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Welcome back to another edition of Tidbits covering all the recent things worth talking about in business, media, and technology.
đș World Affairs + Geopolitics
#1 Putinâs Gas-for-Rubles Gambit Hits EU Fault Lines as Stakes Rise
After suffering months of punishing sanctions, Vladimir Putin used a powerful tool to impose some economic pain on Europe — and to fracture the unity of his opponents — by shutting off natural gas this week to a pair of NATO members.
The Russian presidentâs decision to cut off Poland and Bulgaria and the risk of more disruptions hits Europe where it really hurts, and where the bloc is least prepared to adjust. The continent needs several years to arrange alternative supplies to power its industry and heat its homes, but Putin forced the issue with his sudden announcement last month that he wouldnât accept anything but rubles for shipments after Apr. 1.
Now, with more payments for that fuel coming due next month, Europe will see if heâs bluffing. The Kremlin has already said more cuts will come if it doesnât get its own currency. The European Union warned that accepting Moscowâs terms would breach sanctions, but some countries that arenât ready to go without Russian gas sought workarounds or edged toward accepting Putinâs terms.
Source: Yahoo
#2 Beijing Orders âStress Testâ As Fears Of Russia-Style Sanctions Mount
Concerned about sweeping Russia-style sanctions from the west, Beijing has ordered a comprehensive âstress testâ to study the implications of a similar scenario for its economy, the Guardian has learned.
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On 22 April, officials from Chinaâs finance ministry and the central bank held a meeting with domestic and foreign banks, including HSBC, to discuss how they could protect Chinaâs overseas assets should Russia-style sanctions led by the US and its western allies also be imposed, according to a recent report by the Financial Times.
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âFor the past few years, thereâs been a growing concern among Beijingâs leadership that a strategic conflict between China and the west may not be a question of whether itâd happen, but when it will happen, in particular over the issue of Taiwan.â
Source: The Guardian
Sadly there is likely no workaround. The only workaround will be a complete split of the financial systems between the “West” and China…the choice then becomes doing it proactively ahead of time under your own terms, or being forced to split at an inopportune time (like at a moment of war).
A lot of things in life are self-fulfilling prophecies, especially when it involves a breakdown of trust. We will never know what the world would have looked like if China and US could have resolved the trust issues that accumulated between 2010-2020. But now that the trust is lost, the world we are heading to is almost a foregone conclusion. The only question is how fast and under which terms.
Money is a promise. While those promises remain intact today, the moment you start to question the faithfulness of your counterparty, there is no way back for either sides.
#3 New Rules for U.S. Investments in China Face Fresh Hurdle: Bidenâs Team
Bipartisan efforts in Congress to shield sensitive U.S. technology from China face a new hurdle: the Biden administration, which is divided over whether to intensify scrutiny of American investments in the worldâs second-largest economy.
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Washington has long had a process for vetting inbound investments, through the Committee on foreign investment in the U.S. — CFIUS — and has used that to block numerous Chinese purchases. But lawmakers are now looking to add outbound controls, a move the American business lobby has opposed, given the importance of Chinaâs market to many firms.
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The dispute over scrutinizing outbound investments is just one example of the administrationâs struggles to settle on a comprehensive China policy. Officials have sparred privately — and in some cases made contradictory statements in public — over whether to maintain the Trump administrationâs tariffs and the former presidentâs trade deal with China. Months of deliberations have yet to produce a consensus.
Source: Bloomberg
The US is still unsure what it wants to do, but it’s clear the US is questioning whether it makes sense to continue to allow Americans to invest in China without oversight (and potentially expanding China’s leverage over American firms). The US is still unsure what it wants to do, but it demonstrates a lack of trust. And trust is a two-way street.
I want to be optimistic, but I think the long-term trend is for China to discourage investments in the “West”, and the “West” to discourage investments in China.
Part of the problem is that even purely private capitalistic decisions can eventually be subjugated to public sector goals:
#4 The Chinese Companies Trying To Buy Strategic Islands
China Sam Enterprise Group is just one of a growing breed of Chinese companies scouring the globe in an effort to secure strategic strips of land. In dozens of cases examined by the Financial Times, mostly little-known Chinese investors have proposed taking long leases or have tried to buy large chunks of land, often in sensitive locations. In some cases, the land is close to US allies or military installations, on islands along key sea lanes of communication, or overlooking important straits and channels.
