Wise’s origin, how it works in general and what competitive advantages the company enjoys

Other stuff I find interesting

($) The Surprising Ways Walking Delivers a High-Intensity Workout. “Walking with more intensity can burn as many calories as higher-impact activities such as running or even HIIT classes, experts say. That could mean incorporating weights, hills, intervals or a faster pace without breaking into a jog. Taking an 11-minute brisk walk daily will also lower your risk of stroke, heart disease and a number of cancers, according to a study from the University of Cambridge published in February.”

This website collects many dark patterns on the Web

The tech workers exiled from Europe’s last dictatorship. It’s always disturbing to learn about a dictator suppressing citizens’ wishes. It’s equally sad that some good folks have their lives turned upside down and must live away from their family & friends, just because they have the courage to do something.

In Scramble for Clean Energy, Europe Is Turning to North Africa. “Solar panels in sun-rich North Africa generate up to three times more energy than in Europe. And North Africa has a lot more room for them than densely populated Europe. Result: Europe’s drive to end its reliance on Russian natural gas supplies, triggered by the Ukraine conflict, is resulting in a rush to install giant solar energy farms and lay underwater cables to tap into North Africa’s abundant renewable energy.“

A lack of water leaves Vietnam’s coffee farmers high and dry. Another example of unsustainable growth.

Stats

Uber CEO revealed at Morgan Stanley Technology, Media & Telecom Conference that New York makes up 2% of its global delivery bookings

2.1 million people visited Kentucky Bourbon Trail in 2022

U.S. solar and storage manufacturing jobs expected to grow to 115,000 by 2030

Business

Weekly reading – 11th February 2023

by MQDuongLeave a Comment on Weekly reading – 11th February 2023

What I wrote last week

Apple had the first revenue decline since Q3 2019. Why I am not worried

Amazon is no longer on Day 1

Business

‘iPhones are made in hell’: 3 months inside China’s iPhone city. As an Apple shareholder, I condone the working conditions at the company’s suppliers. With the bargaining power that Apple has, it can make a difference in this area, especially when the tech giant doesn’t seem to waste any opportunity to tout its efforts to improve everyone’s lives.

EV Startup Vinfast to Cut U.S. Jobs Amid Restructuring. VinFast delivered almost 1,000 cars to the US, only for them to be stopped there because of “software updates”. While cars haven’t hit the roads yet, VinFast is reportedly downsizing operations not only in Vietnam, but also in North America. I used to work for the conglomerate. I am not foreign to the way Vingroup does business and everything said in the article sounds awfully familiar

Elon Musk fires a top Twitter engineer over his declining view count. Firing employees on a whim, product management by tweets, low morale, lack of leadership. All the things that one can imagine of terrible management are on full display at Twitter owned by arguably one of the greatest business executives that we have seen. What power and wealth can do to a person.

Google employees criticize CEO Sundar Pichai for ‘rushed, botched’ announcement of GPT competitor Bard. The urge to launch an AI tool quickly is baffling to me. I mean, ChatGPT may be cool and offer some value, but it’s still not commercialized. What good does it go for Google to have a half-baked alternative out? Why didn’t they wait to have a working product? This is not a good look for Sundar and his leadership team. As a CEO, he made a mistake in hiring too many employees too quickly. Now, he botched this product launch. And there is a report out there that the company even got the layoff improperly. These make you wonder what kind of CEO Sundar is.

Disney CEO Bob Iger’s potential willingness to sell Hulu is a reversal in strategy. Given the important of bundles to Disney’s streaming business and the subsequent importance of Hulu to the bundles, I doubt that Disney will sell its stakes in Hulu. This interview is just Bob Iger trying to gain some bargaining power and changing the narrative. As much as I was not a fan of Bob Chapek, he is a smart guy (otherwise he wouldn’t be CEO of Disney) and if he and his team thought buying out Hulu was strategically sound, I don’t see how the rationale changed in only a few months between then and now.

Zelle
Net profit per vehicle by car brand
Source: Visual Capitalist

Other stuff I find interesting

How New Ideas Arise. There are two takeaways from this article for me. The first is that ideas can come anytime from anywhere. How ideas come pretty much varies from one person to another. What works for one person may not work for others. Find what works for you. Second, the only commonality is that ideas are puzzles. The more pieces one has, the more likely one can put together the puzzles. Hence, your personal experience in life and what you read matter!

