What I found interesting recently.
Why the US needs racial progress:
Two years ago, Marian Croak was hiding in her office at Google’s YouTube offices, convinced the police would enter and shoot her dead.
There was an active shooter on the San Bruno, Calif. campus, and police were moving door-to-door to clear out staff. Though the soft-spoken, petite Ms. Croak was clad in her Google lanyard, she was unwilling to raise her arms and open the door as instructed, lest the officer perceive her as a threat.
“I didn’t understand how anyone could feel safe doing that. My whole body felt like it was on fire,” Ms. Croak says. “That’s when I became aware that I was a black person in that situation. All kinds of fear and dissonance went through my head.”Source: WSJ
The strength of any society (and economy) is the sum of the outputs of society’s people. The sad reality of the present is that women and minorities are, on average, still prevented from contributing to their full potential.
Meanwhile the White House continues to take unproductive steps to limit talent migration into the US:
LEADING AN AMERICA FIRST RECOVERY: President Donald J. Trump is extending and expanding the suspension of certain visas through the end of the year to ensure American workers take first priority as we recover from the economic effects of the coronavirus.Source: White House
This is especially baffling because the US has benefited so much from foreign talent:
While it is important to protect US jobs as well as US intellectual property from theft, bans on foreign talent is unlikely to be the solution.
Offsetting that, this seems to be a potentially very important move:
President Donald Trump is preparing to direct the federal government to overhaul its hiring to prioritize a job applicant’s skills over a college degree, administration and industry officials saySource: AP
This only affects hiring for the Federal government but has broad support across private firms as well including many tech giants. While higher education is important, this country may have gone too far. There are far too many Starbucks baristas that have paid tens of thousands for unnecessary college degrees. The US can never be 100% knowledge-based workforce…it needs balance and that also means balance in terms of skills and education.
We may be heading for a slower economic recovery than expected because it has finally dawned on half of this country that ignoring COVID-19 doesn’t make it go away. And sunlight / summer and humidity doesn’t kill it either.
But, Capital Flywheels’ stance remains unchanged – the stock market and the economy are not the same thing. There will be stocks that work even while the economy does not.
The value-reflation / reopening trade a few weeks ago made very little sense to Capital Flywheels, which is why the Paper Portfolio continued to prioritize secular winners rather than mean reversion plays.
The month is about to end in a few days, but here’s an interesting preview: The only mean reversion-ish stock added to the Paper Portfolio was Boeing, which has handily outperformed reopening plays.
JETS is the ETF for airlines. PBJ is an ETF for restaurant plays. PEJ is an ETF for food and beverage plays. And XOP is an oil and gas ETF (play on more car usage and movement outside of the house). All of them have underperformed Boeing. The month has not ended, yet, but my monitor shows Boeing outperforming the Paper Portfolio as a whole.
And a couple of follow up charts on quantitative easing and inflation:
Japan has been doing quantitative easing for almost 2 decades…still no inflation:
This shows Japan’s central bank balance sheet in USD (UP A LOT) and gold priced in USD. No correlation. Theoretically, high inflation (which did not and has not happened) would lead to currency depreciation and greater correlation of these two variables when using USD as the pricing currency. But no inflation for 20 years.
The picture is the same if you look at gold in USD vs Japan central bank assets in JPY:
Google YouTube launching shoppable ads:
Today, we’re making it even easier for you to inspire people to take action on YouTube with smarter solutions that make video more shoppable, use automation to drive conversions, and help you better understand attribution.
Everyone is getting in on e-commerce. The internet mostly runs on ads, but the ad companies are realizing they have always been derivative to e-commerce (what’s the value of an ad if not to sell something?). Non-e-commerce ads are a headache (too much politics as Facebook and Google and Twitter are realizing). Amazon has mostly won utilitarian e-commerce (and increasingly the ads associated with that), but branded commerce is still wide open.
Meanwhile, Snapchat has their own take on it – Not a shoppable ad but a shoppable show:
Snap will try to turn Snapchat viewers into buyers with its first-ever “shoppable” original show: “The Drop,” focused on “exclusive streetwear collabs” from celebrities and designers.Source: Variety
This actually moves Snapchat closer to what has already become the standard in China – live-streaming e-commerce. It helps when one of Snapchat’s largest investors is Tencent.
Speaking of Tencent…
Some WeChat Official Accounts received the invitation to try WeStore (Weixin Xiaodian). The invitation shows that this is a mini program for selling products that can be launched with one click and operated independently.
After opening, businesses can quickly start live streaming and sell products on WeStore. Speculations from China internet show this might be building a foundation for WeChat Channel Account (short videos).
