Weekly readings – 15th January 2021

What I wrote last week

Some tips for data analysts

State of Mobile 2022

Book Review – The Body: A Guide for Occupants

Business

Why Apple’s iMessage Is Winning: Teens Dread the Green Text Bubble. “Among U.S. consumers, 40% use iPhones, but among those aged 18 to 24, more than 70% are iPhone users, according to Consumer Intelligence Research Partners’s most recent survey of consumers.” I think some reading this article may get it backwards: folks use iMessage because they like iPhones first and foremost. They don’t buy iPhones because of iMessage. It’s frivolous that competitors demand Apple to open up iMessage to Android for the sake of open communication. Think about it this way: if you own a restaurant and have a secret recipe that is the appeal of the place, will you want to openly share it with your competitors just so that they become more knowledgeable and the food culture becomes richer?

Is Clubhouse dead? Not if you are in South Asia. To be honest, I didn’t have it in me to imagine that South Asia would be the saving grace for Clubhouse. Would it ever reach the valuation that venture capitalists dreamed of? I don’t know, but if I had to bet, the coin wouldn’t go that way. Being popular is one thing, making money is another. We’ll see

How Shein beat Amazon at its own game — and reinvented fast fashion. “Through its manufacturing partners on the ground in China, Shein churns out and tests thousands of different items simultaneously. Between July and December of 2021, it added anywhere between 2,000 and 10,000 SKUs — stock keeping units, or individual styles — to its app each day, according to data collected by Rest of World. The company confirmed it starts by ordering a small batch of each garment, often a few dozen pieces, and then waits to see how buyers respond. If the cropped sweater vest is a hit, Shein orders more. It calls the system a “large-scale automated test and re-order (LATR) model.” The secret is Shein’s internal software, which connects its entire business from design to delivery. “Everything is optimized with big data,” Lin said. Each of Shein’s suppliers gets their own account on the platform, which spits out information about what styles are selling well and can also quickly identify which might become future hits. “You can see the current sales, and then it will tell you to stock up more if you sell well and what you need to do if you don’t sell well. It’s all there.””

Fintech Startup Checkout.com Scores $40 Billion Valuation in Latest Share Sale. “Checkout.com plans to use much of the new capital to fuel an expansion into the U.S. Last summer, the company hired Céline Dufétel, chief financial officer at money manager T. Rowe Price Group Inc., to do the same job for Checkout.com. Many of the company’s top executives and investors now reside in the U.S. It also plans to enlarge its business catering to cryptocurrency companies. Exchanges such as Coinbase Global Inc. and wallets like Novi from Meta Platforms Inc. use Checkout.com to move customers’ money into and out of digital currencies. Crypto and financial-technology transactions account for more than half of Checkout.com’s payments volume, Ms. Dufétel said”.

Netflix Needs New Subscribers. Its Korean Playbook Is Its Secret Weapon. “Bound by certain social taboos and rules on what could be shown on public broadcast TV, mainstream networks in Korea typically passed on most of what they got pitched. The resulting flow of rejected ideas created an opening for Netflix. Because it is a paid private service, Netflix enjoyed more leeway in terms of what it could show its viewers. Netflix began harvesting ideas considered too edgy for the broadcasters and building a slate of programming that leaned into sex and violence, as well as prickly themes, such as social inequality and politics. In 2020, the company turned its first annual profit in South Korea while reporting sales of $356 million. South Korea is now one of Netflix’s largest markets in Asia, trailing only Australia and Japan. The company has more than 5 million subscribers in South Korea, according to Media Partners Asia. To date, Netflix has spent more than $1 billion on programming in Korean, one of its largest content investments outside the U.S. Along the way, Netflix’s status has flipped. Once shunned by the local creative community, Netflix is now courted.

Other stuff I found interesting

My first impressions of web3. We should accept the premise that people will not run their own servers by designing systems that can distribute trust without having to distribute infrastructure. This means architecture that anticipates and accepts the inevitable outcome of relatively centralized client/server relationships, but uses cryptography (rather than infrastructure) to distribute trust. One of the surprising things to me about web3, despite being built on “crypto,” is how little cryptography seems to be involved!”

The Architecture of Tomorrow Mimics Nature to Cool the Planet. I am at loss for words to describe my support to integrate our civil architecture and planning into nature. A city without trees or nature is lifeless and frankly unappealing to me. Why not integrating nature into our architecture? Well, if you haven’t noticed, nature has been here long before our buildings ever have

This Ad-Free Google Search Alternative Is Actually Worth Using. It’s actually pretty good on iOS. The ad-free experience is refreshing

Another masterful article by Morgan Housel. It’s full of interesting short stories with wonderful punchlines and wisdom in the end

Stats

On average, each owner spent $1,400 and $900 in annual expenses in 2021 for dogs and cats respectively

“An estimated 29.2 million general-purpose credit cards were issued to people with credit scores of 660 and below last year”

Apple Books has 100 million users each month.

“Digital tickets in Wallet helped venues and their guests create safe, contactless experiences, and last year, customers used 30 million NFC tickets in Wallet for events across music, sports, theater, and more across the US and Canada.”

Global mobile ad spend is forecast to reach $350 billion in 2022

“There are now 110 million monthly active Android TV devices in the world”

Book Review – The Body: A Guide For Occupants

I don’t remember how I picked up The Body: A Guide For Occupants, but I am very happy that I did. The book offers a scientific and anatomical look at a human body from top to bottom, from outside to inside. It’s full of details and discoveries that I didn’t know before. We often say that we know our body most, but do we? Of course, we can tell if something is wrong, but many of us, I believe, don’t possess a basic understanding of how our body works. If this is something that you are interested in, pick up this book and give it a try.

There are two things that I really like about this book. The first is that the author managed to tell a compelling story about our body so that even laymen like myself can follow and understand. Every chapter’s content is driven by research and some are more technical than others, but overall, even without background in physiology or anatomy, readers can expect to leave this book knowing more about a human body. I also love some of the historical stories that give spotlight to unsung heroes who contributed massively to science but didn’t get the credit that they fully deserve. For instance, Albert Schatz worked tirelessly to discover streptomycin, one of the great microbiological breakthroughs of the previous century. Nonetheless, he didn’t receive credit as well as financial rewards that a discovery of that magnitude should warrant him. I wouldn’t know about him if I hadn’t read this book and for that, I am grateful to the author.

I took a lot of notes throughout the book and here are some of them:

Composition of our body

“Altogether, according to RSC calculations, fifty-nine elements are needed to construct a human being. Six of these—carbon, oxygen, hydrogen, nitrogen, calcium, and phosphorus—account for 99.1 percent of what makes us, but much of the rest is a bit unexpected. Who would have thought that we would be incomplete without some molybdenum inside us, or vanadium, manganese, tin, and copper? Our requirements for some of these, it must be said, are surpassingly modest and are measured in parts per million or even parts per billion. We need, for instance, just 20 atoms of cobalt and 30 of chromium for every 999,999,999½ atoms of everything else.

Thorium costs over $3,000 per gram but constitutes just 0.0000001 percent of you, so you can buy a body’s worth for thirty-three cents. All the tin you require can be yours for six cents, while zirconium and niobium will cost you just three cents apiece. The 0.000000007 percent of you that is samarium isn’t apparently worth charging for at all. It’s logged in the RSC accounts as costing $0.00

“Cadmium, for instance, is the twenty-third most common element in the body, constituting 0.1 percent of your bulk, but it is seriously toxic. We have it in us not because our body craves it but because it gets into plants from the soil and then into us when we eat the plants. If you are from North America, you probably ingest about eighty micrograms of cadmium a day, and no part of it does you any good at all.”

Microbes and viruses

“Luckily, most microbes have nothing to do with us. Some live benignly inside us and are known as commensals. Only a tiny portion of them make us ill. Of the million or so microbes that have been identified, just 1,415 are known to cause disease in humans—very few, all things considered. On the other hand, that is still a lot of ways to be unwell, and together those 1,415 tiny, mindless entities cause one-third of all the deaths on the planet.”

“More recently, Dana Willner, a biologist at San Diego State University, looked into the number of viruses found in healthy human lungs—somewhere else that viruses were not thought to lurk much. Willner found that the average person harbored 174 species of virus, 90 percent of which had never been seen before. Earth, we now know, is aswarm with viruses to a degree that until recently we barely suspected”

“The common cold is not a single illness but rather a family of symptoms generated by a multiplicity of viruses, of which the most pernicious are the rhinoviruses. These alone come in a hundred varieties. There are, in short, lots of ways to catch a cold, which is why you never develop enough immunity to stop catching them all.”

Penicillin and two unsung heroes

“With Britain preoccupied by World War II and the United States not yet in it, the quest to produce bulk penicillin moved to a U.S. government research facility in Peoria, Illinois. Scientists and other interested parties all over the Allied world were secretly asked to send in soil and mold samples. Hundreds responded, but nothing they sent proved promising. Then, two years after testing had begun, a lab assistant in Peoria named Mary Hunt brought in a cantaloupe from a local grocery store. It had a “pretty golden mold” growing on it, she recalled later. That mold proved to be two hundred times more potent than anything previously tested. The name and location of the store where Mary Hunt shopped are now forgotten, and the historic cantaloupe itself was not preserved: after the mold was scraped off, it was cut into pieces and eaten by the staff. But the mold lived on. Every bit of penicillin made since that day is descended from that single random cantaloupe.”

