Weekly reading – 26th February 2022

What I wrote last week

Travel during Covid, from the US to Vietnam with a transit at Haneda Airport in Japan

Business

Some Companies Ditch Annual Raises and Review Worker Pay More Often. I support the review of pay and performance more often than just once a year. The practice will enable workers to make adjustments more timely and get rewarded for their hard work faster. What’s there not to like?

Craft Beer Snobs Suddenly Love the Humble Lager. “Lagers, which range from the bright yellow pilsner to the darker, full-bodied Märzen, are produced at low temperatures. The slow fermentation and refrigeration process reduces the speed of yeast activity during conditioning, creating a crisp flavor and brilliant color. But keeping the beer in tanks for the weeks it takes to make a lager costs more time and money. Lagers are the most popular style of beer on the U.S. market, according to an analysis by Allied Market Research.”

Inside Peloton’s epic run of bungled calls and bad luck. Epic indeed. It’s a major red flag that a Board of Directors had to tell its CEO to take his ambitious claims down a notch.

Netflix struggles with ambitions in India. I don’t know if Netflix’s alleged 5.5 million subscribers in India is correct, but its struggle to fight Amazon Prime and Disney is widely reported. There is a reason why Netflix cut its prices in India by 60%. According to Financial Times, the company’s struggle stems from the failure to localize its strategy and cater to the India consumers. Time will tell if Netflix will become more competitive in such an important market. “According to one industry veteran, Netflix’s approach “was more like, ‘I have built the plumbing for the whole world, I just need to turn on the tap in India,’ instead of having an India strategy”.

Berkshire Hathaway’s 2021 annual letter. “Whatever our form of ownership, our goal is to have meaningful investments in businesses with both durable economic advantages and a first-class CEO. Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.”

On the Origin of the iPhone

Boeing outsourced $9-per-hour engineers in India to write the software for Boeing 737. If pushed too far, the urge to generate as big a bottom line as possible can mean a world of harm to a company, including human lives. What happened to Boeing and its 737’s deadly crashes are a perfect example of that. I am not saying that $9-per-hour engineers aren’t technically good. The use of these low-pay contractors may not be THE reason for the crashes. It surely adds to the disturbing reports on Boeing’s less than ideal due diligence in manufacturing 737s.

Other stuff I find interesting

Inside Pornhub. An interesting look inside one of the most popular porn sites on the Net as well as the content moderation issue.

USPS is deploying gasoline-powered delivery fleet in a snub to the Biden’s administration’s effort to reduce carbon emissions. It’s a mystery to me that Louis DeJoy is still the CEO of USPS

The digestible Ukraine explainer you’ve been waiting for. Treat it as a starter, not a comprehensive read on the subject. Regardless, it’s mind-blowing that we are at risk of having World War III when the pandemic is still wrecking havoc around the world

Why did renewables become so cheap so fast? A pretty interesting piece on the prices of energy from different sources as well as some alleged reasons for the price movements.

Stats

“Global Consumer Spending in Top 100 Subscription Apps Climbed 41% to $18.3 Billion in 2021”

Apple is the top brand in the US, according to a survey of more than 13,500 consumers by prophet

Ethiopia will spend 5.6% of its gross domestic product, or $6 billion, each year until 2030 to counter the impact of floods, climate-driven diseases, hailstorms and wildfires

Source: Techcrunch

Weekly reading – 22nd January 2022

What I wrote last week

Square Online’s on-demand delivery

Netflix’s price hike

Uber Eats lags behind DoorDash in the US. Advertisers made up 18% of Uber merchants