Visual design rules you can safely follow every time. Even when you are preparing for your term paper or a document to your boss, these tips can come in handy

A guide for Van Life in Japan. I found this post inspiring. As a long-time admirer of Japan, reading this blog makes me want to travel to and explore the country even more.

TikTok’s Secret ‘Heating’ Button Can Make Anyone Go Viral. “According to six current and former employees of TikTok and its parent company, ByteDance, and internal documents and communications reviewed by Forbes. These sources reveal that in addition to letting the algorithm decide what goes viral, staff at TikTok and ByteDance also secretly hand-pick specific videos and supercharge their distribution, using a practice known internally as “heating.” “The heating feature refers to boosting videos into the For You feed through operation intervention to achieve a certain number of video views,” an internal TikTok document titled MINT Heating Playbook explains. “The total video views of heated videos accounts for a large portion of the daily total video views, around 1-2%, which can have a significant impact on overall core metrics.”

Fragrant fungi rewards Himalayan foragers. “For a few weeks each autumn, fine-dining kitchens across Japan are rich with the aroma of the matsutake mushroom. Japan consumes more than 500 tons of the delicacy in that short window, despite prices of up to 70,000 yen a kilogram. Ninety percent of the mushrooms are flown in, and foragers in exporting countries can earn a significant premium over their ordinary incomes. One Himalayan kingdom has been reaping the benefits. Matsutake grow wild at an altitude of 2,900 to 3,100 meters. Like that other prized fungus, the truffle, these mushrooms are hard to cultivate artificially. So foraging begins with a climb up the mountain path.”

Stats

Average price of a new car reached $47,362 in January 2023

Total credit card debt to a record $930.6 billion at the end of 2022

On average, Americans eat more than 9 pounds of Mexican avocados a year

Business

Apple had the first revenue decline since Q3 2019. Here’s why I am not worried

by MQDuong1 Comment on Apple had the first revenue decline since Q3 2019. Here’s why I am not worried

Per Apple Newsroom:

Apple today announced financial results for its fiscal 2023 first quarter ended December 31, 2022. The Company posted quarterly revenue of $117.2 billion, down 5 percent year over year, and quarterly earnings per diluted share of $1.88.

On the earnings call, Tim Cook named three reasons for the revenue decline: unfavorable foreign exchange rates, supply chain issues in China caused by the Chinese government’s Covid policy and a challenging macroeconomic environment. On foreign exchange, Cook quantified the impact at 800 basis points or 8%. Had foreign exchange stayed constant, the company would have had a 3% revenue growth. Regarding supply chain constraints, Apple posted an update on 11/6/2022, warning investors that they would not have enough iPhone 14 to sell. As it turned out, even they underestimated the gravity of the situation since supply shortage lasted through most of the quarter. For good measure, inflation and war in Eastern Europe were, too, significant hindrances.

On the product revenue side, here is where Apple landed:

  • iPhone: $65.78 billion, down 8% YoY
  • iPad: $9.4 billion , up 30% YoY
  • Mac: $7.4 billion, down 29% YoY
  • Wearables: $13.48 billion, down 8% YoY
  • Services: $20.77 billion, up 6% YoY

While there is definitely value in tracking product revenue YoY growth, investors should not put too much stock in it. For two reasons. First, factors such as Covid and lockdown imposed by the Chinese government, affecting much of Apple’s supply chain, are beyond the company’s control. Of course, Apple must address this outsized risk for long-term sustainability, which I believe they already have started, but there are always unpredictable events. Second and more importantly, YoY growth is significantly influenced by Apple’s product release schedule. Take Mac as an example. Stay-at-home orders around the globe pulled forward a lot of demand. Additionally, the launch of Macs with redesigned M1 chips last year was an astounding success, making it a tough comparison this year. On the other end of the spectrum, iPad had a great quarter due to the new products and easy comparison which derived from supply constraints last year.

As a shareholder who has a sizeable share of portfolio in Apple, I am not worried about the company’s foreseeable outlook for the following reasons: customer loyalty & demand, Services and a competent management. During the call with analysts, Apple CFO Luca Maestri gave some color on how much Apple products appealed to consumers:

Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family.