“In 1945, he shared the Nobel Prize in Physiology or Medicine with Ernst Chain and Howard Florey. Florey and Chain never enjoyed the popular acclaim they deserved, partly because they were much less gregarious than Fleming and partly because his story of accidental discovery made better copy than their story of dogged application. Chain, despite sharing the Nobel Prize, became convinced that Florey had not given him sufficient credit, and their friendship, such as it was, dissolved.”

Pharmaceutical patens include clinical trials. Hence, exclusive patent protection is usually just five years

“Yet as the problem has grown, the pharmaceutical industry has retreated from trying to create new antibiotics. “It’s just too expensive for them,” Kinch says. “In the 1950s, for the equivalent of a billion dollars in today’s money, you could develop about ninety drugs. Today, for the same money, you can develop on average just one-third of a drug. Pharmaceutical patents last only for twenty years, but that includes the period of clinical trials. Manufacturers usually have just five years of exclusive patent protection.” In consequence, all but two of the eighteen largest pharmaceutical companies in the world have given up the search for new antibiotics. People take antibiotics for only a week or two. Much better to focus on drugs like statins or antidepressants that people can take more or less indefinitely. “No sane company will develop the next antibiotic,” Kinch says.”

If teenagers are reckless, it’s likely because of their brains

“The brain takes a long time to form completely. A teenager’s brain is only about 80 percent finished (which may not come as a great surprise to the parents of teenagers). Although most of the growth of the brain occurs in the first two years and is 95 percent completed by the age of ten, the synapses aren’t fully wired until a young person is in his or her mid- to late twenties. That means that the teenage years effectively extend well into adulthood. In the meantime, the person in question will almost certainly have more impulsive, less reflective behavior than his elders and will also be more susceptible to the effects of alcohol. “The teenage brain is not just an adult brain with fewer miles on it,” Frances E. Jensen, a neurology professor, told Harvard Magazine in 2008. It is, rather, a different kind of brain altogether.

“The nucleus accumbens, a region of the forebrain associated with pleasure, grows to its largest size in one’s teenage years. At the same time, the body produces more dopamine, the neurotransmitter that conveys pleasure, than it ever will again. That is why the sensations you feel as a teenager are more intense than at any other time of life. But it also means that seeking pleasure is an occupational hazard for teenagers. The leading cause of deaths among teenagers is accidents—and the leading cause of accidents is simply being with other teenagers. When more than one teenager is in a car, for instance, the risk of an accident multiplies by 400 percent.”

Stigma around Monosodium Glutamate may be exaggerated

“Monosodium Glutamate or MSG has had a hard time of it in the West since 1968 when The New England Journal of Medicine published a letter—not an article or a study, but simply a letter—from a doctor noting that he sometimes felt vaguely unwell after eating in Chinese restaurants and wondered if it was the MSG added to the food that was responsible. The headline on the letter was “Chinese-Restaurant Syndrome,” and from this small beginning it became fixed in many people’s minds that MSG was a kind of toxin. In fact, it isn’t. It appears naturally in lots of foods, like tomatoes, and has never been found to have deleterious effects on anybody when eaten in normal quantities. According to Ole G. Mouritsen and Klavs Styrbaek in their fascinating study, Umami: Unlocking the Secrets of the Fifth Taste, “MSG is the food additive that has been subjected to the most thorough scrutiny of all time,” and no scientist has ever found any reason to condemn it, yet its reputation in the West as a source of headaches and low-grade malaise now appears to be undimmed and permanent.”

Diabetes

“Diabetes comes in two varieties. Indeed, it is really two diseases, with similar complications and management issues but generally different pathologies. In type 1 diabetes, the body stops producing insulin altogether. In type 2 diabetes, insulin is less effective, usually because of a combination of decreased production and because the cells on which it acts don’t respond as they normally would. This is referred to as insulin resistance. Type 1 tends to be inherited; type 2 is usually a consequence of lifestyle. But it’s not quite as simple as that. Although type 2 is unequivocally associated with unhealthy living, it also tends to run in families, suggesting a genetic component. Similarly, although type 1 diabetes is associated with a fault in a person’s HLA (human leukocyte antigen) genes, only some people with the fault get diabetes, indicating that there is some additional, unrecognized trigger. Many researchers suspect a link to levels of exposure to a range of pathogens in early life. Others have suggested an imbalance in the victim’s gut microbes or possibly even a connection to how comfortable and well nourished one was in the womb.”

The liver

“NOT ALL GLANDS are tiny, of course. (For the record, a gland is any organ in the body that secretes chemicals.) The liver is a gland and it is, compared with the rest of our glands, gigantic. When fully grown, it weighs about 3.3 pounds, roughly the same as the brain, and fills much of the central abdomen just below the diaphragm. It is disproportionately large in infants, which is why their bellies are so delightfully rounded.”

“It is also the most multifariously busy organ in the body, with functions so vital that if it shuts down, you will be dead within hours. Among its many jobs, it manufactures hormones, proteins, and the digestive juice known as bile. It filters toxins, disposes of obsolescent red blood cells, stores and absorbs vitamins, converts fats and proteins to carbohydrates, and manages glucose—a process which is so vital for the body that its dilution for even a few minutes can cause organ failure and even brain damage”

Perhaps the most wondrous feature of the liver is its capacity to regenerate. You can remove two-thirds of a liver and it will grow back to its original size in just a few weeks. “It’s not pretty,” the Dutch geneticist Professor Hans Clevers told me. “It looks a bit battered and rough compared with the original liver, but it functions well enough. The process is something of a mystery. We don’t know how a liver knows to grow back to just the right size and then stop growing, but it is lucky for some of us that it does.”

Benefits of exercise and the harm of too much sitting

“Study after study since then has shown that exercise produces extraordinary benefits. Going for regular walks reduces the risk of heart attack or stroke by 31 percent. An analysis of 655,000 people in 2012 found that being active for just eleven minutes a day after the age of forty yielded 1.8 years of added life expectancy. Being active for an hour or more a day improved life expectancy by 4.2 years.”

“And how much exercise should we get? That’s not easy to say. The more or less universal belief that we should all walk ten thousand steps a day—that’s about five miles—is not a bad idea, but it has no special basis in science. Clearly, any ambulation is likely to be beneficial, but the notion that there is a universal magic number of steps that will give us health and longevity is a myth. The ten-thousand-step idea is often attributed to a single study done in Japan in the 1960s, though it appears that also may be a myth. In the same way, the Centers for Disease Control’s recommendations on exercise—namely, 150 minutes per week of moderate activity—are based not on the optimal amount needed for health, because no one can say what that is, but on what the CDC’s advisers think people will perceive as realistic goals.”

“Amazingly, and alarmingly, it doesn’t seem to matter how much you exercise the rest of the time. If you spend an evening on the seductive padding of your gluteus maximus, you may nullify any benefits you gained during an active day. As James Hamblin put it in The Atlantic, “You can’t undo sitting.” In fact, people with sedentary occupations and sedentary lifestyles—which is to say, most of us—can easily sit for fourteen or fifteen hours a day, and thus be completely and unhealthily immobile for all but a tiny part of their existence.”

Sugar – Fruits may not be as healthy as we think

“By one estimate, about half the sugar we consume is lurking in foods where we are not even aware of it—in breads, salad dressings, spaghetti sauces, ketchup, and other processed foods that don’t normally strike us as sugary. Altogether about 80 percent of the processed foods we eat contain added sugars. Heinz ketchup is almost one-quarter sugar. It has more sugar per unit of volume than Coca-Cola.”

Many of our fruits and vegetables are nutritionally less good for us than they were even in the fairly recent past. Donald Davis, a biochemist at the University of Texas, in 2011 compared the nutritive values of various foods in 1950 with those of our own era and found substantial drops in almost every type. Modern fruits, for instance, are almost 50 percent poorer in iron than they were in the early 1950s, and about 12 percent down in calcium and 15 percent in vitamin A. ”

Excerpt From: Bill Bryson. “The Body: A Guide for Occupants.” Apple Books.

Weekly reading – 23rd October 2021

What I wrote last week

PayPal in talks to buy Pinterest

Book review: Richer, Wiser Happier: How The World’s Greatest Investors Win In Markets & Life

Good reads on Business

Jokr and Personalized Instant Commerce. The article lays out useful data and information on Instant Commerce, especially Jokr. However, I am still a bit unsure about the unit economics of these delivery services. Last-mile delivery is hard and expensive, especially at scale. The consumer stickiness is naturally low and requires constant incentives to nurture. Competitors are everywhere. Plus, the good-old brick-and-mortar alternatives generally offer sufficient value and people, like myself, like to go out once in a while for some fresh air.

Netflix Loses Its Glow as Critics Target Chappelle Special. Netflix has started to encounter what the likes of Facebook and Twitter have for years: content moderation. The company can’t please everyone; so in this case, it’s natural that one or two stakeholders are disappointed with the Dave Chappelle show. The management team believes that the show brings net benefits to Netflix and acted accordingly. Agree with them or not, you should see where they are coming from. On the other hand, some employees reserve their right to disagree with that decision and be disappointed. That happens to even within families, let alone strangers that merely work at the same place. What remains to be seen to me are 1/ how would this affect staff turnover and talent management at Netflix; 2/ how would Netflix users think about the show?