Business

Another gem from Howard Marks. “Superior investing consists largely of taking advantage of mistakes made by others.  Clearly, selling things because they’re down is a mistake that can give the buyers great opportunities. So it’s generally not a good idea to sell for purposes of market timing.  There are very few occasions to do so profitably and very few people who possess the skill needed to take advantage of these opportunities. Thus, someone entering adulthood today is practically guaranteed to be well fixed by the time they retire if they merely start investing promptly and avoid tampering with the process by trading. On April 11, 2019, The Motley Fool cited data from JP Morgan Asset Management’s 2019 Retirement Guide showing that in the 20-year period between 1999 and 2018, the annual return on the S&P 500 was 5.6%, but your return would only have been 2.0% if you had sat out the 10 best days (or roughly 0.4% of the trading days), and you wouldn’t have made any money at all if you had missed the 20 best days.  In the past, returns have often been similarly concentrated in a small number of days.  Nevertheless, overactive investors continue to jump in and out of the market, incurring transactions costs and capital gains taxes and running the risk of missing those “sharp bursts“”

Google Misled Publishers and Advertisers, Unredacted Lawsuit Alleges.Google misled publishers and advertisers for years about the pricing and processes of its ad auctions, creating secret programs that deflated sales for some companies while increasing prices for buyers, according to newly unredacted allegations and details in a lawsuit by state attorneys general. Meanwhile, Google pocketed the difference between what it told publishers and advertisers that an ad cost and used the pool of money to manipulate future auctions to expand its digital monopoly, the newly unredacted complaint alleges. The documents cite internal correspondence in which Google employees said some of these practices amounted to growing its business through “insider information.”

Shams vs. the ‘Woj bomb’: Sports reporters are duking it out for scoops on Twitter, and their value is soaring. The business of being constantly on the phone for breaking news sounds excruciating and exhausting

Interview: Ryan Petersen, founder and CEO of Flexport. “One thing to remember here is that in America, the ports are owned by the local city that they’re in. Therefore, they’re not managed as a strategic national asset, which they clearly are. The first thing that I would do if I were in charge would be to actually put a team in charge. Right now, there isn’t a dedicated team within the federal government to coordinate all public and private sector activities to help resolve the supply chain crisis. It’s spread across multiple regulatory agencies, jurisdictions and levels of government. The two big bottlenecks are a lack of chassis and a lack of yard space both at the container terminals and in the yards around neighboring cities. We know that the federal government and the state government of California owns a lot of land so we’d love to see them make it available for storing containers and creating off-terminal storage facilities where truckers can pick up containers easily without having to wait in long lines at the gate to the ports.”

What JPMorgan is doing with that $12 billion tech spend. The threat from fintech startups is real. It should be applauded that an incumbent like JP Morgan stays vigilant and is willing to invest a chunk of money to stay competitive. Not every company can do that. With regard to the ROI of this $12 billion investment, I get that folks can be skeptical when the management doesn’t reveal it. But at the same time, there are benefits that are very hard to quantify and the technology roadmap can change all the time.

Google Team That Keeps Services Online Rocked by Mental Health Crisis. A damning account of Google’s working culture, which once was a draw for talents

Peloton reportedly pauses bike and treadmill production because of lack of demand. The darling Covid stock now bears the brunt of ineffective management and operational flaws. They invested a lot in supply, only to find out that they picked all the low hanging fruits on the market and that they couldn’t sign up more customers.

Other stuff I found interesting

Nowa Huta: The city that went from communism to capitalism. An interesting story on how a Polish city transformed itself from a communist ruin into a vibrant city powered by capitalism

Tesla Wooed by India States After Elon Musk Flags Challenges. I am not really a fan of governments at different levels being pitted against one another by rich companies. Companies always go to states that offer them the biggest benefits; which do not often translate into better lives for the constituents and local economies. If Musk and Tesla have to enter India, and if the federal and state governments are unified in how they welcome Tesla, what choice would Tesla have?

How Big Beef Is Fueling the Amazon’s Destruction. “More than 70% of deforested land in the Amazon turns into pasture, the first step in a supply chain that’s among the most complex in the world.”

Stats

Ho Chi Minh City startups raise $1.1 billion in venture capital in 2021

Apple Card’s balance as of Q4 2021 was $8 billion

7 million or more than 5% of US households are unbanked

Alcohol sales was boosted by Covid. Source: Bloomberg

Weekly reading – 8th January 2022

What I wrote last week

Amazon through charts

Amazon’s impact on U.S sellers during holiday seasons

Business

Inside a Year at Peloton: From Pandemic Winner to HBO Punchline. The fact that Covid pulled forward demand isn’t as concerning to me as the management team’s inability to forecast and assess its business; which seems to be the case at Peloton.