At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research.

The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product.

Our installed base of devices in the category (Wearables) set a new all-time record thanks to the largest number of customers new to our smartwatch that we’ve ever had in a given quarter. In fact, nearly 2/3 of customers purchasing an Apple Watch during the quarter were new to the product.

As you can see, Apple doesn’t have a demand problem. What they struggle with is to make sure that they have enough products to sell. It is a much better and easier problem to have than to generate demand. Today, China has relaxed its Covid policy, easing the supply chain bottleneck and giving Apple more products to put on the market. As mentioned before, Apple product releases seriously impact growth numbers and it’s anybody’s guess what products and WHEN the company will announce. Nonetheless, as long as devices fly off the shelves, Apple should be in good shape.

In addition to Products, I am bullish on the Services side of the house. Since 2018, Services revenue grew by 18% every year, reaching $20.77 billion in Q1 FY2023. To put it in perspective, in the last four quarters, Services generated close to $80 billion in income, dwarfing that of some of the iconic US giants like Starbucks, Nike or Boeing.

Apple attributed this growth to its ever growing subscription base and called it “the engine” of Services. As of Q1 FY2023, Apple had 935 paid subscriptions, growing it at 31% every year since 2018. With 2 billion active devices at the moment, that Apple had 935 million paid subscriptions implies there are a lot more subscriptions to acquire. Meanwhile, most existing subscribers should be happy to stick around. Can you imagine having 100 GB of photos and materials and suddenly stop iCloud next month? Furthermore, there are developing avenues for growth such as advertising, financial services or Apple Business Essentials. Because of these reasons, I am confident that Services will continue to grow nicely for Apple, at least in the next 3-5 years.

One last, but definitely not least, reason why I am bullish on Apple is its competent management. While other tech peers such as Microsoft, Meta, Amazon and Google got carried away by the growth during Covid and subsequently fired thousands of employees to cut costs, Apple was disciplined in its hiring and growth initiatives. Such a more measured approach led to Apple being the outlier in tech layoffs and maintaining healthy financial profiles. Despite unfavorable foreign exchange, supply constraints and inflation, Apple’s gross margin stayed relatively intact. Margin for Product, Services and the whole company was down by 1% compared to last year but up 2-3% compared to 2021. That’s not a mean feat. It implies considerable bargaining power against suppliers, thoughtful planning and great execution. And if you care about how a company is run, it’s exactly the kind of signal that you should look for.

Obviously, Apple’s management and investors would prefer a revenue beat to a revenue miss. But investing and characteristics of a company are more nuanced than just revenue figures. That’s exactly the case here. The strength of Apple’s product lineup & Services as well as the competent leadership at the helm make the attention-grabbing headlines from news outlets much less concerning.

Uncategorized

Weekly reading – 4th February 2023

by MQDuongLeave a Comment on Weekly reading – 4th February 2023

What I wrote last week

Banks plan to compete with Apple Pay & PayPal

X1+, a credit card for when things go wrong on travel

Business

Understanding Tesla’s operating leverage. A good post on how Tesla managed to increase its operating margin while vehicles prices dropped

($) Americans Are Gobbling Up Takeout Food. Restaurants Bet That Won’t Change. Quite an interesting trend in the restaurant industry. I have no idea how it will go because my personal experience is conflicted. My wife and I are often marveled at the long line in front of every Chick-fil-A store that we pass by. On the other hand, I saw fast food stores with no line, no car in the parking slot and very few diners. Takeout may increase sales for restaurants, as long as they survive

Aldi, H-E-B among growth leaders in 2022: Report. “Small-format stores are cheaper to build and require less land or space to buy or lease. This allows access to more markets than a larger-format store would. Furthermore, as retailers continue to invest heavily in e-commerce, these smaller stores can act as fulfillment centers for online orders.”

($) Bed Bath & Beyond Used to Be Great. These Two Are Why. Bed Bath & Beyond’s founders serve as an example of honesty, authenticity, frugality and customer orientation. They are not afraid to admit their own mistake, including not realizing the potential of the Internet. At first, when the company’s budget was tiny, the two men used cardboard boxes as trash bins and still make sure both sides of scrap paper are used. I also found it awesome that they finally learned to let go of their creation after being pushed out.