Source: China Internet Watch
Alibaba reveals global logistics plans (translated):
Over the next nine months, the rookie network plans to increase the number of charter flights from 260 to 1,260, meaning that the air time will be reduced from the current seven to 10 days, to three to five days.
or overseas warehouses, the rookie network plans to increase the number of existing 30 overseas warehouses from about 1 million square meters (about 10.76 million square feet) to about 2 million square meters (about 21.53 million square feet) within three years. Small and medium-sized enterprises in China are able to prestock in these overseas warehouses, enabling cross-border orders to be completed in about 100 cities around the world in 72 hours.Source: Alibaba
As Alibaba’s network efficient improves, it could eventually be disruptive to Amazon since the vast majority of goods on Amazon come from China anyway. But for now, e-commerce is the largest industry opportunity in the world and is large enough to support many players.
Tiktok is joining the fight, too:
TikTok owner ByteDance formed an e-commerce division today that will mainly focus on meeting the shopping needs of the video-sharing platform’s users, a company insider told Yicai Global.
ByteDance cannot challenge e-commerce giant Alibaba Group Holding in the domestic market, Dolphin Think Tank founder Li Chengdong told Yicai Global, adding that its core ad revenue is largely from e-commerce platforms such as Alibaba. It would be unwise to turn partners into rivals with a high-profile move into the sector, Li said.
But the potential shopping needs of a large overseas usership can still be fully exploited. Plus, the pressure on the company’s operating performance due to its high revenue goals in 2020 are driving ByteDance to make new attempts at the e-commerce business.Source: Yicai Global
And seems like I’m not the only one that thinks The US market is a little easier to attack than China’s.
Also helps that Tiktok has some pretty innovative ad solutions:
TikTok is announcing to advertisers that it’s open for business. The company is today officially introducing a new brand and platform called “TikTok For Business” that will serve as the home for all its current and future marketing solutions for brands. At launch, the site will include access to TikTok ad formats, including its marque product, TopView, which is the ad that appears when you first launch the TikTok app. Other products under this TikTok For Business umbrella include Brand Takeovers, In-Feed Videos, Hashtag Challenges and Branded Effects.
Brand Takeovers are the three to five-second ads that can be either a video or image. In-Feed Videos can be up to 60 seconds in length and run with the sound on. Hashtag Challenges allow brands to participate in the user community by inviting TikTok users to create content around a hashtag of their choice. This includes Hashtag Plus, which also adds a shopping feature to this experience.
Meanwhile, Branded Effects allow brands to insert themselves more directly into the content creation experience. The effects allow a brand or product to be added to a video in a 2D, 3D or now AR format in either the foreground or background of the video. These can also be combined with Hashtag Challenges to boost engagement with the brand.Source: Techcrunch
💭 Online and Offline / Tech and Non-Tech Convergence
Years ago, China used to be perceived as a tech copycat. But in the last 3-4 years, this perception has changed primarily because of China’s leapfrogging in payments and O2O (online-to-offline) efforts. China was particularly well positioned to leapfrog the US because the payments and offline infrastructure in China was weaker (no strong incumbents to stop the efforts of the tech companies). In contrast, US tech companies have to fight relatively strong incumbents like Visa / Mastercard offline payments infrastructure. But COVID-19 has weakened offline incumbents in the US, and the US gap vs China is likely narrowing. This will lead to many new businesses and business models.
In China, Tencent WeChat solidified its position as a daily utility app when it solidified its importance to the offline world (e.g. digital communication channel for offline relationships, offline payments, O2O capabilities via QR codes).
Similar things are starting to happen in the US, and it all spells tech dominance:
Apple iPhone / Payments / Siri offline integration continues to take new forms:
Convenience store chain 7-Eleven is debuting a new feature for customers that allows them to pay for gasoline by voice through Apple’s Siri and only get out to fill the tank.
“This is an innovation that lets customers come to a gas pump and not take their wallet out, just talk to their iPhone,” Tarang Sethia, the chief digital officer at 7-Eleven, told Cheddar Friday. “You don’t have to worry about spending five minutes to interact with the station to fill gas for two minutes.”Source: Cheddar
This is on top of existing efforts running below the radar to integrate Apple’s payment infrastructure in non-payment applications such as in identity management:
Ahead of the upcoming school year, Apple this morning announced it’s bringing contactless student IDs in Apple Wallet to several more U.S. universities. The expansion will allow more than 100,000 additional college students to carry their student ID on their iPhone or Apple Watch, where it can be used for a variety of tasks, including paying for their meals and snacks and entry into buildings, like the student’s dorm and other campus facilities.Source: Techcrunch
iPhones and Macs are now quite prevalent in business, but it was a 20 year effort that started by penetrating schools. It’s hard to change adult behavior, but young people do not have ingrained habits, yet. The changes that are happening now will happen in a bigger way once Gen Y and Z overtake the Baby Boomers in the next 5 years.