No Permits, No Fabs. “From 1990-2020, the time required to build a new fab in the United States increased 38 percent, rising from an average of 665 days (1.8 years) during the 1990 to 2000 time period to 918 days (2.5 years) during the 2010-2020 time period. At the same time, the total number of new fab projects in the United States was halved, decreasing from 55 greenfield fab projects in the 1990-2000 time period to 22 greenfield fab projects between 2010 and 2020.”

Some great investment insights from Philip Fisher. “There are two approaches to accumulating wealth in the stock market. One is to time the market, buying stocks when they are cheap, and selling when they are expensive. The other is to find outstanding companies and hold them”

Chip Makers Contend for Talent as Industry Faces Labor Shortage. This labor shortage in one of the most critical and influential industries in the next few years makes you wonder why in the world lawmakers don’t open doors to welcome more hungry and talented immigrants. The tribal politics, fear-mongering and myopia are astoundingly disappointing and detrimental to the country

Hawaii Is Rethinking Tourism. Here’s What That Means for You. “For the first time, Hawaii’s tourism authority is majority-run by Hawaiian natives, rather than white mainlanders with hospitality degrees. With the input of locals, who range from farmers to hotel owners, each of Hawaii’s four counties has created a strategic plan that stretches into 2025 and focuses on sustainable destination management rather than marketing. The plan relies heavily on community involvement and visitor education. “In the past, visitors were spoon-fed what outsiders thought they wanted,” says Kainoa Horcajo, founder of the Mo’olelo Group, a Maui-based consultancy that helps hotels to reimagine their cultural experiences. “Now, it’s time to take a risk, challenge the visitor, and give them something real.”

How pioneering deep learning is reducing Amazon’s packaging waste. “Machine learning approaches helped Amazon drive change over the past six years, reducing per-shipment packaging weight by 36% and eliminating more than a million tons of packaging, equivalent to more than 2 billion shipping boxes.”

Turn podcast listeners into customers with CTA cards. Quite a big step by Spotify to improve their advertising platform.

Affirm Debit +: The Great Credit Card Unbuilding Is Underway

Other stuff that I found interesting

The Case Against Crypto. “The real world has fundamental constraints that make the technology unworkable, whenever it has to interact with the outside world the benefits of decentralization disappear and the solutions end up simply recreating slower and worse versions of processes and structures that already exist

A good article on China from an experienced journalist, who has spent a lot of time on the ground there. “Everything that can go wrong in urban design has gone wrong in Beijing. Each region has a different personality. The north is economically dysfunctional. Large parts of it suffer from resource dependency, environmental problems, and the population loss that results from these trends. Cities near Beijing showcase overcapacity in steel and coal, while Tianjin is well-known for having falsified its economic data. The northeast provinces nearby have seen a population decline of around 10% over the last decade, while the north as a whole has seen its share of the country’s GDP shrink from half in 1960 to a third today.

Your attention didn’t collapse. It was stolen. “For example, one study at the Carnegie Mellon University’s human computer interaction lab took 136 students and got them to sit a test. Some of them had to have their phones switched off, and others had their phones on and received intermittent text messages. The students who received messages performed, on average, 20% worse. It seems to me that almost all of us are currently losing that 20% of our brainpower, almost all the time. Miller told me that as a result we now live in “a perfect storm of cognitive degradation”. Individual abstinence is “not the solution, for the same reason that wearing a gas mask for two days a week outside isn’t the answer to pollution. It might, for a short period of time, keep certain effects at bay, but it’s not sustainable, and it doesn’t address the systemic issues.” He said that our attention is being deeply altered by huge invasive forces in wider society. Saying the solution was to just adjust your own habits – to pledge to break up with your phone, say – was just “pushing it back on to the individual” he said, when “it’s really the environmental changes that will really make the difference”.”