TikTok is driving an offline lift in sales for some brands. Very helpful and interesting examples of how TikTok is helping brands drive sales.

Other stuff I found interesting

First use of Apple Emergency SOS in B.C. may have saved two lives. Apple’s innovation is increasingly proven valuable in real-life crises. Even one of these cases is even worth working on

($) Japan, Netherlands Agree to Limit Exports of Chip-Making Equipment to China. A great triumph for the Biden administration in hampering China’s ambition in this critical area. Without the most advanced materials and technologies from ASML, Nikon and other important manufacturers, China won’t be able to scale their semiconductor operations and bridge the gap to the US

($) The U.S. Consumer Is Starting to Freak Out. Signs of the troubling times to come are here

The highest rail route in northern Europe. “Connecting Norway’s stylish capital with its most picturesque city, the 496km, 39-station Oslo-Bergen railway is one of the world’s most beautiful train journeys.”

The Antidote to Envy. Understanding yourself is the best way to avoid envy

Package Deal: In 1915, Coca-Cola had many imitators. Then it designed a patented bottle nobody could copy. The origin story of the iconic Coca Cola bottle is a fascinating one.

Stats

Mount Olympus on Mars is the tallest mountain in the Solar System, three times as tall as Mount Everest

Customers loaded $3.3 billion onto Starbucks gift cards during the quarter ending December 31, 2022

Mount Washington in New Hampshire experienced wind chill at -108 Fahrenheit degrees or -78 Celsius degrees. Lowest ever recorded in the US

Source: JLL Research
Source: 9to5Mac
Business

Banks plan to compete with Apple Pay & PayPal

by MQDuong1 Comment on Banks plan to compete with Apple Pay & PayPal

Per WSJ:

Wells Fargo, Bank of America, JPMorgan Chase and four other banks are working on a new product that will allow shoppers to pay at merchants’ online checkout with a wallet that will be linked to their debit and credit cards. The digital wallet will be managed by Early Warning Services LLC, the bank-owned company that operates money-transfer service Zelle. The wallet, which doesn’t have a name yet, will operate separately from Zelle, EWS said.

EWS’s owner banks are also trying to cut down on fraud. Customers using their wallet wouldn’t have to type in their card numbers, which can raise the risk of fraud and rejected payments that result in lost sales. 

The banks are still ironing out the details of the customer experience. It likely will involve consumers’ typing their email on a merchant’s checkout page. The merchant would ping EWS, which would use its back-end connections to banks to identify which of the consumer’s cards can be loaded onto the wallet. Consumers would then choose which card to use or could opt out. 

Banks are reacting to the threats from PayPal and especially Apple. The tech giant is moving deeper and deeper into the consumer banking space with the imminent launch of a savings account and BNPL product. Incumbent banks are concerned that Apple will control the customer relationship, rendering banks’ offerings a stepping stone or accessories at best. In “Owning the relationship with your customers. A look at the controversial case of Apple“, I wrote:

Apple is at the peak of their power and having the best relationship ever with users, a relationship that involves other parties such as app developers. The company invests a lot of resources into cultivating the relationship with both end users and app developers. As long as the former is strong (apparently it is now given its strong financial results), it gives Apple enormous bargaining power over anyone who wants to leverage such a relationship. To reduce Apple’s power, the most logical way is to weaken the bond they have with the end users by offering a better alternative, though it’s by no means an easy ask.

There is virtually nothing that these banks can do to stop consumers from buying Apple hardware. Manufacturing a smartphone is not in their circle of competence. As a result, the only way to weaken the bond that Apple forges with consumers is to offer an alternative to Apple Pay. Do that and banks can hope to wrestle back the control over customer relationship. While the plan makes sense, there are major concerns over its practicality.

The first issue is fraud. EWS operates the P2P network Zelle, which enables money exchange between users’ bank accounts. Though popular, Zelle has seen a concerning amount of fraud which attracted criticisms from lawmakers such as Elizabeth Warren. I was personally told that my employer, a bank, hesitated to offer Zelle mainly because of fraud. If EWS cannot solve fraud on Zelle and there is little information on how the new unnamed mobile wallet will minimize fraud, what is to make us believe that will actually happen?

