MoviePass’ old stale song and dance

In the beginning, MoviePass’ popularity rose quickly due to its unlimited $9.99/month plan that allowed users to watch a movie a day. Sometime in the 2018 summer, the company stopped the plan since it was bleeding cash and on the verge of bankruptcy. Of course, when you buy goods at retail prices and sell them to your customers at wholesale prices, you are doomed to empty your own bank account.

Fast forward to now, after several changes in its plans, MoviePass announced the comeback of its unlimited plan, with some changes.

Source: MoviePass

The plan is $5 more expensive than its previous version. If subscribed to an annual plan, users can get the plan at $9.95. However, the thing that caught my attention is the text below the “Get Started” button. It reads: “*Your movie choices may be restricted due to excessive individual usage which negatively impacts system-wide capacity. See Terms of Use section 2.5 for further details”.

Curious, I went to the Terms of Use section and found out a couple of other points that should be called out

2.4. MoviePass reserves the right to change or modify the Service or subscriptions at any time and in its sole discretion, including but not limited to applicable prices, without prior notice. MoviePass reserves the right to change the rules of movie-going attendance and ticket availability to subscribers in connection with the Service at any time. 

2.5. MoviePass makes no guarantee on the availability to any particular theater, showtime, or title that is presented in our app. MoviePass ticket inventory may vary from specific theater ticket inventory. MoviePass reserves the right to adjust its inventory to maintain fair access and usage to its full customer base. MoviePass may utilize its proprietary data and algorithms to impose restrictions on individual users based on their location, day of movie, time of movie, title, and the individual user’s historical usage. This means that MoviePass has the right to limit the selection of movies and/or the times of available movies should your individual use adversely impact MoviePass’s system-wide capacity or the availability of the Service for other subscribers.

2.6 You agree to choose the movie title, theater, and showtime up to no more than three (3) hours prior to the selected showtime, through the MoviePass App.

Source: MoviePass Terms of Service

To be fair, writing an encompassing Terms and Conditions text is a standard in the service business. I wouldn’t be surprised if MoviePass had the same terms one year ago. But how could one person “negatively impacts system-wide capacity”? MoviePass has this clause in place to leave some room to wriggle itself out of blockbuster movies that attract moviegoers and inflict losses. Furthermore, it is different now than it was a year ago.

I personally used the original unlimited plan in the last month before it was terminated. I could book any showtimes at any hour that I liked. There was no restriction on the selection of movies. Nonetheless, MoviePass started to remove the unlimited part of the plan and added restrictions on showtimes and movie selection. It’s very likely that they would do it again this time. Plus, users can only book movies 3 hours before the showtime. It’s very limiting and didn’t exist one year ago.

If you call a plan uncapped, yet have some unpleasant surprised in store for users, odds are that users will be greatly disappointed. Disappointed users are not what you want in the subscription business, especially given that the business model is inherently flawed in the first place and that there is great competition in AMC or other streaming services. There seems to be ample ingredients for another failure by MoviePass.

What could go wrong this time?

Concern over Facebook’s new privacy-focused vision

A few days ago, Mark Zuckerberg shared with the world his privacy-focused vision for Facebook moving forward. I understand that it may make sense strategically for the company, but I have real concerns over the feasibility of the strategy.

Lack of trust

Facebook has been littered with scandals for the past two years. The trust between the blue brand and users isn’t particularly at its all-time high. There have been documented evidence on the exodus of users from Facebook or the significant decrease in activities. If the trust is already shaky, why would users trust Facebook with every aspect of their life by using their proposed super app? (The super app concept is similar to WeChat, which users can use to do many things while on the platform such as booking movie tickets, paying bills, transferring money to friends and families…). If we can’t trust Facebook with just daily communication, how can we entrust it with more aspects of our life? If you can’t trust a dentist to treat your teeth, would you trust that dentist if he said he could fix your eyes?