Inside TSMC, the Taiwanese chipmaking giant that’s building a new plant in Phoenix. “TSMC makes key components for everything from cellphones to F-35 fighter jets to NASA’s Perseverance Rover mission to Mars. Earlier this month, it announced plans for a new factory in Japan, where it will produce chips with older technologies, for things like household devices and certain car components. TSMC is also Apple’s exclusive provider of the most advanced chips inside every iPhone currently on the market and most Mac computers. TSMC alone was responsible for 24% of the world’s semiconductor output in 2020, up from 21% in 2019, according to the company. When it comes to the most advanced chips used in the latest iPhones, supercomputers and automotive AI, TSMC is responsible for 92% of production while Samsung is responsible for the other 8%, according to research group Capital Economics. ”

How YouTube Makes Sure Its Hitmakers Don’t Stumble. YouTube spends tens of thousands of dollars on the top YouTubers to grow their content and ecosystem. Their in-house digital agency also offers guidance and consulting services to these personalities so that they can sustain attractive videos and high viewership. This kind of support, along with YouTube or its parent company’s resources, makes it difficult for other competitors to match.

Squid Game’ success shines a light on how cheap it is to make TV shows outside the U.S. “The total cost of making “Squid Game” was just $21.4 million. Episodes of Disney+’s Marvel shows, such as “WandaVision” or “The Falcon,” cost Disney $25 million per episode — more than all nine episodes of “Squid Game”“. I’d also prefer local characters being played by true locals to by Americans.

Is Best Buy undermining its storybook turnaround? I don’t think it’s a good idea to mess with a formula that works. Especially, that formula is around customer services and satisfaction. If I were a Best Buy shareholder, I’d send the CEO and the Management Team this article with a lot of questions.

Business Breakdown episode on Uber. If you are interested in gig economy and especially Uber as a business, have a listen. Whether you are a bull or a bear, I think it’ll be worth your time

How Many Users Does Facebook Have? The Company Struggles to Figure It Out. “A separate memo from May said that the number of U.S. Facebook users who are in their 20s and active at least once a month often exceeds the total population of Americans their age. “This brings out an elephant in the room: SUMA,” the memo’s author wrote, using an internal abbreviation for “Single User Multiple Accounts.” The author added that the issue could render Facebook’s ratio of users active each day “less trustable. Facebook said in its most recent quarterly securities filings that it estimates 11% of its monthly active users world-wide—which totaled 2.9 billion for its flagship platform in the second quarter—are duplicate accounts, with developing markets accounting for a higher proportion of them than developed ones.”

Other interesting stuff

Your Guide to the Third-Party Cookie. A very useful primer on the key factor in the digital advertising world. I have been on both sides of this issue. As a marketer, I can see why companies want to get as much data as possible to hone their targeting and make the best use of their ads dollars. On the other hand, as a consumer, I absolutely hate the feeling that somebody follows me everywhere across the Web. Privacy has been on the rise and will continue to be. iOS users now have a choice to voice their opinion on the matter with ATT. I don’t know how this all will shake out, but I would think that marketers would do well if they pivoted from 3rd party tracking.

Belgium’s shift from nuclear under fire as gas price surge strains Europe. It is baffling to me that countries are moving away from nuclear energy for gas-based power.

The Greek region too remote for maps

New Viking artifacts may mean that Christopher Columbus might not be the first one to discover the America continent. I guess it’s time to keep the holiday yet change the freaking name

Stats

Gas bills this winter can be at least 30% higher than last year

Book review: Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life

This book is up there among the best that I have ever read. You won’t find the technical advice or methods to determine whether a stock is a good buy/sell or when. Instead, it’s full of nuggets of wisdom drawn from some of the best investors or thinkers in the world such as Howard Marks, Nick Sleep or Charlie Munger. Whether you are a successful investor has more to do with your patience, your temperament, your thinking and your process than with your IQ, your maths prowess or your ability to build sophisticated financial models. Don’t get me wrong. Those factors definitely help, but if they were the role determinators of success in the investing world, then why would professional traders fail to beat S&P500 all the time and why wouldn’t we have more millionaires?

Because how you approach investing, your patience, your ability to detach emotions from decisions, your character and your thinking affect significantly impact the outcome of your portfolio, they also shape how happy and wise you are in life. On the other hand, learning to be a better investor also helps you understand about yourself better and become wiser & happier. This book is all about that.

Even though the investors interviewed in this book are highly successful and legendary, all the lessons and advice aren’t applicable universally. Everybody’s make-up is different. The audience will have to decide for themselves which lesson works and which doesn’t. Case in point, there are a few investors that are more tolerant of risks and have high concentration of their portfolios in a few stocks, while others consider more diversification acceptable. Some investors feel more comfortable through the volatilities of the markets while others prefer a smooth ride.

I really learned a lot from this book and expect to read it again soon. Really recommend to anyone who is interested in self-improvement or investing. Below are a few of my favorite excerpts. It’s not really easy to pick out these because I literally took note all over the book.

Learn from other people

I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart. —Charlie Munger

“Yet Pabrai’s success both as an investor and a philanthropist is built entirely on smart ideas that he has borrowed from others. “I’m a shameless copycat,” he says. “Everything in my life is cloned.… I have no original ideas.” ”

Luck & humility

One way that Marks keeps his own ego in check is by reminding himself of the starring role that luck has played in his life. After reading Malcolm Gladwell’s book Outliers, which explores various causes of success, Marks compiled a list of lucky breaks that have helped to propel him to where he is today. His streak began with the “demographic luck” of being born to white, middle-class parents in the United States at the start of a golden era of postwar growth.III Nobody in his family had a college degree, but he was fortunate that his parents valued learning, bought an encyclopedia, and encouraged him to go to college. His high school grades were nothing special, so he thinks he was also lucky that Wharton accepted him. And it was Wharton that exposed him to finance, leading him to jettison his earlier ambition of a career in accounting.”

“I once gave an interview in which I mentioned that Marks has a high IQ, which has no doubt contributed significantly to his success. In response, he sent me a charmingly modest email, remarking, “People who don’t fully acknowledge their luck miss the fact that being intelligent is nothing but luck. No one does anything to ‘deserve’ a high IQ.”

There’s one other great benefit to acknowledging his luck: it makes him happy. “I walk around with this incredible feeling that I’m a lucky guy,” Marks confides. “If you’re a negative person, you might say, ‘Well, I’ve been lucky in my life and that really sucks because it means that my success is undeserved and may not continue.’ But I say, ‘Gee, what a great thing to be lucky. And, you know, I really owe it to somebody, whether it’s God or chance or whatever.’ ”

Patience

“Instead, says Pabrai, they “place many bets, small bets, and frequent bets.” The trouble is, there aren’t enough compelling opportunities to justify all of this activity. So Pabrai, like his two idols, prefers to wait for the most succulent salmon. During a conversation in his office in Irvine, he says, “The number one skill in investing is patience—extreme patience.” When the market crashed in 2008, he made ten investments in two months. In more typical times, he bought just two stocks in 2011, three in 2012, and none in 2013.”

Fourth, said Templeton, successful investing requires patience. When he bought US stocks at the outbreak of World War II, he knew how cheap they were, but he couldn’t predict how long it would take for the market to agree with him. His edge lay not just in his superior insight, but in his willingness to wait year after painful year for the situation to play out as he’d predicted.”

Margin of safety

How, then, can individuals reduce their vulnerability and bolster their resilience? Following Buffett’s lead, we should always keep enough cash in reserve so we’ll never be forced to sell stocks (or any other beleaguered asset) in a downturn. We should never borrow to excess because, as Eveillard warns, debt erodes our “staying power.” Like him, we should avoid the temptation to speculate on hot stocks with supposedly glorious growth prospects but no margin of safety. And we should bypass businesses with weak balance sheets or a looming need for external funding, which is liable to disappear in times of distress. None of this is brain surgery. But it requires us to take seriously that oft-forgotten commandment Thou shalt not depend on the kindness of strangers.”

“Kahn became Graham’s teaching assistant at Columbia in the 1920s, and they remained friends for decades. I wanted to know what he’d learned from Graham that had helped him to prosper during his eighty-six years in the financial markets. Kahn’s answer: “Investing is about preserving more than anything. That must be your first thought, not looking for large gains. If you achieve only reasonable returns and suffer minimal losses, you will become a wealthy man and will surpass any gambler friends you may have. This is also a good way to cure your sleeping problems.”

As Kahn put it, the secret of investing could be expressed in one word: “safety.” And the key to making intelligent investment decisions was always to begin by asking, “How much can I lose?” He explained, “Considering the downside is the single most important thing an investor must do. This task must be dealt with before any consideration can be made for gains. The problem is that people nowadays think they’re pretty smart because they can do something quite rapidly. You can make the horse gallop. But are you on the right path? Can you see where you’re going?”

“Second, to achieve resilience, it’s imperative to reduce or eliminate debt, avoid leverage, and beware of excessive expenses, all of which can make us dependent on the kindness of strangers. There are two critical questions to ask: “Where am I fragile? And how can I reduce my fragility?” If, say, all of your money is in one bank, one brokerage, one country, one currency, one asset class, or one fund, you may be playing with a loaded gun. With luck, you can get away with anything in the short term. With time, the odds rise that your vulnerability will be exposed by unforeseen events.

Third, instead of fixating on short-term gains or beating benchmarks, we should place greater emphasis on becoming shock resistant, avoiding ruin, and staying in the game. ”

Hard work

“Second, said Vinik, “There’s another constant through the twelve years, and that’s very, very hard work. The more companies you can analyze, the more cash-flow statements you can go through—and go through every line of—the more good ideas you’re going to find and the better the performance is going to be. There’s no substitute for hard work.”

“The best predictor of success is often nothing more mysterious than the unflagging fervency of a person’s desire”

Incremental yet sustainable improvement

What’s distinctive is the indomitable consistency of his discipline. Most people get fired up for a few days, then flame out. I own a kettlebell and a skipping rope, neither of which I’ve used more than three times. The primary purpose of their existence is to make me feel guilty. Yet Gayner keeps plugging away, never perfect, but always directionally correct. The key, he says, is that he is “radically moderate” about everything he does. “If I make extreme changes, they’re not sustainable. But moderate, incremental changes—they’re sustainable.”