The advantage that Apple has in this area is that their hardware is built as a fraud deterrent. Any Apple Pay transaction needs to be approved either with a Touch or Face ID. And we can bet that Apple won’t make a competitor a native wallet on their devices like Apple Pay.

An argument can be made that since the new wallet challenger will operate like PayPal, which is a massive brand, surely it can replicate PayPal’s success. Well, that’s where the second issue lies. PayPal has a giant network of 380 million consumer and 35 million merchant accounts. Merchants like PayPal because it can help with conversion, while consumers like PayPal because it is widely accepted. One cannot live without the other. How can big banks convince thousands, if not millions, of merchants to display the new checkout button?

To do that, banks first have to convince consumers to use the new shiny wallet. Starting with credit cards is smart since that’s where rewards are. But what about trust? If consumers are unfamiliar with the new wallet’s name, whatever it may be, will they choose it instead of the more established names like PayPal or Apple Pay? Would you choose to pay with “Minh’s Pay” if I had a wallet after my name? That in and of itself is not an easy task.

JPMorgan launched Chase Pay in November 2016, about two years after Apple launched Apple Pay. It’s beyond dispute to say that Apple Pay is a much more successful and popular mobile wallet than Chase Pay. Remember that JPMorgan Chase is one of, if not, the biggest bank in the US. Even they couldn’t get its own proprietary wallet to compete with Apple Pay or PayPal. What are the odds that several banks whose interests may not always align can get the job done when they are several years behind?

Weekly readings

Weekly reading – 10th December 2022

by MQDuongLeave a Comment on Weekly reading – 10th December 2022

Business

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

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

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

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

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

Other stuff I find interesting

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

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

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

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

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

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

Stats

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

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

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

Source: Science.org
Weekly readings

Weekly reading – 3rd December 2022

by MQDuongLeave a Comment on Weekly reading – 3rd December 2022

What I wrote last week

My notes from the 2022 McKinsey Global Payments Report

Business

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

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

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

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

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

Other stuff I find interesting

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

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

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

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

Stats

2022 Black Friday sales exceeded $9 billion

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

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

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

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

Weekly reading – 12th November 2022

by MQDuongLeave a Comment on Weekly reading – 12th November 2022

What I wrote last week

My review of the US Bank Shopper Cash Rewards Visa Signature Credit Card

Business

($) What If Apple Made an E-Bike? On paper, the idea that Apple would change the e-bike/micromobility industry forever with its own product makes sense. The question is: how would an e-bike connect with the rest of the ecosystem? How would all devices complement one another? Apart from transporting a person from A to B, what utility would an e-bike provide?

The Russo Brothers Assemble: Inside AGBO, Their $1 Billion Studio, and When They Might Return to Marvel. Some insights into the entertainment industry

Why we’re leaving the cloud. I am not a fan of DHH, to say the least, but I appreciate his and his company’s perspective on this issue. Indeed, one of the biggest selling points of cloud providers is that you can save time and money renting their infrastructure. I am not saying that it’s impossible. But every buyer needs to do their homework and run a trial to see if that’s the case. My first-hand experience with our company’s transition to AWS is that we have a net positive, but you need to remember that most banks run on mainframes which are expensive to service in the first place.

($) Adobe Is Trying to Spend $20 Billion to Buy Back Its Swagger. I honestly don’t understand why people compared this to Facebook’s acquisition of Instagram. To me, because of the price tag, this deal looks similar to the $19 billion purchase of WhatsApp by Facebook. Nonetheless, I think there is a real chance that regulators would block this deal given the recent developments.

Stack Overflow CEO on how it became the world’s most popular programming site. A few stats on Stack Overflow: 50 million questions & answers, 100 million monthly visitors worldwide, 50 billion visits in the last 14 years, 15,000 organizations that use StackOverflow-for-Teams

Emergency SOS via satellite on iPhone 14 and iPhone 14 Pro lineups made possible by $450 million Apple investment in US infrastructure. There is innovation that doesn’t make headlines, yet improves lives. There is also innovation that grabs all sorts of attention, yet seems to be based on imagination than reality. Meterverse and this Emergency SOS, guess which one improves lives?