The audience

I think one of the reasons why WeChat is successful is because of the target audience. Coming from that part of the world, I can say from personal experience that we Asians tend to not care as much as Western audience about privacy. I think there is a reason why WeChat hasn’t been as successful overseas as it is in China. If it were marketed to Western audience, given its relationship with the Chinese government and Western users’ concern over privacy, I don’t think it would be a triumphant effort. Hence, to convince Western users to use Facebook for everything, the trust has to be pretty solid. It’s not there now for sure.

Regulatory hurdles

Facebook has attracted unwelcome attention from lawmakers recently. And for a good reason. Even if they had done nothing wrong, which is definitely not the case, I suspect that the road to the super app vision wouldn’t be without robust challenges from the regulatory perspective.

Essentially, it’s all well and good for Facebook to change its stance on privacy. However, the trust isn’t there. I would love to see more concrete actions to transition from a company whose more than 95% of its revenue is from ads to a company that values privacy first. I am not a believer at the moment since Facebook has used up the rope we gave them already. If they want us to trust them again, they have to do it the hard way. And I think they have to hurry as well as the world won’t stand still for them. If this is the vision that makes business sense, others will go for it as well.

If they are committed and succeed in the future, kudos to them. Until then, I choose to remain skeptical of the vision.

Elizabeth Warren’s big (ridiculous) plan

Elizabeth Warren, one of the politicians who announced intention to run for the Presidency in 2020, released a blog post today outlining her plan to break up technology companies, if she is elected.

It’s ridiculous in my opinion.

I totally agree with Senator Warren on the role of promoting competition, because 1) it’s good for small-and-medium sized businesses; and 2) more importantly, it’s good for consumers. When there is competition to earn consumers’ money, it’s the consumers who reap the benefits.

Senator Warren’s whole piece seems to focus only on the first point above and neglect the second one, which in my opinion is the more important between the two. In her blog post, the Senator had a bolded claim that reads: “How the new tech monopolies hurt small businesses and innovation”. It depends on which industry she was referring to. It can be argued that Google’s monopoly can stifle any search engine startups, but it’s unfair to imply that Google can threaten in manufacturing industries and many others that are not where Google operates.

She accused tech powerhouses to use M&A to kill competition. Without Google, would Android and millions of users around the world have an established alternative to Apple today? One of the reasons why companies do M&A is to gain capabilities in a short amount of time. It’s like when you don’t know speak Japanese, instead of spending easily a decade to learn the language, you can hire somebody from Japan tomorrow and start doing business. The same thing applies to companies. Rather than spend money and years on R&D without guaranteed success, companies can acquire the capabilities available on the market quickly and reduce the risk of missing out strategic opportunities. The acquired companies can leverage resources at the acquirers to evolve to the next level. There is an argument to be made about Instagram & Facebook, Disney and Marvel, VMWare and Nicira.

Here is what she had to say on marketplaces

Using Proprietary Marketplaces to Limit Competition. Many big tech companies own a marketplace — where buyers and sellers transact — while also participating on the marketplace. This can create a conflict of interest that undermines competition. Amazon crushes small companies by copying the goods they sell on the Amazon Marketplace and then selling its own branded version. Google allegedly snuffed out a competing small search engine by demoting its content on its search algorithm, and it has favored its own restaurant ratings over those of Yelp.

There is some truth in what she said, but selling private labels and running a marketplace are two different things. If the private labels, as in the case of Amazon, are crappy, Amazon won’t be able to sell them. If Google-favored content isn’t in the best interest of users, they won’t consume it. Functioning as a marketplace, Amazon and Google generate revenue by offering a marketing channel and logistics help to vendors. Small businesses can sell goods on Amazon without worrying much about building a supply chain on its own. For many businesses, Google is the best way to reach online users. I can buy in the claim that these tech companies can be unfavorably biased to vendors which sell competing services/products, but the tech firms do also help a lot of other small guys.