Resounding victories tend to be the result of small, incremental advances and improvements sustained over long stretches of time. “If you want the secret to great success, it’s just to make each day a little bit better than the day before,” says Gayner. “There are different ways you can go about doing that, but that’s the story.… Just making progress over and over again is the critical part.”

“In short, there’s nothing flashy or grandiose about Gayner. Yet it would be hard to find a better role model in the investment world. After all, his “satisfying, slow, and steady” method of building wealth relies heavily on common sense and well-chosen habits, not esoteric skills or daredevil risks. When I ask him what regular investors should do to get rich, he offers the least exotic advice imaginable: “Live on less than you make. Invest the difference at a positive rate of return. You cannot fail if you accomplish those two tasks.” He adds, “If you’re living on less than your means, you’re rich right now.”

It’s more important to avoid idiocy than to try to be smart

“I don’t have any wonderful insights that other people don’t have. I just have slightly more consistently than others avoided idiocy. Other people are trying to be smart. All I’m trying to be is non-idiotic. I find that all you have to do to get ahead in life is to be non-idiotic and live a long time. It’s harder to be non-idiotic than most people think.”

“None of this would have happened if Buffett and Munger weren’t so committed to challenging their beliefs. Munger has always disdained “heavy ideology” in everything from investing to politics, denouncing it as “one of the most extreme distorters of human cognition.”

“While other billionaires collect art, vintage cars, and racehorses, Munger describes himself as a collector of “absurdities,” “asininities,” and “inanities.” His daughter Molly recalls listening in her youth to his many cautionary tales “about people doing stupid things,” which often included “a tinge of ingratitude and poor moral judgment.” A typical story would feature the cosseted heir to a fortune who turned with bitter resentment against his father. Molly Munger remarks, “It’s stupid at every level: ungrateful, self-sabotaging, unrealistic, egotistical.”

This habit of actively collecting examples of other people’s foolish behavior is an invaluable antidote to idiocy. In fact, it’s the second great anti-stupidity technique we should learn from Munger. It’s a perverse hobby that provides him with endless entertainment and insight, enabling him to catalog in his head all of the “boneheaded” moves to excise from his playbook. Anyone can benefit from this practice, he tells me, “but I don’t think you get it unless you have a certain temperament. A lot of what I do is not IQ. It’s something else. Temperament. Attitude.”

Book Review – Obviously Awesome – An Ugly Truth: Inside Facebook’s Battle for Domination – Stray Reflections

In this post, I’ll briefly review the three books I finished recently. Let me know in the comment if you read any of them and what you think about it.

An Ugly Truth: Inside Facebook’s Battle for Domination

Written by two award-winning New York Times journalists Sheera Frenkel and Cecilia Kang, An Ugly Truth covers Facebook’s battle with misinformation and how the company, in my opinion, has failed so far in preventing bad actors from abusing Facebook’s platforms for their agendas. The book draws from hundreds of interviews with sources, including former & current employees who courageously put their career in danger to speak the truth, and takes readers inside the company and throughout the past few years when the conflicting interests came to their heads. Facebook has perfect recipes for a disaster.

The company’s purpose is to connect everybody on Earth. It means that you’ll connect not only the good guys, but also the bad guys. To Facebook, the engagement level is always one of the high priorities. The more engaged users are, the more money the company can make from advertising. As a consequence, any idea or initiative, no matter how constructive or beneficial to the company, would be shelved if it was considered hurting the user engagement. Additionally, the company is Mark Zuckerberg’s, plain and simple. He can fire the Board of Directors if he wants to and there is nothing anybody can do about it. At first, Mark didn’t seem to believe that his creation could be leveraged for harmful purposes. He seemed to actually believe that Facebook was a positive contributor to the world in a sense that since everyone should have the freedom of expression, his platforms were there to facilitate it. It is this belief that led to some of his controversial decisions when it came to content moderation. Last but not least, the bureaucracy and office politics at Facebook also played a role in this mess. Take Stamos and his threat intel team as an example. Alex Stamos was hired by Facebook to be its Chief Security Officer. Along with his team, Stamos unearthed how Russia misused Facebook to interfere in the U.S election. They tried to sound the alarm for months, but their efforts were thwarted and ignored by the upper management team. When they finally got a meeting with Mark and Sheryl, Stamos suddenly became the culprit and scapegoat.

Combine all of those factors together and you can see why Facebook was always poised for a disaster. There are other stories in the book that could highlight how efforts to rein in misinformation always took a back seat at Facebook for various reasons. While the theme of the book may not be anything new, the behind-the-scenes stories are riveting and interesting. If you want an easy read and like to learn about the inner workings at Facebook, this should be a good one to pick up.

Obviously Awesome: How to Nail Product Positioning so Customers Get It, Buy It, Love It

Product positioning is hard. It’s virtually impossible to create a completely new product or service without any direct or indirect alternatives. The challenge then becomes: how can you position your product so that your customers know what it stands for, among all the noises and distractions? In this book, positioning expert April Dunford offers 10 concrete steps to address your positioning problems, along with specific case studies to make her points. As a business student at bachelor and Master’s degree level, I learned about marketing and positioning. So, some of the points April made are not novel to me. Yet, it’s still interesting to look at positioning from her point of view and it’s great to brush upon what I learned in the past. Personally speaking, I think this book is more suitable for B2B products/services than B2C.

Her writing is easy to understand and doesn’t involve a lot of jargon. It’s quite witty in some parts; which makes the experience more enjoyable. I kinda like the book. You can learn quite a lot from a $7 book (the Kindle version), a cost-effective option compared to hundreds of dollars spent on a few credits in college.

Stray Reflections

Jawad Mian hails from Pakistan and is the founder of Stray Reflections, a macro research firm. Two of his obsessions are writing and finding truth in life; which are the inspiration for this book. In it, Jawad shares with readers some of his intimate personal experiences, from growing up in Pakistan to adulthood and fatherhood, as well as important lessons about life that he picked up along the way. In addition to his stories, the author puts to great use some excerpts from classic literature by historical figures. In a busy society full of angst and distractions, this small book helps readers pause, catch their breath and reflect on what matters in life. Reading it was invigorating and refreshing for my soul.

“No distance of place or lapse of time can lessen the friendship of those who are thoroughly persuaded of each other’s worth.”

I’ve grown up to believe there are no coincidences in life. We are always in the right place, and everything happens at exactly the right time. Instead of obsessing about our goals or destination, maybe we should remain in the present moment and just let the universe move about. Like the river, life has its own flow; we cannot impose our own structure on it. We can’t control it—all we can do is listen to its current. Sometimes, when the outside noise dulls down, the quietness within reveals a lot, but only if you listen intently.

I beg you, to have patience with everything unresolved in your heart. Try to love the questions themselves as if they were locked rooms or books written in a foreign language. Don’t search for the answers, which could not be given to you now, because you would not be able to live them. And the point is to live everything. Live the questions now. Perhaps then, someday far in the future, you will gradually, without even noticing it, live your way into the answer.

Life is a journey, and we are all just travelers. It’s okay to fall down or not know where you’re going. Nature has marked out a path for each of us, and it won’t let us stray too far from our course. There is no shame in falling, only in failing to rise and get back up on our feet. As Paulo Coelho said, the secret of life is to fall seven times and to get up eight times. Even success, it has been well said, is nothing more than moving from one failure to the next with undiminished enthusiasm.

Weekly reading – 24th July 2021

What I wrote last week

My review of From Junk To Gold

Business

An excerpt from an upcoming book on what went wrong with WeWork. This should be talked about in business schools as one of the examples of why egos and delusional ambition can lead to disasters. These guys are richer than many many people on Earth and have more money than most folks can earn in a lifetime. Nonetheless, it’s staggering to see their silly actions.

The Verge has an interesting interview with Mark Zuckerberg. The interview touches upon a lot of things but there are two that I want to quickly highlight here. Mark talks about how people shouldn’t expect that there is no transgression on his company’s platforms. That is always bound to happen. Instead, what people should expect is that Facebook is there to police the platform when it happens and puts in place integrity systems to deter bad demeanor. Secondly, I think the idea of interoperability is great, but not 100% perfect. That’s just how it is in life. There are always advantages and disadvantages to everything. Apple’s business model doesn’t involve interoperability that these guys advocate for, but in terms of net benefits to the society, has Apple been a positive force? I’d say so.

If you are not familiar with BNPL market, here is a good BNPL industry report

FICO Score’s Hold on the Credit Market Is Slipping. Not great news for the parent company of FICO score.

Grab taps Adyen to extend BNPL offering across Southeast Asia

What I found interesting

Master’s Degrees Are the Second Biggest Scam in Higher Education. My experience is that Master’s Degrees often still hold values because hiring companies value them. There are some exceptional programs that are worth the investment, but many aren’t. It’s crazy to think that so many people got into a huge debt to get something that is far less valuable

Giant tsunami from dino-killing asteroid impact revealed in fossilized ‘megaripples’. I can’t even bring myself to imagine what a 1-mile high tsunami looks like. It’s simply impossibly terrifying.

Lost world revealed by human, Neanderthal relics washed up on North Sea beaches

Stats that may interest you

20% of Americans think the U.S government uses Covid-vaccines to plant a microchip in their bodies. Use this info however you want

Lifetime emissions for an EV in Europe are between 66 and 69 percent lower compared to that of a gas-guzzling vehicle, the analysis found. In the US, an EV produces between 60 to 68 percent fewer emissions. In China, which uses more coal, an EV results in between 37 to 45 percent fewer emissions. In India, it’s between 19 to 34 percent lower.