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As geopolitical competition between China and the west intensifies, the US and its allies are struggling to respond to this unique symbiosis between Beijing and its corporate sector overseas. During the cold war, western powers retained their dominance of the Pacific by demanding that the regionâs island nations refrain from taking aid or allowing embassies from the Soviet Union.
âThat strategic denial approach, which worked with the Soviet Union, is not working with China, and thatâs because their companies were there even before the state came,â says Tarcisius Kabutaulaka, an associate professor at the University of Hawaii, who researches China in Oceania and is a Solomon Islander himself.
Source: FT
Although any country could let foreign companies in, there’s no guarantee that those private companies will not become proxies for governments in the future. This runs both ways. China has a reason to mistrust US companies as much as US has a reason to mistrust Chinese companies. Each country will likely plan accordingly.
For example, I’m sure Germany is having an interesting time right now trying to deal with not just the potential of being cut off from Russian oil and gas, but having to figure out how to deal with the fact that some of the most important refineries in Germany are owned by Russia’s Rosneft and Gazprom. Even if they source the oil and gas from the US, the refineries are controlled by Russian companies.
đĄ Defense and Cybersecurity
#5 White House Wants Nation To Prepare For Cryptography-Breaking Quantum Computers
A memorandum issued Wednesday by President Joe Biden orders federal agencies to ramp up preparations for a day when quantum computers are capable of breaking the public-key cryptography currently used to secure digital systems around the world.
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The chief concern is the expected creation of a cryptanalytically relevant quantum computer (CRQC) â the presumed goal of some QIS research by the U.S. as well as adversaries such as China.
âCurrent research shows that at some point in the not-too-distant future, when quantum information science matures and quantum computers are able reach a sufficient size and level of sophistication, they will be capable of breaking much of the cryptography that currently secures our digital communications,â a senior Biden administration official told reporters Tuesday in advance of the memorandumâs release. That cryptography, in many cases, dates to work published in the late 1970s and updated in the decades since.
Source: The Record
The coming quantum computing / communication revolution is an under-discussed area. Almost everything you take for granted when it comes to digital security and privacy depends on cryptographic techniques that can be cracked in mere seconds by (currently hypothetical) quantum computers. Even something like crypto which people claim to be “safe” is entirely hackable by quantum computers. It’s going to come…and the world is not prepared for it.
This reminds me of a conversation back in 2012 (maybe 2013) where a friend and I discussed the ramifications of quantum computers that might already (secretly) be in existence. Many technologies we use (internet, microwaves, satellite GPS, public key cryptography) were first invented by the military. But mainstream knowledge of these technologies were not widely distributed…it’s entirely possible that there are already governments around the world with functional quantum computers. We should view political messaging in these areas as potential inside knowledge that quantum computers are already in existence or will be in existence soon.
đ€ Economics + Markets
#6 U.S. Economy Posts Surprise Contraction, Belying Solid Consumer Picture
The U.S. economy shrank for the first time since 2020, reflecting an import surge tied to solid consumer demand — which in turn suggests growth will return imminently.
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Gross domestic product fell at a 1.4% annualized rate in the first quarter following a 6.9% pace of growth at the end of last year, the Commerce Departmentâs preliminary estimate showed Thursday. The median projection in a Bloomberg survey of economists called for a 1% increase.
Source: Bloomberg
The decline was almost entirely driven by weakness in exports, while the domestic economy remained very strong. Nonetheless, the economy is slowing down, and we have yet to fully see the impact of Ukraine disruptions and rapidly rising interest rates.
#7 Fed Raises Rates By Half A Percentage Point â The Biggest Hike In Two Decades â To Fight Inflation
The Federal Reserve on Wednesday raised its benchmark interest rate by half a percentage point, the most aggressive step yet in its fight against a 40-year high in inflation.
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That likely will mean, according to the chairmanâs comments, multiple 50-basis point rate hikes ahead, though likely nothing more aggressive than that.
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Along with the move higher in rates, the central bank indicated it will begin reducing asset holdings on its $9 trillion balance sheet. The Fed had been buying bonds to keep interest rates low and money flowing through the economy during the pandemic, but the surge in prices has forced a dramatic rethink in monetary policy.
