Target’s growth, Salesforce reportedly about to acquire Slack and Uber vs Lyft

Target’s growth during the pandemic

Writing that 2020 is good for somebody or a company is weird as this year has been nothing, but a disaster. However, from a business perspective, Target has had a pretty good 2020 so far.

Before 2020, its comparable sales growth was often a low or middle single digit. In Q4 2019, its physical store comparable sale growth was even in the negative territory. 2020 flipped the switch. The company’s total comparable sale growth has been in the double digits with Q2 2020 recording the highest at 24%. Digital comparable sales growth is at least 9% or higher. Q3 saw a bit of a decline compared to Q2, but the overall growth was still higher than 20%. I find it interesting that the revenue YoY growth and the store comparable growth seem pretty in sync with each other, but that’s because physical stores make up at least 84% of Target’s revenue. Digital sales was responsible for almost 16% of the overall revenue in Q3 2020, an equivalent of $3.6+ billion in revenue for a quarter and up from 7.5% in the same quarter last year.

In terms of profitability, Q2 and Q3 of 2020 saw the highest gross margin and operating margin in the last 5 years. Operating margin reached 10% and 8.5% in Q2 and Q3 respectively while gross margin was 30.9% and 30.6% in Q2 and Q3. During a year dominated by a once-in-a-lifetime pandemic, Target managed to pivot its business to adapt to the dire situation and improved not only its top line, but also its profitability. That’s proof of resilience and managerial competence.

Source: Target

Another aspect of their business that I find interesting is their branded cards’ penetration. Target measured its credit and debit card’s penetration as percentage of sales that took place on their cards. In other words, if there is about $200 million in sales in a week and $50 million of which is paid through Target’s credit and debit cards, the penetration rate is 25%. And shoppers have a reason to use those cards. Owners of these cards have exclusive benefits that other issuers can hardly match, such as: no annual fee, 5% off on purchases at Target stores and on its website, free 2-day shipping on select items and longer return period. Yet, there has been a slowly steady decline in terms of the RedCard penetration. The penetration rate in Q3 2020 was 21%, down from 23% from the year before. Given the increase in sales and the unique offerings of the RedCards, it’s surprising that the figure not only didn’t grow, but it also contracted. This indicates to me that Target can do much better in getting customers to apply for a RedCard. It is a good retention tool and it brings extra revenue to the company. In Q3 2020, credit card profit sharing was $166 million, but down from $177 in the same period last year.

In short, Target has been doing quite well. They succeeded in growing their online business which has been turbocharged by the pandemic, but that, in no way, means that the company didn’t put in the effort. Think about it this way, every retailer tried to grow its online business, but Target managed to do in a cut-throat industry and at their scale. So credit to them. Plus, they made appropriate and necessary investments in same-day services and deliver. In the last two earning calls, the management reported ridiculous numbers of same-day services’ growth, to the tune of several hundred percentages. Shoppers like options. With Target, they can now order online and have it delivered to their door, or drive up to the parking lot to pick the order up or fetch it in stores. The flexibility is there and it will bode well for Target in the upcoming holiday season that is unfortunately engulfed, still, by the pandemic.

Regarding the possibility of Target having a similar subscription to Walmart+ or Amazon Prime, I think Target is still missing the main hook, the main attraction. Amazon Prime has been around for more than 10 years. Over the years, Amazon kept adding more and more benefits for shoppers so that the subscription now offers a plethora of benefits ranging from unlimited 2-day shipping regardless of order size, movies, music, books, exclusive deals and so on. On Walmart Plus side, Walmart can offer affordable groceries and discount on fuel. Target doesn’t seem to me that it can match any of those benefits. Even though some pieces are there such as Target’s popularity, its network of stores across the country and its delivery flexibility, I don’t see a main selling point for a Target’s own subscription yet. We’ll see.