Source: The Verge

Book review: Junk to Gold – From Salvage To The World’s Largest Online Auto Auction

I picked up this book after seeing a few folks on Twitter recommend it. This is more or less an autobiography of Willis Johnson, the founder of Copart, one of the two largest online auto auction in the world. My overall experience from reading this book is positive because I like the content and its reasonable length.

Many books tend to be filled with a lot of junk, no pun intended, and longer than what they should be. This book is straight to the point and can be easily finished on a weekend. Content wise, it can teach readers many meaningful business lessons without shelling out tens of thousands of dollars on college. For example, Willis was a visionary because he and his son-in-law repeatedly invested handsomely in IT ahead of anybody else. They worked with California DMV to leverage computers to register cars instead of manual paperwork. This move sped up the selling process and improved customer experience. Then, they spent $3 million, a big sum at the time, on Copart Auction System (CAS) to allow online bidding for all of their yards; which nobody else did at the time. When the Internet started to gain popularity, Johnson and his right-hand son-in-law hopped on the trend and built out Copart’s online presence. In hindsight, these initiatives seemed rather obvious, but from my own experience working in the U.S, there are many companies that are reluctant in investing in IT, my current employer included.

Willis Johnson is a shrewd businessman. He knew that in order to grow his business, he had to generate more than one revenue stream from the same resources. In his words, he was “putting more through the pipe”. He also learned how to increase his margin and lower the cost. While other yards at the time sold many parts together and had to guarantee buy-backs because the value of the purchase was higher, Willis sold the parts individually and didn’t have to guarantee buy-backs so that his margin was higher than his competitors. Additionally, the founder of Copart bought yards in strategic places. That way, he could cover more areas without incurring more tolling expenses and hurting his margin. A bit later, he managed to buy parts in bulk from Asia to take advantage of cheap labor and wholesale pricing, and sold them at retail prices.

Many books were written on Blue Ocean Strategy, which basically means that companies can gain advantage by finding under-served customer segments and focusing on that particular segment instead of launching lookalike products or services and having to compete with many rivals. You can learn the same lesson from Willis in his book. He wisely specialized on Chrysler parts which weren’t popular at the time. The specialization gave him two advantages. First, he didn’t have to compete with others on Chrysler parts. In fact, Chrysler was happy to partner with him to some extent. He could secure the parts more economically. Second, Chrysler customers were even referred to his yards because others didn’t have the parts.

There are other plenty of good anecdotes and lessons from this book. If you want to learn great business lessons or just want to get to know Copart, I highly recommend this book. Below are some excerpts that I like

Everyone Is Created Equal, but They Aren’t Always Treated Equally While hard work became second nature, I learned it wasn’t always a guarantee of success, and people aren’t always treated equally for equal work. The world was unfair, and this bothered me.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

To us, the business world was black and white, and a deal you aren’t sure about isn’t really a deal at all. It never ceases to surprise me, though, when others cross that line without even a blink of an eye. I was raised to believe that cheating is the same whether you are taking ten cents or $10,000. And if you could do it once, there was a good chance you would do it again.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Dad also had an expression: “Take care of your pennies and the dollars will take care of themselves.” It’s a phrase I have also passed on to others so they would learn the same lesson I learned from him—that small amounts of money can add up to either big profits or big losses. You can’t ignore the small expenses or the small amounts of money unaccounted for if you hope to succeed at the end of the day.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

There were pockets of General Motors and Ford specialty yards but not Chrysler, so we were filling a need for a big area. It was also cheaper to stock Chrysler parts. At the time we were still partly in the scrap business, so we could buy all the junk Chrysler cars for thirty-five to forty dollars whereas we were paying seventy-five to one hundred dollars for General Motors junk cars. I could go to an auction and buy a wrecked Dodge Polara for twenty-five cents on a dollar compared to a Chevrolet. So I could buy parts cheaper, but the parts were just as valuable, especially since no one else carried them. Before we specialized, Curtis and I were running between $3,500 and $5,000 worth of parts a month at Mather. After specializing, we were running around $3,500 worth of parts a day.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

I spent $110,000 on a large reel-to-reel computer—about double the amount most people spent on a house at the time. The reels themselves were fourteen inches in diameter and stored all the information about the business and its inventory. Every night, new reels were put on the computer to back up the information. This resulted in boxes and boxes of reels. Today, an iPhone could probably hold the same amount of data. Curtis remembers that other people thought I was crazy (or stupid—or maybe both) to spend so much money on a computer for a wrecking yard. But I was never afraid to spend money on technology if it could help us be more efficient. And it turned out that the whole industry would end up computerizing once they saw the benefits it gave people like me and Marv.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Instead of waiting for the DMV to find a better way, I went to them and proposed a solution. I would develop a way to create electronic forms and print them from a computer, thereby eliminating the need for the DMV to send out the books at all, saving them money and my business valuable time. I spent about $40,000 building the computerized system for the state of California. Now we could go to the computer and fill out all the paperwork needed and didn’t have to wait for books. It sped up the whole process and was an example of how it pays to fix something yourself instead of waiting for someone else to solve the problem for you.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Every time you can add a revenue stream to the same pipeline, the profit margins change drastically. You are putting more through that pipe. That’s what I always tried to do in my businesses, and it is how we were successful.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

“Barry, here’s the thing. I’m not just buying a can of soup for twenty-nine cents and selling it for forty-nine cents,” I explained. “I have ten different services that are growing all the time. Think of us like the local sewer system.”

Well, that got his attention.

“We’re a utility. Nothing can get rid of us—nothing. Two of the biggest businesses in the world are car manufacturers and insurance companies,” I went on. “If insurance companies don’t write insurance policies on cars, then they’re out of business. If manufacturers don’t make cars, then they’re out of business. They’re always gonna make cars, and they’re always gonna insure them. We’re the guy in between.”

I looked him right in the eye and said, “As long as we’ve got the land in the right place to put the cars on, we can’t fail. We are like the septic tanks of the sewer system. You can’t have the system without us.”

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

In the meantime, IAA was gobbling up facilities across the country as fast as they could. I knew from my dealings with Bob Spence that their plan was to acquire as many locations as they could and let the yards still run like they had been before they purchased them, even if that meant they ran on separate computer systems and used different business models. IAA figured they’d worry about converting them into one system later, when they had finished growing.

My philosophy was much different. I felt Copart should grow slowly, acquiring strategic locations and then converting each one over to the Copart system and business model immediately. Jay had already become an expert at converting yards—taking the lead in changing things over in all the facilities I had acquired while getting ready to go public.

I just didn’t want to grow to grow. I wanted to build a brand. I wanted anything with a Copart logo on it to run the same way—same computer system, same pricing, same way of treating our employees—so people started relating our name to a certain way of doing business. We spent time converting things over and converting employees over and teaching them our way of doing things because in many cases, the old way they were doing things hadn’t been working. That’s why they had to sell.

That’s also why I think IAA’s approach to keeping newly acquired yards running the same way was wrong. They weren’t fixing what was broken in the first place.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Book Review – Amazon Unbound

Brad Stone followed his first book on Amazon “The Everything Store” with “Amazon Unbound” ten years apart. Similar to its predecessor, this book is the result of extensive research and journalism on the company that captures the imagination and admiration of the public and millions around the world. How much you like this book depends on how familiar you are with the company and its enigmatic and iconic founder, Jeff Bezos. Personally, having read quite a bit on both, I didn’t find some chapters very useful or interesting because I didn’t think it was necessary for me to know in details what happened internally. With that being said, I did find the book worth the time. If you are fond of business and Amazon, give it a try! Below are a few things that stood out for me

Bezos’ ability to think big and delegate

The chapters on the development of Alexa, Amazon Go, Indian market as well as the acquisition of Whole Foods is interesting. In these chapters, readers can see how Jeff’s ability to think big and push his team to think big resulted in unfathomable success. His vision and boldness led the team to enduring long working hours for years and challenges, both technically and from the market, to introduce services and products that have proven to be strategic assets to Amazon. His genius also lies in his willingness to delegate big & important projects to his team. His previous Technical Advisors led the charge on Alexa, AWS and India. In addition to opportunity and resources, Bezos also provides oversight and counsel, and often the push that his team needs to think big.

“By then, Amazon’s China bet was souring, so Bezos did not want to relinquish his shot at what seemed like the world’s next largest prize. In most OP1 sessions, he usually spoke last, not to sway the group with his formidable opinion. But this time, he interjected while Agarwal was still giving his presentation. “You guys are going to fail,” he bluntly told the Indian crew. “I don’t need computer scientists in India. I need cowboys.

“Don’t come to me with a plan that assumes I will only make a certain level of investment,” Bezos continued, according to the recollection of two executives who were there. “Tell me how to win. Then tell me how much it costs.” Another Indian executive at the meeting, Amit Deshpande, says the message was: “Go big and take risks. Make it happen. We have your backs.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Bezos and his employees riffed on the idea over email for a few days, but no further action was taken, and it could have ended there. Then a few weeks later, Hart met with Bezos in a sixth-floor conference room in Amazon’s headquarters, Day 1 North, to discuss his career options. His tenure as TA was wrapping up, so they discussed several possible opportunities to lead new initiatives at the company, including positions in Amazon’s video streaming and advertising groups. Bezos jotted their ideas down on a whiteboard, adding a few of his own, and then started to apply his usual criteria to assess their merit: If they work, will they grow to become big businesses? If the company didn’t pursue them aggressively now, would it miss an opportunity? Eventually Bezos and Hart crossed off all the items on the list except one—pursuing Bezos’s idea for a voice-activated cloud computer.