The global shipping industry is facing a new problem — too many containers. The demand for shipping dropped significantly, to the point that there are idle containers. I wonder if this is a sign that a recession is coming upon all of us.

Number One in Formula One. As much as I disliked Mercedes’ dominance in F1 the past decade, I have nothing but respect for their achievements because they were earned honestly. Toto Wolff is a magnificent team principal and his leadership lessons shared in this article are invaluable

Other stuff I find interesting

TSMC approaching 1 nm with 2D materials breakthrough. Any company or country still on chips bigger than 20nm is essentially years behind

US Traffic Safety Is Getting Worse, While Other Countries Improve. “The US underperformance in road safety is especially dramatical: 11.4 Americans per 100,000 died in crashes in 2020, a number that dwarfs countries including Spain (2.9), Israel (3.3) and New Zealand (6.3). And unlike most developed nations, US roadways have grown more deadly during the last two decades (including during the pandemic), especially for those outside of cars. Last year saw the most pedestrians killed in the US in 40 years, and deaths among those biking rose 44% from 2010 to 2020. That narrative is hogwash. For proof, look no further than Canada, an equally spacious and car-centric neighbor where the likelihood of dying in a crash is 60% lower.“

The Car Safety Feature That Kills the Other Guy. Owning a truck is a waste of space & fuel and it increases risks of collision. For the lift of me, I never get used to sitting in my car next to a truck that is twice as big. “After decades of decline, U.S. road deaths flattened and then began rising about 20 years ago. Some 42,915 people died in crashes during 2021, a 16-year high. Notably, it was also 20 years ago that the American flirtation with SUVs and trucks became an all-out obsession. These vehicles first outsold cars in the U.S. in 2002; they have been gobbling up the market share ever since. SUVs and trucks may leave their occupants feeling safer, but they create grave dangers for everyone else on the street. A 2015 federal study found that an SUV is two to three times more likely to kill a pedestrian than a car is, and economist Justin Tyndall has tied the ascent of SUVs to an increase in pedestrian deaths, which hit a 40-year high in 2021. Cyclist deaths, meanwhile, rose 44 percent from 2010 to 2020.”

India has lost 70 million hectares of farmland since 2015. Climate irregularities which are likely caused by our carbon emissions severely impact India’s agriculture and food security. It could be a global theme one day in the near future

Stats

In highly polluted areas, or if plastic pollution continues to rise in the future, the whales could be eating 150m pieces a day

SEC obtained record $6.4b in monetary sanctions in past fiscal year

90% of electric vehicles sold in France in 2021 were two-wheelers

90% of new vehicles sold in Norway in 2021 were either electric or hybrid

Business

Apple Earnings – The Resilience & Effectiveness Of Apple

by MQDuong1 Comment on Apple Earnings – The Resilience & Effectiveness Of Apple

Last Thursday, Apple announced its Q4 FY2022 earnings results as follows

  • Revenue: $90.15 bn vs $88.9 bn estimated. Up 8% year over year (YoY)
  • Gross Margin: 42.3% vs 42.1% estimated. Essentially flat YoY
  • iPhone revenue: $42.63 bn vs $43.21 bn estimated. Up 9.7% YoY
  • Mac revenue: $11.51 bn vs $9.36 bn estimated . Up 25.4% YoY
  • iPad revenue: $7.17 bn vs $7.94 bn estimated. Down 13.6% YoY
  • Other Products revenue: $9.65 bn vs $9.17 bn estimated. Up 9.9% YoY
  • Services revenue: $19.19 bn vs $20.1 bn estimated. Up 5% YoY
  • EPS: $1.29 vs. $1.27 estimated

On the surface, it looks like a routinely great quarter for Apple, but there are a few points worth calling out.

Apple's revenue growth
Figure 1 – Apple’s revenue growth

First, Apple got hit with a 600 basis point of unfavorable foreign exchange impact due to the strength of the dollar. Had the currency exchange stayed constant, Apple’s revenue growth would likely have been two-digits and could have gone up to as much as 14%. Despite significant foreign exchange headwinds, product margin was 35%, flat compared to Q3 FY2022, and 100 basis point up year over year. This indicates Apple managed to gain efficiency and sell more expensive products. To investors who care about how a company is run, this is a good sign.