Source: CNBC
After raising rates by 25bps back in March, the Fed raised rates by another 50bps and signaled more 50bps hikes in upcoming meetings. Despite the rapid tightening, markets initially reacted positively due to Powell’s comments that a larger 75bps hike is not currently under consideration.
However, other Fed officials gave subsequent interviews. And Barkin suggested 75bps was not off the table, which likely cool much of the initial market enthusiasm:
#8 Fedâs Barkin Declines to Take 75 Basis-Point Hike Off Table
Federal Reserve officials stressed their determination to curb inflation, with one saying nothing was off the table, including raising its key interest rate by 75 basis points — an option downplayed by Chair Jerome Powell.
Source: Bloomberg
One of the key reasons why US Treasury yields are going up is because the largest owner / buyer of US Treasuries is no longer buying them:
#9 Biggest Treasury Buyer Outside U.S. Quietly Selling Billions
Japanese institutional managers — known for their legendary U.S. debt buying sprees in recent decades — are now fueling the great bond selloff just as the Federal Reserve pares its $9 trillion balance sheet.
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Thatâs because the monetary path between the U.S. and the Asian nation is diverging ever more, the yen is plumbing 20-year lows and market volatility stateside is breaking out. All that is ramping up currency-hedging costs and completely offsetting the appeal of higher nominal U.S. yields, especially among large life insurers.
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While 10-year U.S. yields traded a whisker away from 3% in New York trading, buyers who pay to protect against fluctuations in the yen-dollar exchange rate see their effective yields dwindle to just 1.3%. Thatâs because hedging costs have ballooned to 1.66 percentage points, a level not seen since early 2020 when the global demand for dollars spiked in the pandemic rout.
Source: Yahoo
We discussed this dynamic a few weeks ago.
Although US Treasury yields have gone up relative to Japanese government bonds, the yield increase is not enough to offset the damage / losses incurred from a falling Yen. There is no point earning 3% per year on US Treasuries if you will lose 3% from Yen weakness in a week.
US Treasury yields (orange line below) are showing an extremely tight correlation with the Yen (white line), more so than the Euro (blue line) or RMB (purple line):
#10 Shanghai Lockdown Reignites Supply-Chain Problems for U.S. Companies
Some U.S. companies are warning that Covid-19 lockdowns in Shanghai and elsewhere in China are denting sales, disrupting operations and putting added strain on supply chains that could be felt well into the summer.
Apple Inc. AAPL 0.47%âČ said it could take a sales hit of as much as $8 billion in its current quarter, primarily because of the Shanghai lockdowns. Industrial giant Honeywell International Inc. HON -1.23%⌠said the Covid measures had curbed production at half of its Chinese plants. J.B. Hunt Transport Services Inc. JBHT 0.07%âČ said the freight carrierâs customers are worried about deliveries scheduled for July.
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Even if the lockdowns lift soon, the ripple effects may be felt for months as many of the cargo ships currently waiting outside Shanghai will make their way to the U.S., where ports are starting to improve after months of congestion.
Source: WSJ
Supply chain problems aren’t new, but supply chain problems on both sides of the ocean is new. During covid, China was operating fairly normally, while US ports were swamped. Now US ports are clearing up, but China’s logistics is being disrupted. This will eventually ping-pong back to US ports around the summer. We probably haven’t seen the last of this supply chain issue.
For more on supply chains, this interview with the founder of FreightWaves is a good one.
#11 China May Be Getting Ready To Wind Down Its Crackdown On Big Tech
Shares of Chinese tech companiessoared on Friday after Beijing signaled that it may throw the beleagured industry a lifeline and promised again to minimize the impact of Covid-19 on the economy.
Hong Kongâs Hang Seng index jumped 4%, while the Shanghai Composite was up 2.4%, after Chinese state media reported that the countryâs top leaders had vowed to boost growth.
They also promised to âpromote the healthy developmentâ of the internet economy and âintroduce specific measuresâ to support the sector, the Communist Partyâs Politburo said Friday, according to state-run Xinhua News Agency.
Source: CNN
A week and a half ago, China voiced support for the economy including some favorable statements from the President. Markets reacted positively, especially if it signals the end of a regulatory crackdown on China internet. However, there’s been very little concrete details since, which is probably eroding some of the initial optimism.