“Jeff, I don’t have any experience in hardware, and the largest software team I’ve led is only about forty people,” Hart recalled saying. “You’ll do fine,” Bezos replied.

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

Even heroes aren’t perfect

Jeff Bezos is known for making his employees put their ideas into a PR FAQ, which is a single pager that summarizes key points on a new product/service, or a 6-page memo that includes analysis and rationale for an idea or a big initiative. I love this approach. I think it makes a lot of sense to ask folks to put thoughts to paper and strengthen their ideas. However, when it comes to Jeff’s own ideas, he sometimes didn’t meet the high standard. Furthermore, Jeff instills the philosophy of “single-threaded leaders” into Amazon. The thinking here is that when somebody is responsible for an initiative, they shouldn’t be distracted by anything else. Jeff’s focus was initially only on Amazon. Over the years, he became distracted by his new girlfriend and his investments in Blue Origin & Washington Post. The book detailed how he missed meetings and went for days without a visit to the office. He was still involved at Amazon, but that’s not the standard of focus that he demands from his employees.

What I took away from this is the reinforcement of the belief that even your heroes are far from perfect. They don’t always practice what they preach. It doesn’t mean they don’t have good ideas, but it also doesn’t mean that they are perfect either. We should look at people, or at least try to, with some grain of salt, instead of blind loyalty or admiration.

“The first, which Bezos proposed in a free-flowing brainstorm session in 2014, started as a notion he called “the steak truck.” Imagined as “an ice cream truck for adults,” the original suggestion was to stock a van or truck with steaks, drive into neighborhoods with lights flashing and horn blaring, and sell them to residents, as Doug Herrington remembered it. It would be convenient and a great deal for customers, since the meat was being sold in bulk. Eventually, the company might even predict demand and eliminate the inefficiencies and wasted food of supermarkets.”

“But the service was never as ubiquitous or as endearing as Jeff Bezos and Doug Herrington had hoped. Internet critics were baffled by the project and sneered at some of the more inexplicable deals (“bidet sprayers for $19.99, 33% off!”). One empty Treasure Truck burst into flames in a West Philadelphia parking lot at 1:30 a.m. Bezos briefly touted the initiative in his 2017 shareholder letter, but an executive on the finance team told me that it never performed particularly well or was close to profitable. If Amazon wanted to arouse excitement and loyalty for its fledgling grocery services, it needed something else entirely—like a unique product that customers were passionate about.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Well, Bezos had an idea for that as well and it was just as bizarre. In August 2015, the Washington Post published an unappetizing article about how a single hamburger might contain the meat of up to a hundred cows. Sourcing a burger from just a single cow could theoretically produce a superior-tasting patty but that “would be hard and expensive,” a meat distributor told the paper. That caught Bezos’s attention. He seemed to have increasingly adventurous tastes, later sampling an iguana, for example, at a meeting of New York City’s Explorers Club. In another brainstorming meeting with Herrington, he suggested they find a ranch to produce a “single cow burger” and make it a unique item that customers could only buy from Amazon. “I really think you should try this,” Bezos told Herrington, who recalled thinking at first it was a joke. “How hard can it be?”

“The project once again represented a different style of innovation within Amazon. Employees didn’t “work backwards” from their idealized customers, who had never asked for such a creation. They worked backwards from Bezos’s intuition and were catering to his sometimes eclectic tastes (literally). Bezos was right a lot, particularly when it came to cutting-edge technology. But in the end, the single cow burger and other culinary innovations introduced within Amazon Fresh generated little buzz or increased business.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Still, many Amazon execs and alums would have a hard time moving on so easily. Bezos had always demanded that Amazonians comport themselves with discretion and impeccable judgment. He ripped documents in half and walked out of rooms when employees fell short of expectations. By conducting an extramarital relationship so carelessly that it became fodder for a salacious spread in the National Enquirer and then a high-profile media free-for-all, he had failed to meet his own high standards. Dozens of current and former executives would later say that they were surprised and disappointed by Bezos’s affair. Their infallible and righteous leader was, after all, a flawed human.

The revelations also might have explained some of the more curious changes in his recent behavior. Bezos had been increasingly hard to find in the Seattle offices over the past year; OP1 meetings had been delayed or postponed, and longtime deputies were finding it difficult to get time on his calendar. He was spending more time traveling, colleagues had noticed, and that November had popped up with only a few hours’ notice in the Santa Monica offices of Ring, the connected doorbell startup Amazon had acquired in February 2018.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

Dark side of Amazon

Amazon is not an angel. There is a dark side that involves using the practice of leveraging data from 3rd parties for their own advantage and sacrificing smaller merchants for their own profit. Are those practices cringe-worthy and distasteful? Yes. Are they illegal? It’s clearly in the grey right now as the government is still conducting its investigation and no charge has been announced on Amazon yet. Nonetheless, given the threat from the likes of Shopify, these practices can cause concern and fear from 3rd parties, which can ultimately lead to sizable losses and damage for Amazon.

“Wendell Morris largely agreed with that sentiment. The founder of the Santa Monica–based YogaRat was one of the first sellers on Amazon to hawk yoga mats and yoga towels; he later expanded into beach towels and microfiber blankets, all sourced from China. In 2014, he became one of the few Amazon sellers that Jeff Bezos touted by name in his widely read annual letters to shareholders. “The beauty of Amazon is that someone can say, ‘I want to start a business,’ and they can go on Amazon and really start a business,” Bezos had quoted Morris as saying that year. “You don’t have to get a lease on a building or even have any employees at first. You can just do it on your own. And that’s what I did.”

But by the time I talked to him, Morris, like Saunders, had changed his opinion. In 2016, when YogaRat employed seven people, he found that his listings were inexplicably disappearing from Amazon’s search results. He spent hours on the phone with an Amazon customer support staffer in India and wrote pleading emails to Bezos’s public email address. His listings were finally restored, though they never returned to their previous positions at the top of search results. A year later, his seller account was suspended altogether because some of the images on his listings violated Amazon’s guidelines against depicting groups of people in product photos. Morris conceded the error while bitterly showing me how countless other sellers violated the same rules without penalty. Someone—probably a competitor—had singled him out to Amazon’s enforcement team.”

“While Morris scrambled to reinstate his account, other sellers of the same merchandise replaced him atop search results. YogaRat never recovered. He now runs what’s left of his firm alone with his wife, and the challenges are daunting. He is constantly fighting overseas knockoffs of his designs and reviews of his products that mysteriously show up on rival listings. When he calls Amazon customer service, he suspects the reps’ primary metric for success is how quickly they can get off the phone. Once a devoted yogi, Morris can barely stand to look at a yoga mat anymore.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Aarstol tried to advertise on Amazon to boost his visibility but that gutted his profits. In the years after he was mentioned in Bezos’s letter, he went from employing ten people to three and from recording $4 million in annual sales to less than $1.5 million. “Amazon doesn’t give a shit about brands,” said Aarstol, who by 2020 was almost completely off Amazon and focusing on sales over his own website. “They don’t care whether you live or die.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Speaking on the condition of anonymity, several private-label managers admitted to exploiting a resource that was even more precious than product reviews—prominence in Amazon’s search results. When they introduced a new brand, like Mama Bear diapers, a practice called “search seeding” allowed the brand managers to pin the initial relevancy score for the new product to the score of an established product, such as Pampers, at least for the first few days. The Amazon product would then appear at the top of search results, rather than starting on the unseen last page with other new brands.

When I asked Doug Herrington whether Amazon changed search results for its private-label products, he flatly denied the practice occurred. “We don’t manipulate search results at all,” he said. He added that Amazon brands were sometimes given prominent advertising slots in search results when they were a “great deal for the customer,” and if customers didn’t respond, the Amazon products quickly vanished. He also compared Amazon’s tactics to those of competing physical retailers, who put generic products like painkillers right next to Tylenol and Advil, taking up limited shelf space. Amazon, on the other hand, had “infinite aisles,”

One who worked on a new lifestyle brand called Solimo said she originally assumed third-party data was off limits when she joined the company in 2016. A year into her job, her boss showed her how to access the sales data and told her to ask Amazon’s data analysts if she needed help. The employee, who asked that her name not be used, subsequently examined third-party sales to determine the fastest-selling vitamin supplements, how many units were sold, and the average selling price and profitability of each.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

Other interesting anecdotes

“Logistics employees who worked on the California service said this hub-and-spoke model ended up being inefficient and unreliable; one said that Amazon was “basically stapling a $10 or $20 bill to every order.” The Fresh team also tracked a metric called “perfect deliveries”—when an order was promptly delivered and included every item. They found they were hitting that target less than 70 percent of the time. Grocery industry veterans belittled the effort from afar. “Amazon Fresh is their Waterloo,” John Mackey told me during our chat in 2014. “What’s the one thing people want? Convenience. You can’t do that with distribution centers and trucks.”