Second, the stickiness of iPhone. Since Q4 FY2020, iPhone revenue has increased year over year every quarter. In FY2022, iPhone revenue grew by 7%, on top of the monstrous 39% growth achieved in FY2021. As a billion business worth more than $200 billion, that’s no mean feat. More impressively, the numbers could have been even rosier. According to Tim Cook, the company has been facing and still faces supply chain constraints for the popular iPhone 14, iPhone 14 Pro and iPhone 14 Pro Max. Had Apple had enough parts to meet the demand, they could have added a couple of more billions to their top line. In the time of unprecedented inflation and uncertain macro-economic conditions, this shows how much consumers love their iPhone and considers it more of a necessity than a luxury.

Apple business segments' revenue growth
Figure 2 – Apple business segments’ revenue growth

Next, Services grew 5% YoY and slightly missed analysts’ expectation. Adding the estimated foreign exchange impact of 600 basis points, Services would have grown by 11%, beating the consensus. Since 2018, Services has grown by double digits every year, reaching $78.1 billion in annual revenue in FY2022, up from almost $40 billion in 2018. Compared to previous year, FY2022 posed a lower annual growth, but there are levers that Apple can pull:

  • Apple recently announced price hikes on Apple Music, Apple TV+ & Apple One. The company explained that the price increase for Apple Music is due to more payouts to artists while that for Apple TV+ is fair considering the amount of content that Apple has added since the launch of the streaming service. As the flagship overarching subscription, of course, Apple One will also be more expensive. I think the justification makes sense because if Apple REALLY wanted to increase Services revenue and abuse its power, the company would raise iCloud’s prices. There are alternatives to Apple Music and TV+, but there is nothing to replace iCloud and no Apple user I know doesn’t buy additional storage. In short, this is not a move out of desperation.
  • Apple is loading more ads on the App Store. In their 2022 annual report, the company already cited advertising as one of the main drivers behind Services’ growth. Ads revenue is great and all, but too many ads will harm the user experience. Plus, there is already backlash from developers who saw online gaming ads placed next to their apps. Hence, Apple needs to be careful and considerate about pushing their advertising division
  • Apple Business Essentials. There has been no disclosure from Apple regarding this service, but I suspect it will come to the fold more in the next couple of years

Last but not least, I am really pleased with how Apple manages its costs. The gross margin profile of Products, Services and the whole company have been very stable in the last four years, despite Covid-19, the war in Ukraine, the withdrawal from Russia, the supply chain challenges and other macro-economic events. Operating expenses, including R&D and SG&A, as % of total revenue never exceeded 8% in the last four years. Based on the commentary from the executives, that should be the case for the next twelve months:

When we look at our capex, as you correctly said, I mean, we’ve been fairly stable, and I think our capital intensity is really very good. We have three major buckets in capex for the company. We have certain dedicated tools for the manufacturing facilities. We had some spend around data centers, and we have spent around our office facilities around the world. We obviously monitor all of them. There is nothing unusual that we see for the next 12 months.

When a company reaches a trillion dollar mark in valuation and generates billions of dollars in cash flow every 90 days, there is understandably a risk of being negligent on cost control. Think about yourself. Do you allow yourself more luxuries and impulsive purchases now than you did as a student and when you had lower income? From this perspective, Apple has been a disciplined and prudent steward of shareholder capital. To some extent, I don’t think you can make the same point about other big techs, such as Amazon or Facebook.

Apple's gross margin
Figure 3 – Apple’s gross margin

In short, this quarter’s results were not the most impressive that Apple has ever put out. They were just routinely and boringly good from my perspective and for the reasons I listed above. Even though there is no headline-grabbing debate-fueling stuff such as the investment in Reality Labs by Facebook, I prefer a stable and effective management that keeps their feet on the ground and produces results for shareholders.

Weekly readings

Weekly reading – 29th October 2022

by MQDuongLeave a Comment on Weekly reading – 29th October 2022

What I wrote last week

Uber plans to advertise to riders based on destination data

Business

Forget Netflix and Disney: a local streaming service is king in Indonesia. Vidio is winning because it understands the local audience and what they want from a streaming service.