Salesforce reportedly in talks to buy Slack

Yesterday, after the news broke that Salesforce has been in talks to acquire Slack and a deal can happen next week, Slack’s stock price popped by more than 30% within a day. The reaction that I saw on Twitter was mostly positive for both parties. I can see why. But the fact that investors are happy about this prospect of an acquisition says something about Slack as a standalone business. Slack last reported its active daily user at 12 million back in October 2019. Within the past 12 months, Microsoft revealed the metric at least 3 times: 20 million in Q2 FY 2020, 75 million in Q3 FY 2020 and 115 million last month for Q1 FY 2021. There are two reasons why companies don’t make disclosures: 1/ they are legally obligated not to and 2/ there is nothing rosy to disclose. In this case, it’s squarely the latter case. My guess is that Slack hasn’t seen a meaningful increase in its Daily Active Users (DAU) numbers DESPITE a pandemic that turbocharged working from home, the same way that Microsoft Teams has achieved. In the face of a formidable challenge from Microsoft, Slack initially played it cool. Below was their reaction 6 months ago

“What we’ve seen over the past couple of months is that Teams is not a competitor to Slack,” Butterfield told CNBC in an interview after Microsoft’s Q3 earnings update. Butterfield also downplayed the impact on Slack’s growth caused by Microsoft “bundling [Teams] and giving it away for free” with Office 365 over the past three years. 

Source: ZDNET

Yet, Slack filed a formal complaint to the EU about Microsoft’s alleged anti-competition practice, the same practice that Butterfield downplayed. I wrote here about why that formal complaint is unlikely to succeed. But it shows Slack’s desperation. If Microsoft weren’t a competitor and its bundling practice was nothing, why would Slack sue to stop it? All of these factors and the fact that investors were happy about the prospect of being acquired by Salesforce paint a solemn picture of Slack as a standalone company. If it joins Salesforce, there will likely be a Salesforce bundle that includes Slack, the same way that Microsoft bundles Teams into Office 365. Slack would get more assistance in selling to corporate clients while Salesforce would get extra capabilities quickly without having to build them from scratch.

Uber vs Lyft

The pandemic has been a catastrophe for ride-hailing companies such as Lyft and Uber. According to Second Measure, the market in the US dropped to only half of the 2016 level and only recovered to the 2016 level in October 2020. That’s how big the impact of the pandemic has been on this business. Since Uber and Lyft are always compared to each other, you’d think that their business is faring similarly. Not really.

While Lyft essentially has only one business in ride-sharing, Uber successfully grew its food delivery service UberEats to be a $4.5 run rate business, making up 40% of Uber’s revenue in Q3 2020. Uber Eats’ $1.1 billion in revenue in Q3 2020 was more than double Lyft’s entire revenue in the same period. Additionally, the pandemic affects each other differently. Lyft’s main market is the US, which is, unfortunately, going deeper and deeper into the pandemic. There is no sign of things turned around here in the US, unless there is a vaccine. It severely handicaps Lyft’s business and Uber’s ride-sharing segment. Nonetheless, Covid-19 has been a boon to Uber Eats. It has grown substantially in the past few months and become a silver lining for Uber. Plus, Uber announced its effort to deliver groceries and its acquisition of Postmates indicates that it is serious about becoming a delivery-as-a-service business. In other words, while the two companies are often mentioned in comparison, they are vastly different now, with Uber becoming more of a diversified company. It is more diversified horizontally (more services) and vertically (if you consider being present in more countries). In this environment, I think that the Uber model is a much better one. Don’t take my word for it. Look at the stock prices. The two companies made debut on the stock market almost at the same time. While Uber soared past its IPO price, Lyft is trading nowhere close to its own IPO price.

It’ll be interesting to see how the next couple of years will be for these two companies. Would Lyft venture into another business like Uber did? What would a vaccine bringing back our previous life mean for Uber? Knowing that it would power up the ride-sharing business, but adversely affect the growth of Uber Eats?