Here is another point she made:

Weak antitrust enforcement has led to a dramatic reduction in competition and innovation in the tech sector. Venture capitalists are now hesitant to fund new startups to compete with these big tech companies because it’s so easy for the big companies to either snap up growing competitors or drive them out of business.

Having big techs swallow startups IS an exit venture capitalists want to recoup their investments. I don’t know if she noticed, but there have been quite many VC funds that have one billion dollars or more. This argument is pretty shaky at best.

She threatened to unwind these mergers and acquisitions if she is elected:

Amazon: Whole Foods; Zappos
Facebook: WhatsApp; Instagram
Google: Waze; Nest; DoubleClick

I can see the point behind Facebook – WhatsApp – Instagram, but I honestly don’t know her rationale behind the other two. Amazon doesn’t have a monopoly on selling shoes online just because they acquired Zappos, not does it have monopoly on groceries just because of Whole Foods. Walmart is fighting back really hard and other retailers such as Target is also expanding their footprint because they embraced the digital trend to compete with Amazon. On the other hand, yes Google has the monopoly in search, but DoubleClick is NOT all the reasons for that monopoly. And what do Waze and Nest have to do with it? Also, Google won because it offered the best and fastest search to users. Take it apart and what would that do to users?

Don’t get me wrong. I am in favor of the RIGHT regulations to keep tech companies in check. We need to step up our game to protect users’ privacy. It’s just not any citizen’s job to write regulations. That’s why we elect politicians.

The whole blog post is not a well-thought-out piece on the topic. If she really wants to break up competition, look at the airlines. Look at the credit score companies. Look at the pharmaceuticals that have MONOPOLIES over drugs for 10-20 years. How many companies do you know produce airplanes? Boeing and Airbus, the list ends there for me and likely many others. How about Comcast, AT&T and Verizon?

To tackle this problem, it’s important to look at it from different perspectives. Tech corporations are not perfect, but it will be unfair just to look at their faults and ignore the benefits they bring to our lives.

Facebook’s privacy-focused vision

Yesterday, Mark Zuckerberg released a blog post on a “privacy-focused vision” that centers on:

Private interactions. People should have simple, intimate places where they have clear control over who can communicate with them and confidence that no one else can access what they share.

Encryption. People’s private communications should be secure. End-to-end encryption prevents anyone — including us — from seeing what people share on our services.

Reducing Permanence. People should be comfortable being themselves, and should not have to worry about what they share coming back to hurt them later. So we won’t keep messages or stories around for longer than necessary to deliver the service or longer than people want them.

Safety. People should expect that we will do everything we can to keep them safe on our services within the limits of what’s possible in an encrypted service.

Interoperability. People should be able to use any of our apps to reach their friends, and they should be able to communicate across networks easily and securely.

Secure data storage. People should expect that we won’t store sensitive data in countries with weak records on human rights like privacy and freedom of expression in order to protect data from being improperly accessed.

Be that as it may that this vision can bring business and strategic benefits, meaning that Facebook has a reason to follow suit. Nonetheless, I have nothing, but skepticisms about this vision.

First of all, the majority of Facebook’s revenue comes from ads. By majority, I meant 98.5% of their revenue in 2018 comes from ads

Source: Facebook

When something is 98.5% of you, any claim that you will do something threatening that 98.5% part tends to raise genuine concerns about its legitimacy.

Second of all, Facebook’s track record on keeping its promise isn’t that great. For the last two years, it will be a hard ask to find a tech company that is involved in more scandals than the blue brand. I came across this disturbing article from Buzzfeed on Facebook. Here is what it has on decision-making at Facebook

Zuckerberg and Chief Operating Officer Sheryl Sandberg do not make judgment calls “until pressure is applied,” said another former employee, who worked with Facebook’s leadership and declined to be named for fear of retribution. “That pressure could come from the press or regulators, but they’re not keen on decision-making until they’re forced to do so.”