“Success in delivering online groceries relied on getting the logistics exactly right and amassing enough demand to make it profitable to send drivers into residential neighborhoods. Amazon had set up warehouses too far from customers, made it too expensive for them to sign up, and saddled them with bulky tote bags and sacks of dry ice after each delivery. Bezos had finally agreed with Doug Herrington that Amazon needed to reinvent its retail business, but they were going to have to find a different way to do it.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“For the next few quarters, Amazon avoided buying Google ads in Mexico and tried to compensate with billboards, radio, and TV ads, and shipping discounts. As Garcia had feared, it hobbled the site. The offline ads were more expensive and less effective. Google brought in $70 billion in annual advertising revenues because search ads worked and were a relatively inexpensive way for websites to attract visitors. “I wanted to see if we could get traction in a country launch without using Google,” Wilke later said, “and it turned out, the answer was no…. We weren’t reaching enough customers.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Internally the program was called AMPED. Amazon contracted with an Australian data collection firm, Appen, and went on the road with Alexa, in disguise. Appen rented homes and apartments, initially in Boston, and then Amazon littered several rooms with all kinds of “decoy” devices: pedestal microphones, Xbox gaming consoles, televisions, and tablets. There were also some twenty Alexa devices planted around the rooms at different heights, each shrouded in an acoustic fabric that hid them from view but allowed sound to pass through. Appen then contracted with a temp agency, and a stream of contract workers filtered through the properties, eight hours a day, six days a week, reading scripts from an iPad with canned lines and open-ended requests like “ask to play your favorite tune” and “ask anything you’d like an assistant to do.”

The speakers were turned off, so the Alexas didn’t make a peep, but the seven microphones on each device captured everything and streamed the audio to Amazon’s servers. Then another army of workers manually reviewed the recordings and annotated the transcripts, classifying queries that might stump a machine, like “turn on Hunger Games,” as a request to play the Jennifer Lawrence film, so that the next time, Alexa would know.

The Boston test showed promise, so Amazon expanded the program, renting more homes and apartments in Seattle and ten other cities over the next six months to capture the voices and speech patterns of thousands more paid volunteers. It was a mushroom-cloud explosion of data about device placement, acoustic environments, background noise, regional accents, and all the gloriously random ways a human being might phrase a simple request to hear the weather, for example, or play a Justin Timberlake hit.

The daylong flood of random people into homes and apartments repeatedly provoked suspicious neighbors to call the police. In one instance, a resident of a Boston condo complex suspected a drug-dealing or prostitution ring was next door and called the cops, who asked to enter the apartment. The nervous staff gave them an elusive explanation and a tour and afterward hastily shut down the site. Occasionally, temp workers would show up, consider the bizarre script and vagueness of the entire affair, and simply refuse to participate. One Amazon employee who was annotating transcripts later recalled hearing a temp worker interrupt a session and whisper to whoever he suspected was listening: “This is so dumb. The company behind this should be embarrassed!

But Amazon was anything but embarrassed. By 2014, it had increased its store of speech data by a factor of ten thousand and largely closed the data gap with rivals like Apple and Google. ”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.


Book Review – Think Again: The Power Of Knowing What You Don’t Know

The title gives away much of what the book is all about. Although it doesn’t reveal any groundbreaking fact or insight that no other books has, Think Again is a helpful reminder that we all need to re-evaluate our thinking and our life regularly.

Adam Grant is a professor at Wharton School of The University of Pennsylvania and majors in organizational psychology. In addition to penning several books, including Think Again, he received his tenure at the age of 28, authored many papers and research in his field, and was the highest ranked professor at Wharton from 2012 to 2018. In terms of credibility, there shouldn’t be much to worry about. Back to the book itself. The tenet of Think Again is to encourage readers to think like a scientist with a great deal of humility. To think like a scientist, we need to avoid being too invested in our own opinions. As scientists usually possess a healthy dose of doubt and tend to review formed opinions regularly with concrete data and new facts, that’s what Adam Grant wants us to do. Whatever we learned needs to be revisited and, if necessary, unlearned. The world becomes increasingly complicated. Virtually all the issues that we discuss in our life are multi-faceted and complex; which requires constant investigation and evolution of thinking when new data and theses come up. Yet, many of us, including myself, succumb to mental laziness. We get stuck in the way we think and the opinions we formed in the long past. Changing our minds is often accompanied by admitting that we were wrong and that we made mistakes. Such an admission can be unpleasant and is not what many of us are willing to do. But Adam Grant, using academic research, argues that we must do the hard thing and constantly challenge/review our opinions, for our own benefits.

About a decade ago, when I was fresh out of school, I held beliefs that would make me ashamed now. Back then, success in life was to get a job at a big company, to have a fancy title and to have a lot of money. That success, in turn, would make me happy. Three years into my career, I got depressed. I resigned from a job that paid me well at the time, took almost two months’ sabbatical and accepted a job in a much smaller job market. My life got better. I learned more about the holes and the shortcomings in my thinking which evolved a bit, but there was still a lot of room for improvement. I was still haunted by the idea of pursuing my passion and figuring out the one thing that I should do in my life, like many of us are by all the self-help books and the speeches by the lucky ones such as Steve Jobs. It took me years to finally be at peace with not knowing what I was born to do in this world. Instead, I am happy with being healthy, working towards a future life with my girlfriend and having the freedom that my parents don’t have. Whether that state of mind will persist in the future remains to be seen. But I guess that’s in line with what Adam Grant talks about in the book.

All in all, a nice read for the weekend. It is simple to digest, but the lessons it brings can be profound. Really recommend it.

“If you’re a scientist by trade, rethinking is fundamental to your profession. You’re paid to be constantly aware of the limits of your understanding. You’re expected to doubt what you know, be curious about what you don’t know, and update your views based on new data. In the past century alone, the application of scientific principles has led to dramatic progress. Biological scientists discovered penicillin. Rocket scientists sent us to the moon. Computer scientists built the internet. But being a scientist is not just a profession. It’s a frame of mind—a mode of thinking that differs from preaching, prosecuting, and politicking”

“Mental horsepower doesn’t guarantee mental dexterity. No matter how much brainpower you have, if you lack the motivation to change your mind, you’ll miss many occasions to think again. Research reveals that the higher you score on an IQ test, the more likely you are to fall for stereotypes, because you’re faster at recognizing patterns. And recent experiments suggest that the smarter you are, the more you might struggle to update your beliefs.”

Excerpt From: Adam Grant. “Think Again.” Apple Books.

“In preacher mode, changing our minds is a mark of moral weakness; in scientist mode, it’s a sign of intellectual integrity. In prosecutor mode, allowing ourselves to be persuaded is admitting defeat; in scientist mode, it’s a step toward the truth. In politician mode, we flip-flop in response to carrots and sticks; in scientist mode, we shift in the face of sharper logic and stronger data.”

Excerpt From: Adam Grant. “Think Again.” Apple Books.

“When we lack the knowledge and skills to achieve excellence, we sometimes lack the knowledge and skills to judge excellence. This insight should immediately put your favorite confident ignoramuses in their place. Before we poke fun at them, though, it’s worth remembering that we all have moments when we are them.

We’re all novices at many things, but we’re not always blind to that fact. We tend to overestimate ourselves on desirable skills, like the ability to carry on a riveting conversation. We’re also prone to overconfidence in situations where it’s easy to confuse experience for expertise, like driving, typing, trivia, and managing emotions. Yet we underestimate ourselves when we can easily recognize that we lack experience—like painting, driving a race car, and rapidly reciting the alphabet backward. Absolute beginners rarely fall into the Dunning-Kruger trap. If you don’t know a thing about football, you probably don’t walk around believing you know more than the coach.”

“It’s when we progress from novice to amateur that we become overconfident. A bit of knowledge can be a dangerous thing. In too many domains of our lives, we never gain enough expertise to question our opinions or discover what we don’t know. We have just enough information to feel self-assured about making pronouncements and passing judgment, failing to realize that we’ve climbed to the top of Mount Stupid without making it over to the other side.”

Excerpt From: Adam Grant. “Think Again.” Apple Books.

“Arrogance is ignorance plus conviction,” blogger Tim Urban explains. “While humility is a permeable filter that absorbs life experience and converts it into knowledge and wisdom, arrogance is a rubber shield that life experience simply bounces off of. Humility is often misunderstood. It’s not a matter of having low self-confidence. One of the Latin roots of humility means “from the earth.” It’s about being grounded—recognizing that we’re flawed and fallible. Confidence is a measure of how much you believe in yourself. Evidence shows that’s distinct from how much you believe in your methods. You can be confident in your ability to achieve a goal in the future while maintaining the humility to question whether you have the right tools in the present. That’s the sweet spot of confidence.”

“Beware of getting stranded at the summit of Mount Stupid. Don’t confuse confidence with competence. The Dunning-Kruger effect is a good reminder that the better you think you are, the greater the risk that you’re overestimating yourself—and the greater the odds that you’ll stop improving. To prevent overconfidence in your knowledge, reflect on how well you can explain a given subject.”

Excerpt From: Adam Grant. “Think Again.” Apple Books.
Excerpt From: Adam Grant. “Think Again.” Apple Books.

“One possibility is that when we’re searching for happiness, we get too busy evaluating life to actually experience it. Instead of savoring our moments of joy, we ruminate about why our lives aren’t more joyful. A second likely culprit is that we spend too much time striving for peak happiness, overlooking the fact that happiness depends more on the frequency of positive emotions than their intensity.”

“At work and in life, the best we can do is plan for what we want to learn and contribute over the next year or two, and stay open to what might come next. To adapt an analogy from E. L. Doctorow, writing out a plan for your life “is like driving at night in the fog. You can only see as far as your headlights, but you can make the whole trip that way.”

Excerpt From: Adam Grant. “Think Again.” Apple Books.