Likely competition for Uber/Lyft in California. Grocery delivery is growing. Apple’s response to Epic’s lawsuit

Potential competition for Uber/Lyft in California

The two poster children of ride hailing companies in the US, Uber and Lyft, are having a legal fight with the state of California. The outcome of that battle remains to be seen, but if they lose, the companies already threatened to leave the state. Meanwhile, CNBC reported that at least 2-3 ride hailing startups talked about potentially swooping in to replace Uber and Lyft if they depart. One of those startups that I found interesting is Alto. Alto is a ride hailing startup that mainly operates in Dallas and Fort Worth. What differentiates Alto from their two bigger peers is that Alto’s drivers are salaried employees with benefits. Also, drivers don’t have to worry about gas or maintenance costs. Here is what their recruitment page says

Source: Alto

Some critics of AB5, the law that can potentially cause Uber/Lyft to leave California, say that the law is flawed in that it kills the flexible schedule that drivers, classified as contractors, enjoy. That is a valid point. Some do prioritize a flexible schedule over everything else. I have seen myself several drivers who just drive on the weekends to get some more money on this side gig. These drivers likely wouldn’t appreciate entering an employment contract that would likely require them to work more than they want. Clearly, in this case, AB5 likely won’t work.

That; however, doesn’t change the fact that Uber and Lyft’s refusal to classify drivers as employees can put drivers as disadvantage. Some drivers put in a lot of working hours, but do not earn enough after they take into account gas, car maintenance expenses and dead miles (hours when they drive around without any rides). Because they are not employees, they don’t have benefits like paid time off or insurance either.

There are two separate camps in this argument with virtually conflicting interests. Whether AB5 alone is a sufficient fix remains to be seen, but the existence of companies like Alto and its willingness to enter California’s market offer proof that there is an alternative model to what Uber and Lyft stand for.

Online grocery continues to grow amid the pandemic

Since March, Covid-19 has pushed online grocery to new heights that few could have predicted. According to Brickmeetsclick, even though growth has plateaued in June, online grocery sales reached $7.2 billion and an incredible 85 million orders.

Recent market developments suggest that the trend is likely to continue in the upcoming months. Shipt announced the drop of membership requirements and instead let customers pay $10 for a single order, $9 per delivery for 3 orders and $8 for 5 orders. Additionally, Walmart and Instacart recently partnered to provide same-day delivery in four markets across California and Oklahoma. Last Thursday, DoorDash entered the grocery delivery market with DashPass, a $10/month subscription which allows customers to order and receive groceries in about an hour. Last month, Uber joined the party with their own grocery delivery option through the main Uber and Uber Eats apps. Moreover, FreshDirect unveiled its expansion into New Jersey, New York and Connecticut.

Grocers and delivery services are working in tandem to facilitate more online grocery spend. Grocers let customers receive orders at their front door, pick up and drive up at stores. Delivery services lower barriers and compete with one another to acquire users. In the near future, this battle will be very fierce and the biggest beneficiary will be the end consumers.

Apple’s legal issues with Epic Games

Apple responded to Epic Games’ lawsuit over the App Store policies. In the response, Apple offered reasons why the court should let Apple continue to ban Epic Games’ apps while the legal battle rumbles on, including:

  • Epic’s alleged harm is not irreparable. Epic’s apps will be reinstated on the App Store if the game maker removes its own payment option, the cause of its violation of the terms of services, and adheres to the guidelines that Epic agreed to from day one.
  • Epic’s alleged harm is its own doing. The game maker first asked Apple for a special treatment by creating an Epic Store inside the App Store. Then, it asked Apple to open up the App Store by allowing more payment options. After the requests were declined, Epic Games decided to circumvent the App Store policies by offering its own payment scheme, suing Apple and launching a coordinated PR attack.
  • Apple does not engage in anti-competition practices and the App Store policies are to make sure that 1/ consumers’ privacy and safety are protected and 2/ Apple gets paid for its investments

The legal document is here and if you’re interested in this kind of stuff, you should have a read.