The Race to Make Vials for Coronavirus Vaccines. Fascinating

Stats

The average credit card balance in the U.S in 2021 was $5,525, according to Experian

2% of U.S menus feature chicken thighs while 42% list chicken wings

45% of surveyed Americans said they plan to shop 50% or more of their groceries online in the next 12 months

“PYMNTS’ research found that real-time disbursements accounted for 17% of all disbursements made in 2021, up from 5.7% last year”

Weekly reading – 29th May 2021

What I wrote last week

My review of Amazon Unbound

Business

A long post that outlines a bull thesis on Peloton

An excellent review of the new Apple store in Rome. Apple’s retail stores are great valuable assets. They build up the brand image of the company and function as hubs where customers can try out products, receive services and just really connect with the brand.

Instacart kicks off Priority Delivery. This new move by Instacart to deliver items in 30 minutes shows how cut-throat this market is. Competitors such as Instacart, Uber Eats or DoorDash strive to cut the delivery time to gain customers and market share. What remains to be seen is how it would affect Instacart’s bottom line. I don’t think that they are profitable yet. So, we’ll see when they release their S-1.

DoorDash and Uber Eats Are Hot. They’re Still Not Making Money. A pretty telling piece on delivery services

Amazon Briefing: A look inside Amazon’s cloud gaming ambitions

What I found interesting

Financial and emotional risks of working for a startup. Somebody took the time to write about the potential downsides of working at a startup. There are a lot of things to love about startup life and I am pleased to see people talk about it. But it’s also important to shed light on the risks as well

Google now lets you password-protect the page that shows all your searches. Privacy and security are powerful user preferences that are NOT going away any time soon. In fact, they will only get stronger. Google should do more and talk more about what they do in this area. I haven’t seen a lot of marketing efforts in talking about their initiatives to protect user data and privacy

How a Japanese Company Cut 80% of the Time Needed to Manually Count Pearls

Payment links from Stripe. This is what innovation should be

No, Millennials Aren’t Poorer Than Previous Generations. What stood out for me is that Millennials have more non-mortgage debts.

Stats that may interest you

As of 5/24/2021, 40%, 43% and 62% of Airbnb bookings for the summer of 2021 in Seattle, LA and NYC respectively were more than 28 days

75% of Target’s digital orders were fulfilled by their stores. 30 million Americans shop at Target every week

2.5% – 3.5% is what Costco reported as inflation in the latest quarter

iMac 2021’s thickness is 11.5mm, 1 mm slimmer than iPhone 2

Overwork Killed More Than 745,000 People In A Year, WHO Study Finds

Brief thoughts on Apple One & Apple Fitness+

Yesterday, Apple held an event to announce updates on their hardware, software and services. Everything related to Apple should be widely covered. You can read about the event on the news. I just want to share my thoughts on the two notable services: Apple One and Apple Fitness+

Apple Fitness+

It’s a fitness subscription that resides inside the Fitness app and is built for Apple Watch. Essentially, if you’re wearing an Apple Watch and have a screen that can show various workouts developed by Apple, you can see health and exercise data while sweating and hustling through the physical torture :D. According to Apple, there are workouts for everyone, including Cycling, Treadmill, Rowing, HIIT, Strength, Yoga, Dance, Core, and Mindful Cooldown. Each workout is accompanied by curated music, but you can also add your own tunes from Apple Music. Apple claimed that machine learning on device would use your previous workouts as well as health data to personalize suggestions for you. All the data would not leave your devices.

Apple Fitness+ home screen on iPhone 11 Pro.
Figure 1 – Apple Fitness+. Source: Apple
Figure 2 – Apple Fitness+. Source: Apple

Apple Fitness+ will be available at the end of the year in the US, Australia, Ireland, the U, Canada and New Zealand. A subscription will cost $9.99/month or $79.99/year with one month trial and can be shared with up to five people. To gain access to Apple Fitness+, customers need Apple Watch Series 3 or later.