Buzzfeed

On Facebook’s attention to privacy

One former employee noted that Facebook’s executives historically only took privacy seriously if problems affected the key metrics of daily active users, which totaled 1.52 billion accounts in December, or monthly active users, which totaled 2.32 billion accounts. Both figures increased by about 9% year-over-year in December.

“If it came down to user privacy or MAU growth, Facebook always chose the latter,” the person said. 

Buzzfeed

On their denial to admit problems:

Other sources told BuzzFeed News that Facebook executives continue to view the problems of 2018 fundamentally as communication issues. They said some insiders among leadership and the rank and file could not understand how Facebook had become the focus of so much public ire and floated the idea that news publications, who had seen their business models decimated by Facebook and Google, had been directed to cover the company in a harsher light.

Buzzfeed

On a new feature called Clear History:

“If you watch the presentation, we really had nothing to show anyone,” said one person, who was close to F8. “Mark just wanted to score some points.”

Still, nine months after its initial announcement, Clear History is nowhere to be found. A Facebook executive conceded in a December interview with Recode that “it’s taking longer than we initially thought” due to issues with how data is stored and processed. 

Buzzfeed

By now, you should see why I am skeptical of Facebook’s new vision. We all have to take a side and so does Facebook. It just happens that taking advertisers side means Facebook is not on ours as users.

How a private sale promotion by a hotel chain works

I received positive feedback from a friend who found my post on revenue management in hospitality helpful with what he does. That means a lot to me since he is one of my best friends and sharing is one of the biggest reasons why I spend time and money on this endeavor. So I decided to write a bit more about hospitality, from my own experience. This time is about private sale in hotel chains.

Every hotel chain wants to keep guests in its loyalty program. Membership makes guests drawn more towards the brand when booking decisions loom. If you are in Marriott’s loyalty program, you are more interested in staying at Marriott properties to accumulate points and enjoy perks, if possible. To keep guests exclusive on its program and out of its competitors’, a chain needs to offer exclusive benefits. Private sale is one way to do so.

Before we go into the details of a private sale, it’s important to be aware of different rates a hotel can offer for a room on a certain date. Below is what I learned from working for Accor Hotels. I suspect that it will be the same for other chains, at least in principles.

Different rates for a room on Accorhotels.com

Following the screenshot above, it’s normal to see a few rates on a website when you book a room. The lowest one in Accor Hotels system is called R03 (Stay Longer and Save in the screenshot) while the Flexible Rate is called R01 (Flexible Rate). R03 rates are about 15% cheaper than R01 rates, but come with more restrictions such as no cancellation or no refund. B&B rates such as the last one in the screenshot are usually R01 rates plus breakfast.

A sale promotion from Accor Hotels is usually 2 weeks and can go up to 50% discount on normal rates. On the first day of the promotion, information on the sale is sent out to strictly Accor Members only. In the following 7-8 days, information will be shared with both Accor Members and Subscribers. Bookings can only take place on Accorhotels.com. After that, information will become public on online travel agents such as Booking.com or Expedia. If you are an Accor member, discount can go up to 50%. An Accor subscriber or non-member and indirect channel guests such as those on OTAs can enjoy 40% discount. That way, guests are more motivated to become members or subscribers of Accor Hotels in order to receive exclusive benefits.

Discount is applied to R01 rates, the higher tier as mentioned above, with the restrictions of R03 rates. That way, participating hotels in the program don’t ruin their Average Daily Rates or RevPar too much. On that point, if your property is in a hotel chain, you can opt in or out of a sale, depending on the state of your property. For instance, it makes no sense to participate in a sale if your hotel has high occupancy already and is expected to pick up more. Otherwise, a sale can be a good tool to fill up the rooms.