Personally, I don’t think Epic will win this legal battle. The App Store is Apple’s investment and intellectual property. Hence, Apple is entitled to enforcing the policies on the app marketplace, the same policies that Epic Games has agreed to when it launched its apps on the App Store. Whether Apple is wielding too much power is another matter for discussion, but if you created a marketplace and invests a lot of resources into it, it’s pretty difficult to understand the sentiment that you’re not allowed to benefit from your own investments or to enact and enforce policies that you see fit.

Plus, what happened, based on the emails exchanged between Apple and Epic, seems pretty distasteful and bully-like from the latter. On 6/30/2020, Tim Sweeney wrote to Apple the following, which is part of a longer email. His requests were rejected by Apple on 7/10/2020:

Source: Scribd

On 8/13/2020, Epic wrote to Apple, declaring its intention not to follow the App Store guidelines and to take legal actions if Apple retaliated. Apple subsequently wrote to Epic twice, informing the app maker of its violations and asking it to remedy the situation. Epic Games instead sued Apple for enforcing rules on…Apple’s own app marketplace.

Source: Scribd

Since I am not a lawyer, I’ll leave the argument on legal standings to the court and the lawyers from both sides, but from a common sense perspective, I don’t see a chance for Epic here. Hey app from Basecamp had trouble with Apple before. Instead of raising a legal fuzz, Basecamp raised the issue publicly on Twitter and engaged in discussions with Apple to resolve conflicts, which it did. And Hey didn’t even demand to have its way in the App Store like Epic Games did. That’s the way to do it, not the course of actions and manner that Epic Games pursued here.

This legal battle will leave Epic’s reputation tainted while also not doing Apple’s any favor.

Epic vs Apple, Goldman Sachs trying to get into consumer banking and Uber potentially leaving California

Goldman Sachs wants GM’s credit card business

WSJ reported on 12th August 2020 that Goldman Sachs was in the running for GM’s credit card business. Since it launched Apple Card with Apple last October, it is just a matter of time before Goldman Sachs tries to land another partner. No bank in the right mind would invest in consumer credit card infrastructure just to work with one partner.

A deal with GM would advance Goldman’s ambitions on Main Street. Since launching its consumer arm, Marcus, four years ago, the firm has amassed $7 billion in loans and is aiming for $20 billion by 2025. Holders of the Apple Card had $2.3 billion in outstanding balances as of June 30.

In deals like the one being discussed, a new bank typically agrees to pay a small premium to buy an existing card portfolio and hopes to make up the money by encouraging more spending, signing up more cardholders, and cross-selling them on other products. The deals typically involve sharing of card interchange fees and other revenue.

Source: WSJ

I am working at a bank which has a partnership with a different car brand than GM. One of the issues that we have to deal with is gamers who sign up for a credit card and spend on their first purchase at a dealership to take advantage of big signing bonuses and low interest rate. These gamers, after the first month on book, will subsequently use the card much less. As a result, gamers become less profitable than other cardholders who use their cards more regularly. If they manage to land GM, Goldman Sachs may likely find out that issue which I suspect is NOT among their learnings from Apple Card. Another point worth calling out is that Goldman Sachs relies on Apple’s marketing expertise to acquire Apple Card’s users. With other brands, they may have to develop that skillset and invest; something that they may not find easy or cheap.

The article provided an interesting reference point for Apple Card. It had $2.3 billion in balance as of the end of June 2020. The GM’s portfolio has around $3 billion in balance. As mentioned above, the purchasing behavior of Apple Card holders may differ from that of GM credit card users, but it’s worth pointing out that Apple Card was launched only last October and GM credit cards have been available for much longer. It indicates that Apple Card is likely regularly used and has a decent growth.