Book review: The Spotify Play: How Daniel Elk Beat Apple, Google & Amazon In The Race For Audio Dominance

As Spotify is one of the stocks in my portfolio, I have extra motivation to read this book. To get to know more about this company that is largely shrouded by secrecy. The book was written by a couple of Swedish interviews through many interviews and investigation of filings. It’s normal to read this kind of unofficial account of a company with a grain of salt or some skepticism, but it’s far from easy to write about a company when current or former employees are shackled by NDAs and when the founders or executives refuse to cooperate.

The book covered Spotify’s history from the very beginning to when it started to increase investments in podcasts. It started with Spotify’s founders, Daniel Elk and Martin Lorentzon, who each sold a startup and became a couple of millionaires, before they even worked together on a secret idea that would later become Spotify. Back when it just got off the ground, there was no playbook for a music streaming service like Spotify, well not legally. Hence, the young startup had to engineer both an app that was user-friendly and a business model that could yield profitability and work well with music labels. As Daniel Elk insisted on, for the right reason, having a free version of Spotify, which let users stream music for free, music labels in the beginning were highly skeptical and reluctant to cooperate. The prospect of Spotify generating enough ads money on the other side of the business to pay loyalties wasn’t appealing at best or practical at least. Through negotiations with the powerful music labels, Spotify came up with their Freemium model that still exists to this day.

“Eventually, Daniel had to compromise by adding a paid service. Three people at Spotify drove him to that shift in strategy: Spotify’s “dynamic duo”—Niklas Ivarsson and Petra Hansson—and the New York-based advisor Ken Parks. After scores of meetings with labels and legal consultants, they are said to have convinced Daniel that a paid version was the only way forward. The alternative would simply cost too much, in both cash and company shares, and never lead to a sustainable business. The freemium model that would define Spotify was thus born out of a tit-for-tat dialogue with the labels, with Niklas and Petra painstakingly hammering out the details of a new template. The industry hated the free service, but was prepared to put up with it as a means to an end, with Spotify vowing to convert free users to an ad-free, premium version.”

Excerpt From: Sven Carlsson. “The Spotify Play.”

In the first few years of its existence, Spotify came close to being belly up financially a couple of times. Back in the latter half of the 2000s, Spotify’s model was a new concept to investors. An investment in Spotify without an agreement with major music labels presented a significant risk. If Spotify had operated without official licenses, it would have embroiled itself and investors’ money in a mountain of legal trouble. Yet, just before the 2008 financial crisis hit, the company labored to put together a funding deal to keep the lights on.

At the Spotify office, around forty employees toasted to the news with glasses of sparkling wine. Daniel was visibly relieved, according to one account.

“That was lucky. If we hadn’t gotten funded, you guys wouldn’t have received your salaries,” he reportedly told his colleagues afterward.

In fact, the timing was immaculate. A few months later, the investment bank Lehman Brothers filed for bankruptcy, setting off the worst financial crisis in more than seventy years.

Excerpt From: Sven Carlsson. “The Spotify Play.”

A few years later, death came close again. This time, it was the ability to see shift in consumer behavior and to react fast that saved Spotify. After the iPhone was invented in 2007, a few years later, consumers started to consume music more on their little computers that could sit comfortable in their hands or pockets. Spotify at the time only had a desktop version. The company’s analytics team found out that their customers didn’t spend enough time on the desktop version on their mobile to be converted into paid users. If they hadn’t reacted and desktop use had kept plummeted, their revenue would have dropped. Without an expansion in paid users, Spotify would have had a hard time convincing potential investors for more cash. The trouble became compounded because having a mobile version required additional licenses from music labels. Somehow, the company pulled through what Daniel Elk called “switching out the engines mid-flight”

“At Jarla House in Stockholm, the analytics team had set up a wide range of dashboards visualizing the music service’s performance in real time. Starting in early 2012, Henrik and his team watched as the inflow of new users switched from desktop—where they could listen for free—to mobile, where Spotify only offered a free trial for forty-eight hours. That clearly wasn’t enough time to convert them into subscribers. Of the new users who tried Spotify on a smartphone, only a small percent would stay on and pay for the service. The conversion rate on desktop—the backbone of Spotify’s business—was much higher. But that was of little comfort if desktop use would keep dropping dramatically.”

“During the summer of 2012, music listening on Spotify plateaued as it usually did during the season. But when fall began, a growing number of users did not return. The analytics team suspected that a large number of them were now using their computers less often, opting for their phones instead. It was an early indication that the massive shift to mobile computing was beginning to pick up speed.”

“At this point, Spotify’s licensing team had spent more than six months negotiating deals for what they called a “mobile free tier.” It was not an easy task. While the record labels were making hundreds of millions of dollars every year in payouts from Spotify, they still disliked the idea of millions of people listening to music without ever being forced to pay. Now, Spotify wanted to expand their free service to include all smartphones, not just the ones belonging to paying subscribers.”

“The data became more and more distressing for Spotify. In the late summer of 2013, more listeners went “mobile only,” by now a common term. Smartphones now appeared to have become a real alternative to computers. Gustav Söderström would later describe this period as “the summer when Europe went mobile. Spotify’s number of active users—the lifeline that kept investors funding the company—was now shrinking. Internal estimates showed that Spotify’s user growth nearly halted between the second and third quarters of 2013.”

“A few years later, Daniel would admit that Spotify would have gone bust within six months if things hadn’t changed. To him, this was one of Spotify’s crowning achievements. Originally conceived as a desktop product, the company managed to adapt to the mobile era—and they did it “mid-flight,” under constant pressure from competitors and from the music industry, which at this time still swallowed around 80 percent of all of Spotify’s revenues.”

Excerpt From: Sven Carlsson. “The Spotify Play.”

The book also touched upon various topics such as challenging negotiations with the music labels, struggle to convince artists that Spotify’s interest was aligned with them, the fight against Apple, the effort to overcome operational chaos before IPO and the negotiations to acquire Soundcloud & Tidal that didn’t come through. Personally, I was interested in the book because I liked to study businesses and as mentioned, because I own Spotify stock. This isn’t an official account approved by the company. Consequently, I am not very sure how much of what was written is true. I don’t believe the authors were out to spread rumors, but on the other hand, I cannot have 100% confidence either. The writing is nothing spectacular. The beginning of Spotify was covered at length, but its more recent history didn’t receive as much attention. Furthermore, I don’t really think the title is correct. Yes, Spotify is a known brand, especially with young audience nowadays, but it’s a long way from being the dominant force in audio. Whoever will emerge victorious in the audio streaming war still remains to be seen. Hence, I would give it a 3/5, but would not put it under the “I highly recommend” category.

“The many problems varied. Spotify had grown quickly, and its organizational structure was, in places, haphazard. Its internal accounting system would have fit a medium-sized business operating in a handful of countries, but not a global market leader with business in nearly sixty countries. If a staffer in the finance department wanted to break down marketing costs for a single country for the year 2014, there would be no way of doing it.

Moreover, it was difficult for Spotify to accurately estimate its own costs. Over the coming years, the company would retroactively write up their royalty payments by more than $60 million due to accounting errors. Spotify had a hard time forecasting how the business would perform. During some quarters, subscriber growth came in well below its own estimates; during others, the number of subscribers surged past the growth team’s targets.”

“A number of sources interviewed for this book would describe how Daniel had a hard time knowing how to handle dustups among his lieutenants. Nearly a decade after Spotify started making big-name hires, many continued to recount how Daniel would let conflicts fester until the warring parties found their own solution. It was, still, a kind of natural selection in a corporate setting. The atmosphere is toxic at times. Daniel tends to give people overlapping responsibilities, then he lets them fight over who gets to do the work,” as one person would recall.

”No one is actually accountable for anything because virtually all decisions must take place though a bewildering process of group consensus, where people who are ignorant of the topic at hand somehow have just as much of a say as the experts,” one former employee at the New York office would post in November of 2019.”

Excerpt From: Sven Carlsson. “The Spotify Play.”

Deal with Sony

“Secret internal documents, which would not emerge until the publication of the Swedish edition of this book, reveal that Sony had negotiated an option—triggered four years down the line—to purchase what would amount to 2.5 percent of Spotify at a heavy discount. The label’s payoff came in the spring of 2015, when Sony paid just under $8 million for shares that, a few months later, would become worth twenty-five times more. Largely as a result of this deal, Sony would become the label with the largest Spotify holdings by the time the company went public in 2018.”

“For the right to stream Sony’s music catalogue in the US, Spotify agrees to pay a $25 million advance for the two-year duration of the contract: $9 million the first year, and $16 million the second. The advance is to be paid in installments every three months, and Spotify can only recoup this money if it meets or beats its revenue targets. The contract, however, does not stipulate how Sony Music can use the advance money. Some industry insiders claim that advance money is generally spent on things other than payouts to artists. Others wonder what happens to the “breakage,” or the part of the advance that is left with the label, when Spotify fails to reach its revenue goals. Is it attributed to streams and distributed to artists, or kept entirely by the label?”

“The contract also stipulates that Spotify give Sony free ad space worth $9 million over three years. Sony can use that space to promote its own artists or resell it at any price they want. Spotify also promises to make a further $15 million of ads available for purchase by Sony at a discounted rate. On top of this, Spotify must also offer Sony a portion of its unsold ad inventory for free, to allow the label to promote its artists.”

“The contract also states that Spotify’s smallest payout per stream will be 0.2 cents. But this measure can’t be used to calculate how much Spotify pays for the artists’ streams. It’s only used when it results in a larger payout than the label’s regular cut of Spotify’s total revenue. In essence, it’s a type of minimum guarantee. If too many users get stuck in the free tier, and Spotify’s average revenue per user falls below a certain level, Sony Music can ask to be paid per stream instead.”

Excerpt From: Sven Carlsson. “The Spotify Play.”