A look at Amazon financials (2013 – 2018)

My understanding of Amazon’s business model is as follows:

  • Successfully become a household online store for shoppers and build a loyal user base (Prime members in particular)
  • Leverage the infrastructure (supply chain) for the online store to allow sellers to fulfill orders and sell products through their stores (3rd parties)
  • Leverage the IT infrastructure built to maintain online stores to offer Enterprise IT services (AWS)
  • Leverage the immense traffic to its online sites and ability to turn traffic into orders to sell advertising services to brands

In my free time, I like to go through annual reports of companies to understand their businesses and performance, in addition to reading the news from sources such as WSJ, Techcrunch, CNBC, to name a few. I did it before for Adobe, Spotify and Apple. Below are my findings from digging through Amazon’s financials from 2013 to 2018. Unavailable figures are due to the lack of reporting from Amazon.

Amazon’s total revenue has been growing increasingly fast in the past 5 years

In terms of net income, except for 2014, it has been growing as well, with 2018 as the standout year

With regard to revenue breakdown, every segment, except online stores, has seen its influence on the total revenue grow for the past 3 years (two for physical stores). AWS, in particular, is making up around 11% of Amazon’s total revenue. Amazon started to report on physical stores’ revenue in 2017. As of 2018, it made up around 7% of the company’s revenue.

Despite making up only 11% of Amazon’s total revenue, AWS is responsible for the majority of Amazon’s operating income. The reason seems to be that the company lost money from its International segment

Much has been discussed about the growth of advertising and AWS. The two segments have indeed been impressive. Advertising has gone nuts for the past three years while AWS’ growth has never been lower than 42% since 2013

Shipping costs have been growing at a 2-digit clip since 2013, a concern that many analysts and investors expressed. However, the growth rate has slowed down since 2016

Expenses have been growing at a two-digit clip in the past 5 years

In terms of expense breakdown, Cost Of Sale is still the dominant item, though its contribution to the total expense has been declining steadily. There is one item called Other Expenses in the reports, but I decided to ignore it since it wasn’t significant compared to other items.

Amazon looks to have been successful in diversifying its business, transitioning to more profitable segments from merely relying on the low-margin online stores. With its dominant market share in the cloud and companies moving to the cloud, I believe AWS will continue to grow its importance to Amazon’s first and bottom lines. It also won’t be a surprise to see a middle two-digit growth this year for advertising.

Thoughts on Spotify

Spotify’s business model has been straightforward. Take music from the creators, let users have frictionless access to the content and generate revenue by either ads or premium subscriptions. The company delivers music in an appealing and user-friendly manner to the point that listeners agree to pay a premium for access every month. On the other side, Spotify pays royalties back to artists or labels every time a song is consumed. As the user base grows, Spotify generates revenue from advertisers which want to convey their marketing messages to an engaged audience.

Yesterday, the company announced their latest quarterly earnings and I found the report interesting. First, the number of subscribers. Both Premium Subscribers and Ad-supported MAUs increased.

Source: Spotify Data

There seems to be a seasonality in the subscriber acquisition. Subscriber acquisition seems to pick up more in Q2 and Q4 than in Q1 and Q3. The increase in premium subscribers in 2018 slows down, compared to the pace in 2017

Meanwhile, the Average Revenue Per User (ARPU) has been on decline.

Source: Spotify Data

With regard to revenue, it seems that the increase in subscriber count outweighs the decline in ARPU as revenue is on the rise

Source: Spotify Data

Both Premium and Ad-Supported revenues seem to be affected by seasonality. Ad-Supported revenue growth fluctuates more than Premium revenue growth. In 2018, revenue from ads grew faster than subscription-based revenue.

Source: Spotify Data

Gross Margin for both revenue streams went up with Ad-Supported gross margin growing at a faster clip in the last four quarters

Source: Spotify Data

In Q4 2018, Spotify became profitable for the first time. Free cash flow also reached the all-time high

Source: Spotify Data

Based on the numbers, it seems that everything is going in the right direction for Spotify. User base is expanding, revenue is going up, free cash flow is growing and the company becomes profitable for the first time. Even though ARPU has been declining, it’s understandable as many users were acquired on a discount. However, it’s necessary to maintain the network effect and grow the user base to attract advertisers.