Epic Games picked an ‘epic’ fight with Apple and Google

In its latest update of Fortnite, Epic Games offered users a payment option designed to circumvent the App Store and Google Play Store’s rules on commission fees. Using Epic Games’ new payment scheme, users would save around 20% compared to using the in-app payment on the App Store and the Google Play Store while the game maker avoids paying Apple and Google 30% commission. The two giants promptly removed the game from their stores. Epic Games went on to sue both companies for anti-competition practices and abuse of power. In a move conspicuously aimed at provoking Apple, Epic Games released an ads mocking the company’s legendary 1984 campaign.

Source: The Verge

The quick releases of the ads and lawsuits showed that Epic Games WANTED this fight and expected retaliation from Apple and Google. The game maker has enough money and popularity to think that they have leverage. Plus, it’s likely banking on public pressure and the recent scrutiny into big tech companies from lawmakers. Given the level of planning and what is at stake here, Epic Games clearly thinks they have enough to win, but Apple doesn’t back down. If Apple caves into Epic Games’ demands, it will set a dangerous precedent that any developers that want to get more margin can corner the company. While I do not think Epic Games will win their lawsuits, Apple and Google will ultimately be hurt in terms of brand equity and reputation. Plus, it will give lawmakers more ammunition in their investigation into the Cupertino-based company’s alleged anti-competition practices.

Even though I think Apple has contributed immensely to the distribution of software around the world and the app economies, and in some cases, they didn’t do anything outrageous or wrong, it’s time for them to sit down and rethink the App Store. Recent clashes with developers and increasing pressure from lawmakers, if dragged out too long, will harm the company in the long run. It’s fair to say that despite getting close to the unprecedented valuation of $2 trillion, Apple still enjoys quite some goodwill from many consumers and developers. While the goodwill is still in the bank, it should start rethinking its position on the App Store and avoid future trouble.

California vs Gig Economy

California’s law that requires gig economy companies such as Uber and Lyft to classify workers as employees is going to be in effect on 20th August 2020. The two companies went to the California Supreme Court to seek for an injunction that would table the law temporarily. Today, the Court rejected the motion from Uber and Lyft. Earlier on this week, Uber CEO threatened to suspect operations in California and potentially leave the state for good if their legal fight failed.

This is a far more complicated issue than it may appear. On one hand, I am in favor of the authority looking out for workers by forcing companies such as Uber to acknowledge them as employees and give them benefits accordingly. That is exactly what an authority should be doing. Without legal mandates, how would the likes of Uber cave and treat workers as they should? The fact that these companies have fought ferociously to defeat the new law says all about their intention. Both Uber and Lyft are unprofitable. Their survival may be in jeopardy if they have to endure more expenses as a consequence of AB5, the shortened name of the new law.

On the other hand, if Uber and Lyft actually leave, their departure may hurt some drivers whose livelihood depends on business with the gig economy companies and negatively impact consumers. Imagine what would be like when you could no longer order an Uber in San Francisco or California. Critics of AB5 lament that the law isn’t thought out well and the unintended consequences will outweigh possible benefits. They do have a point.

That’s why I think AB5 alone isn’t enough. It needs complementary initiatives. With regard to protecting the end users’ benefits once gig economy companies leave, I think there will be space for other startups with new ideas and implementation to come in and serve the available demand. AB5, to some extent, will foster competition and innovation. Plus, it does help to have a lot of venture capital fund available in California, that is waiting to be deployed. Another potential opportunity is to build out public transportation infrastructure so that the reliance on ride hailing companies will be alleviated.

Furthermore, the state of California needs to make sure that workers who are affected by the departure of the likes of Uber will be taken care of. Skill training, job opportunities and social safety nets will need to be extended. Of course, there are workers who prefer a flexible schedule that a full-time job doesn’t usually offer, but if the money and benefits are sufficient, given the uncertain time that we are in, I do think many people will change their position.