ESPN, Formula 1 Extend Track With New Rights Deal. Formula 1 has seen its popularity soar high across the globe and in the US in the past two years. Some say that Netflix’s Drive To Survive elevated the sport’s standing. Others say that being one of a few sports organized during the pandemic to entertain folks at home helped too. Whatever the reason is, it’s undeniable that more American viewers know about Formula 1 than ever before. Viewership has never been this high. Next year, the country will host races in Las Vegas, Miami and Texas. There is a strong chance that an American driver, Logan Sergeant, will be on the grid too. The stars seem to be aligned well for the sport I love

($) The Fantasy of Instant Delivery Is Imploding. Some venture capitalists are poised to book millions of dollars in losses. “Along with entering too many markets, they overspent on marketing, with billboards in Times Square and European soccer and Formula One team sponsorships, former finance executives say. During Gopuff’s billion-dollar funding rounds, the co-CEOs had also sold portions of their stock to investors. (Rank-and-file Gopuffers were not allowed to sell shares unless approved by the company.) After they became multimillionaires, they purchased a Gulfstream jet and mansions five minutes from each other along the Intracoastal Waterway in Miami’s Golden Beach. Gola also bought Joe the Jeweler a home in Cherry Hill to replace the one he’d lost when his cash-for-gold business went bust.“

Exclusive: YouTube’s new redesign is built to feel more like TV. Some insights into how YouTube redesigned its User Experience. It must have been a massive undertaking and I’d love to be a fly on a wall of the meetings that led to decisions being made on the new design.

Square sells access to your inbox. No one seems to know if the law cares. Read how Block (Square) collects your email and sells access to said email to hundreds of sellers. The company also goes to great length to circumvent regulations pertaining to consumer privacy.

Apple on iPhones, Chips, Privacy, Working From Home and More | WSJ Tech Live 2022. I like Joanna Stern as a journalist and a tech reviewer. She is smart, funny and knows her stuff. This interview was really good and featured some hard-hitting questions that, unfortunately yet unsurprisingly, Craig and Joz evaded. Their response to Joanna’s question regarding EU mandate on USB-C was more nuanced than what was widely reported on the news. Their opposition to the Metaverse, a concept that Facebook/Meta champions, was noteworthy. Plus, I found it good Joz’s brief explanation on why ATT was introduced. Overall, if you have 30 minutes to spare, you really should check out this interview.

White House hammers economic issues with attack on ‘junk fees’ two weeks out from Election Day. While they are at it, they should talk to AirBnb CEO Brian Chesky on the outrageous fees that hosts on his platform charge to guests.

Other stuff I find interesting

Little rules about big things. Morgan Housel is one of my favorite writers and he struck gold again. “Most financial mistakes come when you try to force things to happen faster than is required. Compounding doesn’t like when you try to use a cheat code. Risk’s greatest fuels are leverage, overconfidence, ego, and impatience. Its greatest antidote is having options, humility, and other people’s trust.”

Voyage of the Gross Even though every other option is better, most of New York’s trash still goes into a hole in the ground. A fascinating piece that describes the journey of…trash in New York

($) The World’s Biggest Source of Clean Energy Is Evaporating Fast. “The water woes of China’s iconic mega-dam are part of a global hydropower crisis that is being made worse by global warming. From California to Germany, heatwaves and droughts have shrunk rivers that feed reservoirs. Hydroelectricity output fell by 75 terrawatt-hours in Europe this year through September — more than the annual consumption of Greece — and fell 30% across China last month. In the US, generation is expected to fall to the lowest level in six years in September and October. It’s a cruel irony that’s forcing utilities to reconsider the traditional role of hydropower as a reliable and instant source of green energy. Dams are the world’s largest source of clean energy, yet extreme weather is making them less effective in the battle against climate change.“

Stats

84% of maternal deaths in the US are preventable

“Only five percent of plastic waste generated by US households actually gets recycled”

One out of four US adults under 30 gets news on TikTok

The FDIC’s 2021 National Survey of Unbanked and Underbanked Households also found an estimated 4.5 percent of U.S. households were unbanked

Online spending in Southeast Asia is forecast to reach $200 billion in 2022 and $330 billion by 2025

Source: Reddit