And while digital payment efforts by tech companies seem to be moving at a glacial pace, there’s a lot of progress that is going unnoticed…
Apple Pay is already >5% of global payment transactions (note that Apple Pay does not include Apple Card transactions, which would further increase Apple’s reach):
Apple Pay accounts for about 5% of global card transactions and is on pace to handle 1-in-10 such payments by 2025, according to recent trend data compiled by Bernstein, a research firm. “There are indeed plenty of reasons to worry that Apple may attempt to disrupt the payments ecosystem,” Bernstein analysts, led by Harshita Rawat, wrote in a research note.Source: Quartz
And, according to Tim Cook, Apple Pay has already overtaken PayPal in terms of transaction volumes:
In total, Cook says that there were 3 billion Apple Pay transactions during Q4 2019. Apple Pay transactions and revenue both doubled year-over-year, Cook added.
What about PayPal? In comparison to PayPal, Cook says that Apple Pay exceeded PayPal transaction volume and is growing 4 times as fast.Source: Apple via 9-to-5 Mac
While payments and identity are the obvious areas for O2O integration, media continues to be an interesting area for convergence because of how obvious it is for consumers…if consumers are willing to accept convergence in media, then convergence across many areas seems very likely.
For example, Christopher Nolan is hosting a movie night on Fortnite in anticipation of his new film, Tenet (Tenet was officially delayed but the rest of the event went as planned):
A month after Fortnite premiered a trailer for Christopher Nolan’s upcoming film, Tenet, the director is heading back to the game with a full-length feature. On Friday, June 26 Fortnite players will be treated to an in-game movie night featuring one of three Christopher Nolan movies.
The three movies will be Batman Begins, Inception, and The Prestige. The movie available to watch will vary depending on which region you play Fortnite in. Players in the United States will have showings of Inception starting on June 26 at 8 p.m. ET, with a second showing at 11:55 p.m. ET. Meanwhile, players in Canada and the United Kingdom will get to see The Prestige at 12 p.m. ET. For more information on which regions will get which movies, you can check the Fortnite Party Royale website.
The event, which will be called Movie Nite, will take place at Fortnite’s new Party Royale island on the big screen. Just like some of the recent concerts in Fortnite, players should be able to jump in and out of the movie at any time as the movie continues, so if you want to catch the beginning you’ll need to be there right when it starts.Source: Polygon
Even country singer, Garth Brooks, is experimenting:
Video-game platforms like Fortnite and Roblox have already become go-to spots to celebrate birthdays, hear new music and watch movie trailers.
Now they’re pushing to become true media hubs, where entire albums may be distributed exclusively and socializing is just as important as gaming. Even as people begin to emerge from pandemic lockdowns — and can get up from the couch — video games look to bolster their status as the new kings of communication.
Garth Brooks is a convert. The country superstar, who has outsold Elvis, expects to start releasing new songs within Zynga Inc.’s mobile games, such as Words With Friends, which recently began offering free content for Amazon Prime subscribers.Source: Bloomberg
But, the area that I am most excited about is transportation. Every tech company is either publicly or very likely secretly working on autonomous cars.
Now, Amazon is officially in the game:
We’re acquiring Zoox to help bring their vision of autonomous ride-hailing to reality
Amazon has signed an agreement to acquire Zoox, a California-based company working to design autonomous ride-hailing vehicles from the ground up. Aicha Evans, Zoox CEO, and Jesse Levinson, Zoox co-founder and CTO, will continue to lead the team as they innovate and drive towards their mission.Source: Amazon
Zoox could potentially be a threat to Uber, but their total reimagining of the car will probably take a while to roll-out. Zoox could have much more interesting implications for Amazon logistics.
And from the other direction, Uber is releasing their software to help public transportation agencies up their game:
Uber has signed a deal to manage public transport in Marin County, in the San Francisco Bay area, with its software.
Residents in Marin, which has a population of 250,000, will be able to book rides on public minibuses through Uber’s app, which will match riders travelling in the same direction.
While the contract is minor when set against Uber’s quarterly revenues of $3.5bn, it could lay the ground for Uber to sell its software as a service to public transport officials across the world.
David Reich, Uber’s head of transit, said the company was in discussions with “dozens” of regions across “multiple continents” and would announce more locations in 2020.Source: FT
With Uber working on public transportation and Apple working on identity, let’s try to fix DMV quickly, too.