#12 Bill Hwang Archegos Catastrophe Was Wilder Than Anyone Knew
âAre we going to be able to pay for these trades today? I donât see how we can.â
The deputyâs words, now immortalized in a federal indictment, said it all: Inside Bill Hwangâs Archegos Capital Management, panic was setting in. Hwang, the enigmatic billionaire behind Archegos, had amassed one of the worldâs great fortunes in virtual secrecy, and that trove — a staggering $160 billion position in stocks — was unraveling everywhere, all at once.
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A year after the collapse of Archegos sent shock waves through global finance, Hwang was arrested Wednesday morning and, for the first time, federal prosecutors offered an official account of what really happened at the secretive family office.
Source: Bloomberg
Archegos collapsed a little over a year ago and likely contributed significantly to market volatility in first half of 2021. Fascinating details in the indictment…what breathtakingly aggressive risk-taking.
đ» Cryptocurrencies + NFTs
#13 Coinbase NFT Marketplace Beta Sees Less Than 900 Transactions in Opening Week
According to data from crypto analytics site Dune, Coinbaseâs marketplace had less than 900 total transactions since its launch on April 20. (The data is routed through 0x Project, which Coinbase tapped for the marketplaceâs back end.)
Total trade volume on the marketplace in that time has been 73 ETH (roughly $217,000), with around 650 users so far transacting on the platform.
Source: Coindesk
It’s still in beta…so it’s not widely available, yet. But still seems underwhelming.
#14 These Nike NFT ‘Cryptokicks’ Sneakers Sold For $130K
Sneakers are collectors items, so it’s not unusual to see rare ones fetch huge prices. Limited edition Yeezys regularly go for five figures, and shoes with historical value, like those worn by Michael Jordan during iconic games, sometimes auction for over a million. But a recent buy is likely to go down as one of the more unusual sales in the annals of sneaker history: Someone paid $130,000 for a pair of virtual Nike sneakers.
The sneaker in question is an NFT, of course. It’s part of the Nike Dunk Genesis Cryptokicks collection of 20,000 NFTs launched by Nike and RTFKT (“artifact”), a virtual sneaker designer Nike bought last December.
Source: CNET
One brand in NFT space that still seems to be getting attention is Nike. Nike’s recently-launched NFT collection was very well received.
Capital Flywheels continues to believe that NFTs are tools. What people want are not NFTs. What people want is culture. NFTs are simply another tool for possibly holding and transferring culture. Nike already has a fantastic fanbase and culture. NFTs is a new tool available to Nike for creating, holding, and transferring that culture.
However, many people are now discovering what we have discussed on many occasions since early 2021: Some NFTs may be able to hold culture, but this not mean all NFTs hold culture (or value).
In normal Capitalism, you do work first and then get rewarded after. In crypto, the creator gets rewarded first and then the buyer hopes someone does the work to make it useful (either create utility if it’s a utility token, or create culture / brand value if it’s an art token). I’m an optimist, and I believe in the power of technology immensely, but not enough to override bad incentives…
#15 Fidelity to Allow Retirement Savers to Put Bitcoin in 401(k) Accounts
Fidelity Investments plans to allow investors to put a bitcoin account in their 401(k)s, the first major retirement-plan provider to do so.
Employees wonât be able to start adding cryptocurrencies to their nest eggs right away, but later this year, the 23,000 companies that use Fidelity to administer their retirement plans will have the option to put bitcoin on the menu. The endorsement of the nationâs largest retirement-plan provider suggests crypto investing is moving further into the mainstream, but it remains to be seen whether employers will embrace it for their workers.
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Under the plan, Fidelity would let savers allocate as much as 20% of their nest eggs to bitcoin, though that threshold could be lowered by plan sponsors. Mr. Gray said it would be limited to bitcoin initially, but he expects other digital assets to be made available in the future.
Source: WSJ
#16 Sam Bankman-Fried Described Yield Farming and Left Matt Levine Stunned
Sam Bankman-Fried: (21:28)
Let me give you sort of like a really toy model of it, which I actually think has a surprising amount of legitimacy for what farming could mean. You know, where do you start? You start with a company that builds a box and in practice this box, they probably dress it up to look like a life-changing, you know, world-altering protocol that’s gonna replace all the big banks in 38 days or whatever. Maybe for now actually ignore what it does or pretend it does literally nothing. It’s just a box. So what this protocol is, it’s called âProtocol X,â it’s a box, and you take a token. You can take ethereum, you can put it in the box and you take it out of the box. Alright so, you put it into the box and you get like, you know, an IOU for having put it in the box and then you can redeem that IOU back out for the token.