Disclaimer: I own Apple stocks in my personal portfolio

Revenue and margin makers

What I noticed in many businesses is that there are revenue makers and margin generators. Revenue makers refer to activities that draw in the top line numbers in the income statement, but small margin. In other words, these activities can bring in $10 of revenue, but about $1 or less of gross profit (revenue minus cost of revenue). On the other hand, margin generators refer to activities that don’t bring in as much revenue as revenue makers, but act as the source of most margin. Usually. these two complement each other. Let’s take a look at a few examples.

Apple sells their products and services that can only be enjoyed on Apple devices. Products bring in multiple times as much revenue as services, but products’ margin is much smaller than that of services. Take a look at their latest earnings as an example. Products’ margin is about 32% while services’ margin stands at 65%. Folks buy Apple devices mainly to use the services and apps that are on those devices. Apple continues to sell devices to maintain their own monopoly over their unique operating systems and ecosystem.

Source: Apple

Amazon’s eCommerce segment is a revenue maker. They warehouse the goods and ship them to customers. It generates a lot of revenue, but the cost is high as well. Built upon the infrastructure Amazon created for eCommerce, 3rd party fulfillment is a margin generator. In this segment, Amazon acts as a link between buyers and sellers to ensure transactions go smoothly without having to store and ship the goods itself. Margin is significantly higher than that of eCommerce. Amazon takes it to another level with Prime subscriptions and AWS. While trying to figure out how to keep their sites up and running 24/7 smoothly, Amazon came up with the idea of selling unused IT resources. Long behold, AWS is now a $40 billion runrate business and Amazon’s arguably biggest margin generator.

Costco is a household name in the US. Families go to their warehouse-styled stores to stock up essentials and groceries. Due to the volume they sell every year, Costco manages to keep the prices low, but thanks to the cut-throat nature of the industry they are in, the margin is low, about 2-3%. That’s their revenue maker. To compensate for the low margin, Costco relies on their membership fees. Whatever customers pay to be able to shop at Costco is almost pure profit to Costco. There is virtually no cost to process an application and issue a card.

McDonald’s essentially has two business segments: their own McDonald’s operated restaurants and franchising. The brand’s own operated restaurants serve as references to franchise owners for how good McDonald’s brand is as an investment. However, it offers the brand way lower margin than their franchised restaurants.

Airlines make money by flying customers, but there are a lot of costs involved such as planes, airport services, food and beverage, fuel, etc…Airlines can generate more margin with their branded credit cards. Many airline-branded credit cards come with an annual fee. Plus, card issuers may pay airlines a fixed fee for new issued cards and a smaller fee for renewals. Plus, there may be a small percentage for first non-airline purchases. Agreements vary between airlines and card issuers, but it brings a lot of margin to airlines.

Ride sharing apps are notoriously unprofitable. Uber and Lyft lost billions of dollars in their main operations. Recently, they tried to launch a subscription service and in Uber case, a credit card, hoping that these services could help generate the margin they need.

We all know the saying in business: cash is king. Cash can only increase, from an operating perspective, when margin increases. Revenue is crucial because, well, a business needs to convince folks to pay for products or services first. Nonetheless, a business is more robust and valued when margin increases.

Weekly readings – 15th February 2020

An interesting piece on Lyft vs Uber

An argument for the challenges that Google is facing

This is what a hearing should be. Not the kind that has taken place lately

Spotify is evolving

Oklahoma State’s new identity. In my opinion, the new logo doesn’t look bad at all

This article sheds some light on the secretive S team at Amazon

The government’s revenue depends significantly on the tax receipts from citizens and corporations. So the revenue projection depends much on the assumptions of economic growth which seem too optimistic. It’s important to take into account the feasibility of these assumptions; which the media may not capture fully or an average citizen cares enough about

Weekly readings – 12th October 2019

Through Vietnam’s Stories of Coffee and Rice, a Trio Finds Where Art and History Meet

To grow tech startups’ success, Malaysian government becomes a venture capitalist

Over 25% of your cable bills may well be bogus fees, says Consumer Reports

Drivers Say Reporting Assault to Lyft is ‘Extremely Traumatic’

How I failed

Writing is Thinking: Learning to Write with Confidence

The Google SEO Bible: Everything a Startup Needs to Know. I have to say that even if you follow all

The Untold Story About the Founding of Google Maps

iphone 11 pro camera review: china

Update on China’s bike-sharing

AB5 threatens the existence of gig companies like Uber & Lyft

Yesterday, Gizmodo reported that AB5, a bill that is aimed to force gig companies to treat their workers as employees instead of independent contractors as they are now, passed California’s Senate Appropriations Committee and will go to a full vote in the Senate next month. If passed, it is expected to be signed into law by the Governor.