As Spotify doesn’t own the majority of their content and it still has to pay a small royalty for content enjoyed by free users, Spotify faces two significant risks. First, it relies too much on the labels that can take their content elsewhere. Second, paying for content while generating zero revenue from free users might hurt the company’s margin. Hence, it needs original content. Already featuring original series with Amy Schumer and Guy Raz, the company now seems to switch its focus on another source of originals: podcasts.

During the earning call, Spotify announced the acquisitions of Gimlet Media and Anchor. The former is a podcast production company and the latter is a DIY tool that allows publishers to produce and broadcast original podcasts. In the call, CEO of Spotify mentioned that over time 20% of content on Spotify will be non-music and that several potential acquisitions which the company is considering in 2019 will all be related to podcasts.

The acquisitions and focus on podcasts make sense in terms of original content and monetization. Podcasts are gaining in popularity as a form of engaging content. Media outlets have podcasts. Companies have podcasts. Celebrities have podcasts. As an audio platform, Spotify certainly cannot afford to sit this one out. Having podcasts, in addition to music, makes Spotify more appealing. During the earning call, Daniel Elk, CEO of Spotify, hailed podcasts’ positive impact on the engagement of users on the platform. He indicated that podcasts could lure users who wouldn’t have signed up for Spotify. Plus, it’s definitely easier to have access to different content forms on one app than multiple apps. And what’s the better and faster way to be able to produce content than to acquire a proven production firm?

There is also the monetization piece. One revolutionary aspect of Spotify is to help obscure and less-known artists to get their creativity out to the world and get paid. The more their songs are listened through Spotify, especially the Discovery, the more dollars the artists receive. Spotify is in a position to do the same for podcast creators. According to a blog post by Anchor, nearly all podcast advertising concentrates in the top 1% of podcasts. The other 99% have to hope that their episodes are downloaded to the tunes of thousands to be able to attract advertisers. If Spotify can help podcasts generate revenue for their work in the same way as it has done for artists, Spotify can become the Spotify for podcasts and stand a higher chance of securing exclusives and originals in the future.

All in all, I think Spotify is going in the right direction. Securing key capabilities through acquisitions in a key area such as podcasts is crucial to future growth.

New Netflix price surge. Should Netflix livestream sports?

Yesterday, Netflix announced their new price structure. Per WSJ:

Netflix will increase the price of its most popular plan 18% to $13 a month from $11. That plan allows users to stream from two screens at the same time. The most basic plan, which allows a single stream in standard definition, will go up one dollar, or 13%, to $9 a month. The new rates will go into effect immediately for new customers and be applied to the accounts of existing customers in the next few months, according to a person familiar with the plans.

The increase in price is not really surprising in my opinion. Netflix has been investing heavily in original content. WSJ reported that the investment would amount up to $12 billion this year. Netflix needs to enlarge its war chest and the additional revenue from the new prices will help with that. It doesn’t hurt that Netflix has some wriggle room to up its prices, according to Priceintelligently. Additionally, as some content owners such as Disney or Warner Media plan to launch their own streaming services, Netflix will likely have to pay more to retain popular shows or movies.

But there is only so much room for increase in subscription prices. If Netflix pushes too hard, they may lose viewers. Consumers will have more options with the arrival of Disney, Warner Media and NBC, in addition to major current players such as HBO, Amazon, Hulu and Showtime. A normal user should not be expected to pay so much for subscriptions every month. Netflix may need to find another area to grow its user base and revenue.

Should Netflix go for sports?

Sports is a hugely important part of our life and hence it is important to businesses that want our money and attention. To see how important sports become to social media and streaming services, here are a few headlines:

The last headline is very interesting. Coming from Vietnam, I can tell you that football (as millions of people in the world outside the US call it) is a religion in my country and hugely popular in that region. Premier League, in particular, attracts football fans in Vietnam in a way that few leagues do. We have to or at least, used to pay for cable TVs to be able to see the games. The service is subpar, and the fees are slightly cheaper than a Netflix subscription. Vietnamese users pay around $8-9 a month for a Netflix subscription while a cable subscription costs around $5-7. If the fans can stream games from their laptops/computers or project games onto TV through Netflix, it will be a game changer. Fans will strongly consider the service, especially with hours of shows and movies as well.  