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SBF: (24:10)
Describe it this way, you might think, for instance, that in like five minutes with an internet connection, you could create such a box and such a token, and that it should reflect like, you know, it should be worth like $180 or something market cap for like that, you know, that effort that you put into it. In the world that we’re in, if you do this, everyone’s gonna be like, âOoh, box token. Maybe it’s cool. If you buy in box token,â you know, that’s gonna appear on Twitter and itâll have a $20 million market cap. And of course, one thing that you could do is you could like make the float very low and whatever, you know, maybe there haven’t been $20 million dollars that have flowed into it yet. Maybe that’s sort of like, is it, you know, mark to market fully diluted valuation or something, but I acknowledge that it’s not totally clear that this thing should have market cap, but empirically I claim it would have market cap.
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And now all of a sudden everyone’s like, wow, people just decide to put $200 million in the box. This is a pretty cool box, right? Like this is a valuable box as demonstrated by all the money that people have apparently decided should be in the box. And who are we to say that they’re wrong about that? Like, you know, this is, I mean boxes can be great. Look, I love boxes as much as the next guy. And so what happens now? All of a sudden people are kind of recalibrating like, well, $20 million, that’s it? Like that market cap for this box? And it’s been like 48 hours and it already is $200 million, including from like sophisticated players in it. They’re like, come on, that’s too low. And they look at these ratios, TVL, total value locked in the box, you know, as a ratio to market cap of the boxâs token.
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Matt: (27:13)
I think of myself as like a fairly cynical person. And that was so much more cynical than how I would’ve described farming. You’re just like, well, I’m in the Ponzi business and it’s pretty good.
Source: Bloomberg
What an incredible interview. With Sam Bankman-Fried, one of the richest in crypto.
đŹ Media + Games
#17 Snap Partner Summit 2022
Snap recently held their Partner Summit with a number of interesting announcements including a self-operating camera drone. Lots of interesting foundational tech for what comes next.
#18 Netflixâs Big Wake-Up Call: The Power Clash Behind the Crash
Several important Netflix creators voice a very consistent theory about whatâs gone wrong with the streamerâs culture. They see a link between Netflixâs problems and the 2020 fall of Cindy Holland, who played a key role in launching the serviceâs originals â brilliantly and often expensively â with House of Cards, Orange Is the New Black and Stranger Things, among others.
These sources say Holland was the one who nurtured strong relationships with talent and took time to offer thoughtful development notes while still making people feel safe and supported in pursuing their passion projects.
Important multihyphenates who work or have worked with Netflix say it was Holland rather than Ted Sarandos, then chief content officer, who gave Netflix its profile as a home to buzzy, quality shows.
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But a former insider says Sarandosâ volume strategy began to prove destructive to the culture and the quality of the serviceâs offerings. âTed is great at managing growth, but the company hit a phase where they needed to manage differently,â this person says. Whether Hollandâs spendy approach itself would have proved sustainable is a question, but several creators believe Netflix lost much of its early cachet by over-rotating to less expensive, less curated and less compelling â or, the company might say, broader â fare that simultaneously overwhelmed and underwhelmed some subscribers.
Source: The Hollywood Reporter
Although Netflix hasn’t performed materially worse than other tech names in the recent sell-off, there’s a lot that is going on that might suggest some real problems beyond Covid hangover.
This Hollywood Reporter piece gives an interesting look into some of the management and content challenges that may be ailing Netflix. It’s also interesting that despite all the data at Netflix (and talk about algorithms), the content strategy still seems to revolve around real people making gut decisions.
#19 Introducing Meta Store: A Hands-On Experience With Our Hardware
Today, weâre announcing Meta Store â our first physical retail space, which will open May 9 on our campus in Burlingame, California. In the Meta Store, youâll be able to get hands-on experience with all our hardware products.