AB5 stems from a decision by a California Supreme Court decision in 2018, which essentially decrees that “Workers must be treated as employees, not independent contractors, if their jobs are central to a company’s core business or if the bosses direct the way the work is done.”, according to LA Times. According to the ruling, ride-hailing businesses cannot exist without drivers and drivers have to follow certain standards to be able to operate on their platforms. Hence, they should be treated as employees.

Ride-sharing companies exist as middlemen between riders and drivers, managing the supply of drivers and demand for rides. Drivers no longer have to drive around to pick up riders. Surge pricing gives drivers incentives to go out at unpopular hours like early in the morning. The argument that these companies make against AB5 is that drivers have flexibility to choose when and where to work, and as a result, shouldn’t be classified as employees. Well, even as employees, drivers can surely negotiate with Uber or Lyft that right. One of my colleagues moved from Omaha to Austin to work remotely so that she can be with her husband. What is at stake here is the bottom lines.

Gig companies like Uber or Lyft haven’t made any money despite treating their workers as independent contractors. If the proposal is signed into law, it will mean higher operational costs as these companies will need to pay minimum wages and be responsible for other benefits to their employees. Any chance of profitability will become even slimmer.

To be fair to Uber and Lyft, what they have done so far is perfectly legal as up to now there is no law that regulates the industry. They just take advantage of the situation and the bargaining power that they have over drivers. On the driver side, each cannot fight with these companies. They need lawmakers.

Regarding lawmakers, they have reasons to help both drivers and ride-sharing companies, especially in the US. Regulators that are more concerned about the well-being of drivers, their constituents as well, will support proposals such as AB5. Those who are more concerned about the power of lobbyists and about staying in power will fight against AB5. Since California is a progressive state, there seems to be more proponents than opponents of AB5. I am not sure the same can be said in other less progressive states or the federal administration.

Neither am I sure that collectively laws such as AB5 will benefit our society, but personally I am for it. Drivers should be protected against the abuse of these gig companies. Eventually, it has been proven that there is demand for services such as Uber or Lyft. I am confident there will be startups wanting to tap into the demand. As for Uber or Lyft, they will either adapt and innovate to survive and thrive or fall into the category of “thanks for being the trailblazers, but perhaps your time is up” companies.

Weekly readings – 31st August 2019

Free Podcasts Are Good for Me But Bad for Business

Cities Are Saying ‘No’ to 5G, Citing Health, Aesthetics—and FCC Bullying

How Uber Got Lost

Seattle’s ‘microtransit’ experiment drives people to light rail. Is it working?

“He’s full of shit”: How Elon Musk fooled investors, bilked taxpayers, and gambled Tesla to save SolarCity. This article sheds more light on the relationship between SolarCity and Tesla.

Waymo’s Backseat Drivers: Confidential Data Reveals Self-Driving Taxi Hurdles

Costco shuts early on first day in China due to overcrowding

Uber And Lyft Take A Lot More From Drivers Than They Say. The investigation reported cases of take-rate up to 50%.

What Happens When You Don’t Pay a Hospital Bill

How Amazon’s Shipping Empire Is Challenging UPS and FedEx. A super interesting article on Amazon’s capability in logistics and shipping.

Are autonomous vehicles the answer to many businesses’ problems?