But does it make sense for Netflix to do so from a business and financial standpoint? Let’s run a scenario.

Together, Vietnam and Thailand have 165 million people in population. The total number of Netflix subscribers in the two countries are just 500,000 (300,000 for Vietnam and 200,000 for Thailand). If we just assume that 40% of the two countries’ population are young from 15 to 40 years of age, fitting the target demographic, I presume, for Netflix, the Total Addressable Market (TAM) is around 66 million for Vietnam and Thailand. I don’t have the number of subscribers in Laos and Cambodia, but if we apply the same assumption to those countries, the TAM is 9.2 million potential subscribers. For the four countries, the TAM is around 75 million.

If a subscriber is worth $8/month and Netflix gains around 100,000 subscribers a year each in Vietnam and Thailand, as well as 50,000 each in Laos and Cambodia, the total revenue can be around $230 million in 3 years, $30 million less than what Facebook pays for its exclusive rights. Also, the total number of subscribers should be at least 1.7 million, barely a fraction of the TAM mentioned above (75 million).

If we increase the subscription price by $1 in the original scenario, the revenue will be around $259 million, almost as much as what Facebook paid.

If the number of subscribers in that scenario goes up by 30%, the revenue in 3 years will be around $300 million and the subscriber count in 4 countries for Netflix will be around 2.06 million, still a small fraction of the TAM.

Of course, all of the above are assumptions which can be way off the mark, but to me, it seems that it is an opportunity there for Netflix. Besides the financials, gaining more subscribers can make Netflix more valuable due to network effect and give them more data about the users. Netflix paid $100 million to keep Friends on its network for a year. Given that amount and the potential upside of providing sports to international markets, I believe Netflix should give it a try. Plus, it can’t afford to see competitors add sports to their selection without doing anything.

I admire the consistency and focus of Netflix. They have been very consistent on their long-term view as a video streaming service. Nonetheless, the situation may necessitate some changes in the future.

Book: Black Swan

I’d give this book two stars. The book has some interesting insights, but it is unnecessarily long with a lot of anecdotes, name-dropping and less-known examples. Basically, the idea could have been wrapped up in 20-50 pages. Plus, the flow could have been much easier to follow.

In short, Black Swan talks about the great impact of the outliers, unpredictable events that happen in our life. For instance, if a person somehow were involved in a car accident through no fault of his or her own, the person’s life would be turned upside down. As Black Swans are not predictable, the author urged us not to use the past to predict the future. Yet, it seems that we are prone to doing exactly that, using data from the past to predict the future. I believed he claimed that we humans were victims of asymmetry in understanding random events. He also claimed that there were no experts in a lot of fields.

The thesis of the book seems obvious, but we don’t always have it in mind. As human beings, we love to predict the future and know what is going to happen years from now. I am always astonished by the popularity of fortune-telling. It amazes me how those fortune tellers could see the future. It simply seems impossible to me. Even if they could, why would they agree to earn modest income from that profession? Wouldn’t it be much more lucrative to gamble or pick stocks?

Regarding business, who could have predicted in 2000 that Yahoo would be what it is today? Or Nokia, one of the biggest brands in the world in 2005, would be a shell of its former self today? Or Kodak and more recently Facebook? I agree with him that life is too uncertain to predict. We are terrible at it, yet that’s what we keep doing.

Also, I agree with him that being alive is already extraordinary. I always feel lucky enough to be born without any disabilities or sickness. There is no telling what could happen to a child in a mother’s womb. One DNA misplaced could mean a lot of consequences for the child. In an infinite universe, we are living on a speck of dust millions of years old that has gone through a lot of revolutions and unpredictable events. If we are alive, we are already Black Swans.