Through interactive demos, you can make video calls to retail associates with Meta Portal, learn how Ray-Ban Stories can help you stay present with the world around you, and explore the magic of VR with a first-of-its-kind immersive Meta Quest 2 demo. Weâre also making it easier to shop Meta Portal, Ray-Ban Stories and Meta Quest all in one place online, in a new Shop tab on meta.com.
Source: FB
Another area where Apple is far ahead. AR / VR needs to jump a pretty high hurdle for consumer adoption. Consumers need a lot of education. Apple remains (likely) the only company that get simultaneously get a lot of people to buy a new AR / VR product sight unseen AND also has the store infrastructure in place to convince people that are skeptical.
đ° Fintech
#20 Stripe Introduces Financial Connections To Help Businesses Connect To Their Customersâ Bank Accounts
Stripe, a financial infrastructure platform for businesses, today launched Stripe Financial Connections, enabling businesses to establish direct connections with their customersâ bank accounts that power a wide range of financial processes. Businesses can use Financial Connections to verify accounts for payments and payouts, check balances to reduce payment failures, and cut fraud by confirming bank account ownership.
Direct bank account connections have historically been nearly impossible to establish on a programmatic basis. Businesses have had to either build custom integrations with the thousands of different financial institutions where US customers maintain bank accounts, or attempt a workaround, like asking customers to type in routing and account numbers, and then confirm microdeposits a few days later. The latter is a tedious process that 40% of customers abandon along the way.
Financial Connections provides an easier solution: customers simply enter their online banking credentials and select the account theyâd like to link. It supports platforms, businesses, and a full spectrum of users, from NFT creators to churches.
Source: Stripe
Stripe basically launched their own version of Plaid. Stripe’s ambition is breathtaking.
#21 ‘Buy Now, Pay Later’ Is Sending The Tiktok Generation Spiraling Into Debt, Popularized By San Francisco Tech Firms
Do a quick scan of TikTok and youâll find trendy young people casually blowing hundreds or thousands of dollars on clothes and jewelry, often set to the clattering, bass-boosted din of Florida rapper Saucy Santanaâs fittingly titled âMaterial Girl.â Plenty of those influencers get the goods they flaunt for free. But if you donât have the followers, or the up-front cash to blow, TikTokers have a tip: Just use âbuy now, pay laterâ services, the hottest new way to take on debt.
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The services, also known as point-of-sale loans, are heavily marketed by influencers and brands on TikTok and Instagram. They giddily display their âhaulsâ from the most popular brands, not just normalizing debt, but actually glamorizing it â and selling it as a way for trend-conscious young people to have all the coolest consumer goods, whether they have the cash on hand or not.
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âThese buy now, pay later programs incentivize people to spend above their means, because they’re like, âOh, well, it’s only this amount over four months,ââ Celesta, a Bay Area fashion influencer on TikTok who posts as @itscelesta, told SFGATE. (She declined to give her last name.) âPeople almost like brag or joke that âoh, it was only 24 payments of $20â or âI got it with Afterpay, so it’s technically free.ââÂ
Source: SF Gate
Fascinating article on BNPL and how it’s taking off with Gen Z and TikTok.
It wasn’t that long ago that people wondered if BNPL would take off. Capital Flywheels argued that there’s no doubt it would take off because who doesn’t like free money? The real question is can it take off in a sustainable way? Debt is still debt. If BNPL companies like Afterpay and Affirm are truly as good as they say they are at analyzing credit risk, then they will need to make sure their customers don’t spiral into unsustainable debt.
#22 Brazil Central Bank OKs Singapore’s Shopee App as Payment Services Provider
Shopee, the Singaporean shopping app, has gotten authorization from the central bank in Brazil to operate as a payment institution, Reuters reported Monday (May 2).
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Shopee will be able to âmanage prepaid payment accounts, in which funds must be previously deposited,â the gazette read.
Source: PYMNTS
Sea planning to launch Sea Money in Brazil?
