Weekly reading – 4th June 2022

What I wrote last week

Book Review: Trillion Dollar Triage

How Walmart Is Betting On Stores To Catch Amazon In E-Commerce

Business

Amazon Briefing: One year into Andy Jassy’s tenure, sellers see subtle strategic shifts. Under Bezos, Amazon was maniacal about being consumer-oriented. Using the iron grip on consumers, especially Prime members, Amazon managed to exert their bargaining power on merchants. According to the article, there are already subtle changes under Jassy regarding how to work with merchants. Merchants have more dialogue with senior folks from Amazon, but they are expected to spend more on ads and prove their unit economics value to Amazon. The push to grow ads revenue may have one important downstream effect: if shoppers are bombarded with sponsored items instead of what are best for them, there is no telling how that could damage Amazon and loosen their grip on prized Prime members

The first act of the streaming wars saga is over — Netflix’s fall from grace has ushered in the pivotal second act. The first phase is to establish presence. Now, all these streamers need to figure out some tough questions. First, how can they make money while spending a lot of money on content? Streaming is an arms race. You need great content all the time to acquire and retain subscribers. But investors’ patience is wearing thin. They want to see profits. Hence, streamers have a tough balancing act on hands. Secondly, ads or no ads? Disney+ and Netflix are planning to go live with ads-supported plans later this year. However, ads is not a trivial business. There is also a question of consumer experience. Additionally, expanding internationally or not expanding? An international expansion requires extra investments in marketing and content. If you go to India without local content at a dirt cheap price, you won’t win the battle. But this goes back to the first question. If a streamer spends too much on content and marketing, how can it turn profits? All in all, such an interesting space to keep an eye on

Facing Inflation-Weary Shoppers, Grocers Fight Price Increases. As inflation keeps rising, consumers turn to private labels instead of more expensive national brands. Private labels give grocers a higher margin, but the key here is to keep customers happy while resisting the pressure from vendors. Those who can make shoppers happy in tough times like this may get the permanent business in the long run. For me, Aldi has been my go-to grocer for a long time with their highly competitive grocery prices.

Bull Market Rhymes. “I don’t think investors are actually forgetful.  Rather, knowledge of history and the appropriateness of prudence sit on one side of the balance, and the dream of getting rich sits on the other.  The latter always wins.  Memory, prudence, realism, and risk aversion would only get in the way of that dream.  For this reason, reasonable concerns are regularly dismissed when bull markets get going. “

Spotify Podcasters Are Making $18,000 a Month With Nothing But White Noise. Who would have thought that white noise could be a lucrative podcast category?

Other stuff I find interesting

Sun-Starved Sweden Turns to Solar to Fill Power Void. It’s intriguing that Sweden shut down two nuclear plants and relies on solar power for electricity despite lacking sunlight for a long period of time in a year.

While Electric Vehicles Proliferate, Charging Stations Lag Behind. There are 93,000 public charging stations in the country, but it’s estimated that we need 1.2 million more. That’s how much we are lagging behind. The governments, local or federal, need to take a lead in this and perhaps losses too in the beginning to encourage more purchase and usage of electric vehicles.

90% of Women in India Are Shut Out of the Workforce. I have to say that this is an eye-opening yet disappointing read. I 100% support gender equality. To me, there is absolutely no reason why female can’t work or receive the same level of treatment as men do. Hence, it’s insane to think that only 10% of women in a country with 1.3 billion people in population are working. How much more productivity could be unlocked if women could work?

AC Milan’s ‘Mind Room’: The story behind an innovative psychology lab. Fascinating!

Here’s why you shouldn’t miss ‘bột chiên’ while in Ho Chi Minh City. It’s one of my all-time favorite dishes in Vietnam and Saigon. You don’t experience the local cuisine until you try it

Stats

Disney+ Hotstar Hits 5 Million Subscribers in Indonesia

App Store stopped nearly $1.5 billion in fraudulent transactions in 2021

Safari reached one billion worldwide users

Source: Federal Reserve Bank of San Francisco

Book Review: Trillion Dollar Triage

I got to know this book because it was recommended by Warren Buffett and Ted Weschler. Indeed, the read didn’t disappoint. Trillion Dollar Triage is a gripping account of how the Fed, led by Jerome Powell, reacted to the Covid-19 crisis under the intense pressure from Wall Street, an unpredictable and bullying President in Trump and Congress. Jerome Powell never has a PhD in economics, something that many people presume is a prerequisite of being the Fed Chairman. But his Emotional Intelligence, communication skill and willingness to take bold actions seemed to be exactly what the country and the Fed needed in the time of unprecedented challenges in 2020.