Now, I have seen a lot of comparison with Peloton since the service was announced. Let’s take a look at whom each should be for

Whom it is for
Apple Fitness+ 1/ Those who own an Apple Watch Series 3 or later
2/ Those who don’t want to spend at least $1,400 for a piece of equipment and a subscription on top of that just for workout
3/ Those who don’t have a lot of interior space for a bike or a tread
4/ Those who travel quite a lot and can’t carry equipment
5/ Those who prefer working out without equipment
6/ Those who want to incorporate health data always on Apple devices with workouts
Peloton1/ Those who don’t own an Apple Watch Series 3 or later (Obviously!)
2/ Those who are serious enough about fitness to make a sizable investment in a Peloton bike/tread
3/ Families whose multiple members want to share the same account and bike/tread
4/ Those who have enough space for a bike/tread
5/ Those who stay home often enough

For those who already owned a Peloton machine and subscription, I don’t imagine they will sign up for Apple Fitness+. The sunk cost of a Peloton bike/tread is so high that consumers will try to milk as much out of it as possible. Hence, Peloton shouldn’t have to worry about that. While Apple has many fans, it also has as many, if not more, critics. As Apple Fitness requires an Apple Watch, Peloton shouldn’t worry much about this segment of the market, either. It’s inconceivable to think a non-Apple person would invest in a Watch and iPhone (who has the former without the latter?) just for this fitness subscription.

What should worry Peloton is potential customers who own Apple devices and don’t have a Peloton subscription. To those who are interested in fitness enough to spend $10/month, but not as much to spend $1,400+ for a bike, Apple Fitness+ should be much more appealing as the barriers to entry are much lower. Sure enough, a $350 Apple Watch is still a significant investment, but if historical product rollouts by Apple are nothing but an indication, they will add more health-related functions to their Watches to make them more attractive. Case in point. The new Apple Watch will be able to monitor oxygen level in blood. Hence, compared to a big and expensive bike from Peloton, a combination of a Watch and Fitness+ should be an enticing alternative.

With that being said, I do think the market is big enough for these two players. The hardware requirement limits Apple in the same way as it does Peloton. But if a non-Apple phone or smart watch manufacturer jumps into the fitness market and offers the same service, it can spell trouble for Peloton because in that case, the manufacturer wouldn’t be limited by the hardware requirement any more.

Apple One

This is one of the badly kept secrets. On Tuesday, Apple announced its long anticipated umbrella subscription bundle called Apple One. Basically, an Apple One subscription offers consumers access to multiple Apple services such as iCloud, Apple Arcade, Apple Music, Apple TV+, Apple Fitness+ and Apple News+. Below are the tiers and prices

Figure 3: Apple One Tiers. Source: Apple

A bundle is to encourage consumers to use more individual services, usually at a discount. Apple One is no exception. If you buy services individually and add them all up together, Apple One offers a great value for money. Morgan Stanley had a great summary below

Image
Figure 4 – How much money is saved with Apple One. Source: Ben Bajarin

Premier offers an astounding 45% discount and if your family is already using most, if not all, of the included services, Premier tier is a no-brainer. Additionally, it’s worth pointing out that customers with Apple Card will get 3% cash back from Apple One, on top of the already incredible discount.

What gets me excited about a bundle like this is what lays ahead. If you think about it, I believe that Apple must have had this vision for a while. First they rolled out iCloud. Then Apple Music. Then Apple News+, Apple Arcade, Apple TV+ and Apple Fitness+. There is no way that Apple will stop here. I am confident that they already have something in the pipeline already. It won’t surprise me if they add more and more services to their flagship bundle and make it the Amazon Prime of Apple Services. A few options I can think of:

  • Apple Care?
  • A service related to books as they already have iBooks
  • Something related to cars as iPhone can replace car keys for the new BMW already

Apple is known for incremental yet effective progress over time, proven by its approach to hardware and software. So don’t be surprised that it is taking the same path here with Apple One

Disclaimer: I own Apple stocks in my portfolio.