đ Commerce
#23 Holy Ship! Shopify to Acquire Deliverr for $2.1B: Building the Future of Global Logistics for Independent Brands
Shopify Fulfillment Network (SFN) and Deliverr are combining to remove supply chain complexity for merchants of all sizes, on and off Shopify, democratizing access to end-to-end logistics for independent brands for the first time
Deliverrâs technology strengthens SFNâs ability to manage merchant inventory from port to porch as it travels to the warehouse network, gets distributed across sales channels, and ultimately arrives at the consumerâs doorstep
SFN and Deliverr will power Shop Promise, a new service that offers consumers two-day and next-day delivery options with the merchants they love
Source: Shopify
In the last edition of Tidbits, we discussed Amazon’s launch of “Buy With Prime”, which potentially threatens a lot of what Shopify has built. It leverages Amazon’s significant advantages in logistics as a trojan horse to enter Shopify’s ecosystem. We also discussed media reports of Shopify in talks to acquire Deliverr in order to fortify Shopify’s logistics position…that deal is now finalized.
This comes at a critical time (Shopify’s earnings report a few days ago show rapidly slowing growth…this is not unique to Shopify, though. Amazon is also slowing, but it is always times of slowing growth that forces everyone to compete for bigger slices of the same pie.), and Shopify needs to move quickly.
Stratechery has a great piece discussing this topic and how Buy With Prime is a huge step towards “Amazon-as-a-service” with deep implications for Shopify:
#24 Beyond Aggregation: Amazon as a Service
Today Amazonâs logistics is massive and fully integrated from the fulfillment center to the doorstep, even though it only serves Amazon; the obvious next step is opening it up to non-Amazon retailers, and that is exactly what is happening.
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Now Amazon has â or soon will have, in the case of Shopify-only merchants â a solution: the best way to get an Amazon-like shipping experience is to ship via Amazon. And, in contrast to the crappy Webstore product, you can keep using Shopify and its ecosystem for your website. Amazon may have given away business to Shopify in 2015, but that doesnât much matter if said business ends up being a commoditized complement to Amazonâs true differentiation in logistics. That business, thanks to the sheer expense necessary to build it out, has a nearly impregnable moat that is not only attractive to all of the businesses competing to be consumer touchpoints â thus increasing Amazonâs addressable market â but is also one that sees its moat deepen the larger it becomes.
Source: Stratechery
#25 Inside Shopify, Amazonâs âBuy With Primeâ Push Is Raising Existential Questions
Members of Shopifyâs product team discussed over Slack whether the company should build tools to let the 2 million online merchants who use its software access Buy with Prime. On one hand, doing so could help Shopify sellers boost their sales. But one product leadâs message countering that narrative struck a chord.
âWe should not do this,â they wrote to the team, a person who saw the messages told The Information. âI understand this is about creating merchant value, today. But this makes Amazon stronger, locks merchants into Amazon more, and is bad for them long-term.
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The back-and-forth highlights how Amazon has short-circuited Shopifyâs ethos with its Buy with Prime rolloutâShopify has long positioned itself as the anti-Amazon, but it has also put its merchantsâ best interest at the center of the software and other tools it sells to help them run online shops. And while Buy with Prime was the brainchild of a secretive Amazon effort to emulate Shopifyâs success, Shopify also has to think through whether shutting Amazon out will hurt its business more than help it.
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Buy with Prime is likely to be just the first big decision in this vein that Shopify will have to grapple with. Amazon has a whole pipeline of yet-to-be-announced features and tools as part of the broader internal effort that came up with the new Prime service, according to a person familiar with the Amazon project.
Source: The Information
A great inside look at how Shopify is now trying to respond. Unfortunately, Shopify will have to make some very tough choices as it is caught between multiple opposing goals.
#26 This Fashion Brand Built a QR Code Into Its Clothes so People Can Easily Resell Them Later
To cut back on waste and extend the average life of clothing, Scandinavian fashion brand SamsĂže SamsĂže has launched an innovation that simplifies the process of reselling clothes and encourages more people to do so with items from its own collection.
SamsĂže SamsĂžeâs Resell Tag is a QR code built within its clothing that helps people resell the items later. Once scanned with a smartphone, the tag activates a series of digital actions that are meant to save time and remove some of the hassle of reselling clothes online.
The tag is connected to Metaâs marketplace on Facebook and Instagram and automatically mocks up an ad based on datapoints from the piece of clothing, such as its style, size, color and age. It also auto generates images and copy describing the clothes.
Source: Adweek
Really interesting concept. Not only is it better for the environment, it also reduces the cost of ownership if it reduces the friction of reselling.