I am not going to lie. I thought the book would be dry and bore me after a few chapters. Instead, I was hooked. What happened behind the scenes was recounted with exceptional details; which shows that the author did his homework and conducted a thorough research. I learned a great deal about the Fed, how it generally works and the tools that it has at its disposal such as rate adjustments, quantitative easing (QE) – the purchase of assets that are riskier than the Treasury bills, international swap lines – which makes the US dollars available to foreign banks, lending to certain parties in the economy etc…Interestingly, the author and the book were kind to Steve Mnuchin. I didn’t like the former Treasury Secretary, but he was portrayed as someone who was a reasonable deal-maker and an intelligent and hard-working person. You don’t get that kind of impression whenever he went on TV back then, do you?

If you are interested in macro economics and politics, this book will be a good choice.

“The central bank announced the Treasury-Fed accord on March 4, 1951, in an unexceptional, two-paragraph bulletin. Its significance would grow over time because it marked the beginning of what many commentators refer to as Fed independence. Going forward, the Fed would set interest-rate policy to ensure the economy functioned well rather than to support cheaper financing for the government, as the Fed had done since 1942 to support the war effort. Those boundaries have largely remained to the present day. The Treasury manages all of the money the government receives and pays out, while the Fed manages the supply of money in circulation to keep the economy stable.”

Excerpt From: Nick Timiraos. “Trillion Dollar Triage.”

“Most economists, including Yellen and others at the Fed, were guided by basic beliefs: first, that there is a direct inverse relationship between inflation and unemployment—if one goes down, the other must go up—and second, that there is a “natural rate of unemployment,” a level that evenly balances the supply and demand for labor. When unemployment falls below it, companies must compete for workers by driving up wages at a rate that can feed into higher prices. In order to tamp down an overheating economy, the Fed had traditionally raised interest rates.”

Excerpt From: Nick Timiraos. “Trillion Dollar Triage.”

“Ever since Marriner Eccles’s reforms in 1935, Fed policy had officially been decided by the sometimes-unwieldy Federal Open Market Committee. But policy gets shaped before the FOMC meetings by just three people, informally known as the Fed Troika: the Fed chair, the vice chair, and the president of the New York Fed, who also serves as vice chair of the FOMC. The Troika sets the agenda for each FOMC meeting. They refine the policy options and decide which papers or briefing memos should go out to committee members before each meeting. They steer the FOMC toward consensus. This was the power center of the Fed, and Powell had a historic opportunity to influence the selection of the Troika’s other two members.”

Excerpt From: Nick Timiraos. “Trillion Dollar Triage.”

Powell’s conversational style reflected his desire to reach an audience he felt the Fed at times overlooked—average citizens who didn’t work in markets and whose livelihood didn’t require hanging on every word of the Fed chair. They knew the Fed was important, but they might not know much more than that. At his briefings, Powell delivered short answers, used simple language, and spoke in a breezier manner than his academic predecessors—“a Jimmy Stewart of monetary policy,” as a former senior Fed economist put it.

An important part of communicating with the outside world focused on the 535 people who could make Powell’s life more difficult, or easier, if the going got tough: the lawmakers on Capitol Hill. And he wasn’t shy about letting people know that he thought this was one of the most important things the Fed chair could do. “I’m going to wear the carpets of Capitol Hill out by walking those halls and meeting with members,” he said in a July 12, 2018 radio interview.”

Powell also urged humility. The Fed should “give serious consideration to the possibility that we might be getting something wrong,” he said at his formal swearing-in ceremony”

Excerpt From: Nick Timiraos. “Trillion Dollar Triage.”

“Mnuchin, who was reviewing and approving specific provisions on his own. Democrats mostly saw Mnuchin as a fair and candid broker, though he sometimes yelled at Senate aides when they dared to explain the finer points of capital-markets mechanics: “I’ve worked on Wall Street! I know this!” Mnuchin wasn’t fazed when a Democratic senator, Ohio’s Sherrod Brown, joined the negotiations by speakerphone and launched into a political diatribe about how terrible Trump was—the kind of speech usually reserved for the cameras.”

“Lawmakers were both impressed—Mnuchin showed up in person and rolled up his sleeves—and dismayed: his reluctance to delegate slowed progress. “This was $2.3 trillion, and I was working on behalf of the president, and I wanted to make sure I knew exactly what was in the deal,” said Mnuchin”

“Mnuchin’s zeal for delving into the most intricate lending details earned him the moniker “Secretary Minutiae” among some Fed and Treasury staffers. He was also reluctant to delegate, with the exception perhaps of Muzinich. White House staffers were routinely bemused at sending something to a Mnuchin deputy only to receive a call from the secretary himself, offering his input. Fed officials concluded they were able to pull Mnuchin their way more often simply because their teams of dozens of analysts could outwork him. “The guy was really smart, really hardworking, had a mind like a steel trap,” said a Fed official. “But he’s just one man.”

Excerpt From: Nick Timiraos. “Trillion Dollar Triage.”