It’s not uncommon nowadays that businesses mention autonomous vehicles as an opportunity for growth and profitability. Unless their vehicles are self-driven, ride-sharing services such as Lyft or Uber don’t particularly promise a sure path to profitability at the moment. In an article published last week, the CEO of AT&T mentioned self-driving cars as a reason for his optimism

Even Warren Buffett quails at the prospect of competing in such a powerful field of rivals. “Everybody has just got two eyeballs, and they’ve got x hours of discretionary time … maybe four or five hours a day,” he said recently at a charity event, speaking generally about the entertainment industry. “You’ve got some very, very, very big players that are going to fight over those eyeballs. The eyeballs aren’t going to double. You have very smart people with lots of resources trying to figure out how to grab another half-hour of your time.” His assessment: “I would not want to play in that game myself. That’s too tough for me.”

Any business that Buffett wants to avoid sounds unpromising, but Stephenson rejects the legendary investor’s premise. Acknowledging that “there are only 16 waking hours in the day,” he says, “Well, we haven’t filled up the 16 hours yet.” He nods toward his office window over Commerce Street with its busy traffic, which he says will ease when 5G networks enable autonomous cars. “When you have the lion’s share of those cars autonomous, for the average person that’s another two hours of availability of screen time, consuming video.”

AT&T Has Become a New Kind of Media Giant

Are autonomous cars the answer though?

Let’s say, generously speaking, 10 years from now all the cars would be self-driving. What would it look like? If the cars don’t carry passengers, without drivers, where would the cars go? Would all the cars keep driving endlessly till they are called to pick up passengers? Would the cars park on the street and if so, would there be enough space to accommodate all the cars? If the cars park in a garage somewhere, how would the garages be planned and constructed so that the garages are all well spread throughout a decently big area?

There can be many more questions that would result from having mainly autonomous vehicles on the streets. I can’t think of them all, but you get the idea. Right now, we don’t even have many on the streets yet, let alone answering questions and tackling problems that ensue the arrival of self-driving cars. Additionally, I personally don’t believe that we can have all cars or the majority of the cars self-driven on the streets in the next 10 years. I wrote something about it here.

If it takes a long time for self-driving cars to be realized and populated, can the likes of AT&T, Uber or Lyft wait till that time? AT&T’s debt is almost $200 billion and as Warren Buffett said above, and I agreed with his view, that the competition for eyeballs wasn’t going to get any easier. Uber or Lyft keeps losing money operationally and will be expected to continue that path, unless self-driving cars come along. 10-15 years of losing millions, if not billions, of dollars every year doesn’t seem a sort of business that investors like. And before any comparison between Uber and Amazon is raised, the two are far from being similar to each other. Look at their respective operating income.

Source: Wall Street Journal

Obviously, some years from now, it is possible that I may be embarrassed for saying all this and the fine folks in Silicon Valley or that somewhere in the US can deliver the miracle. Until then, I prefer being pragmatic to venturing out too far into fiction and imagination.

Weekly readings 25th May 2019

Inside Google’s Civil War. An interesting story on the internal rift between employees and management over controversial projects.

What makes ramen noodles so special? As a fanatical fan of Japanese food, it’s a very interesting read on one of the more known Japanese dishes

Lower pay and higher costs: The downside of Lyft’s car rental program. The ugly truth about ride-sharing business.

Skift Analysis: Amazon’s Travel Strategy Comes Into Focus

Shark Tank deep dive: A data analysis of all 10 seasons. I am not a huge fan of the show, but it’s cool to look at it from the data perspective

Carmageddon Sinks Tesla’s Bonds. I have been pretty bearish on Tesla and this article doesn’t do much to change my opinion.

An incredible story about a woman who was brave and incredible enough to go out on her own terms

How Data (and Some Breathtaking Soccer) Brought Liverpool to the Cusp of Glory. A fascinating read on how Liverpool used data to enable performance on the pitch.

The Legal Argument That Could Destroy Uber. A really interesting read on what can be a serious legal threat to Uber.