The world is likely to make broader steps towards a more “circular” economy in the coming years. Part of this is driven by climate change / pollution. And part of it is driven by rising costs and deglobalization. Rather than own a lot of cheap, disposable goods, we will likely aspire to own less but BETTER items. And these higher quality items can be resold when we want to change it up.
đšâđ» Technology
#27 With Their Hololens 2 Project, Microsoft And Volkswagen Collaborate To Put Augmented Reality Glasses In Motion
Imagine putting on a pair of augmented reality glasses as you head out in the morning and get into your vehicle. As your self-driving car takes you to your destination, you get holographic displays of traffic information, weather conditions, shopping recommendations and architectural highlights along the way. And as the day dawns, you can use holographic controls in front of you to adjust the interior temperature to your liking.
Thatâs the future of mobility envisioned by researchers at German automobile manufacturer Volkswagen, who see augmented reality as one of the key components of future mobility concepts. To get a little closer to that vision, Volkswagen collaborated with Microsoft to enable the HoloLens 2 mixed reality headset to be used in moving vehicles for the first time.
The new âmoving platformâ mode for HoloLens 2 overcomes a major limitation of mixed reality headsets and creates potential for the technology to be used in new ways â training drivers to handle challenging road conditions, for example, or creating new user experiences for autonomous vehicles. And while mobility is Volkswagenâs focus, the capability could in future be shared across other industries.
Source: Microsoft
Will this work better than just turning the windshield into a smart display?
Will this be necessary if cars can drive themselves?
BUT lots of interesting potential, especially for AR in the real world. Right now it’s hard to imagine people walking around with AR displays, but maybe using it in a car first could be a good way to convince consumers to use this outside the house.
đđœ “Nuts and Bolts” Tech
#28 Boeing Looked for Flaws in Its Dreamliner and Couldnât Stop Finding Them
Two deadly crashes of a different Boeing airplane, the 737 MAX, ushered in a new era of intense scrutiny of everything rolling out of Boeingâs factories.
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Amid the scrutiny, Boeing employees found defects on their own and began taking a harder look at how the company produced Dreamliners. They found more problems.
In 2019, they detected gaps between sections of the Dreamlinerâs fuselage that were slightly wider than specified in the FAA-approved designs. The gaps, about the width of a piece of paper, were wider than the manufacturing tolerance of 0.005 of an inch allowed under the approved design.
âWhat happens when you take a microscope to anything?â said John Plueger, chief executive of Air Lease Corp., a major buyer of Boeing aircraft that it leases to airlines. âYou find more stuff.â
Source: WSJ
Ironic that the plane model is called the Dreamliner. I’m pretty sure it’s a never ending nightmare at this point.
In an era where the US needs to BUILD, situations like these continue to raise questions about whether the US knows how to build anymore.
Much of the learnings and advances in engineering and the sheer capability to BUILD over the last two decades has accrued to China, not the US.
đđŹ Health + Science
#29 David Sinclair: Reversing the Aging Process [The Knowledge Project Ep. #136]
Fascinating podcast discussing aging. Worth checking out.
Aging is a rapidly advancing area of health / scientific research that could have significant impact in the coming years. While humanity has gotten pretty good at delaying death, we are still very early days in terms of reducing the impacts of aging (and potentially reversing it).
Our society increasingly relies on high skilled, knowledge workers that spend years and years to learn and train. However, aging puts a lot of that accumulated knowledge at risk. Slowing and reversing aging could be one of the most important productivity levers the world may see in the coming years.
#30 U.S. Seeks âUrgentâ Data on Covid Relapses After Using Pfizerâs Drug
U.S. government researchers are planning studies of how often and why coronavirus levels rebound in some Covid patients who have completed a five-day course of treatment with Pfizer Inc.âs Paxlovid.
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The demand for answers is rising as Paxlovid has become a key element of the Biden administrationâs pandemic approach, with the drug being made available at pharmacies nationwide. Among other questions the NIH hopes to get a better handle on is how often viral rebounds occur after five days of Paxlovid treatment, whoâs at risk for relapse, and whether it could be avoided with a longer regimen.
Source: Bloomberg
Paxlovid is the pill that promised to help “cure” Covid. Seems like there are some people that are seeing a resurgence in symptoms after treatment stops.
Still seems the most effective measure is just to periodically get a vaccine booster.