Cloudflare Aiming for the King

You come at the king, you best not miss.

Omar Little, The Wire

So in war, the way is to avoid what is strong, and strike at what is weak.

Sun Tzu, The Art of War

Almost two years ago, Capital Flywheels added Cloudflare to the Paper Portfolio shortly after Cloudflare’s IPO. For a while, the market overlooked Cloudflare and largely assumed Cloudflare to be fairly undifferentiated vs other CDN companies like Fastly and Akamai.… Read the rest “Cloudflare Aiming for the King”

How 3D Printing Threatens Amazon…and What That Can Teach Us About the Power of mRNA

The power of mRNA technology to truly transform society in the coming years can be a bit hard to understand.

We can already see the importance of mRNA tech / vaccines in our daily lives because of how central it is for combating COVID-19, but understanding its potential beyond COVID-19 likely takes a bit of a leap of faith for the average person.… Read the rest “How 3D Printing Threatens Amazon…and What That Can Teach Us About the Power of mRNA”

Tidbits #33 – “I am not a cat”

Hello, hello. 👋🏻👋🏻

I usually start off each Tidbits with some overarching theme relative to what’s going on in the world in order to make sense of it all or themes that I believe people should spend more time thinking about…

But nothing I say can better encapsulate the disruptive (but rejuvenating?) chaos that is bubbling underneath all of society at the moment than Keith Gill’s (a.k.a.… Read the rest “Tidbits #33 – “I am not a cat””

Tidbits #32 – The World Continues to Spin

Hi, friends. 👋🏻👋🏻

Hope you’re all enjoying the long weekend. If you have a significant other, hopefully you were able to do / enjoy something nice together for Valentine’s Day. For all my Asian readers, happy lunar new year! And for all my American readers, happy President’s Day!

As always, thanks for sharing a little bit of your time to hear what I have to say.… Read the rest “Tidbits #32 – The World Continues to Spin”

Tidbits #30

Hello, hello! 👋🏻 👋🏻

Thanks for reading.

A little longer than usual, but I hope you have as much fun reading it as I did writing it.

If you can’t get through all of it, please at least check out #20! It’s awesome. I guarantee it.

🗺 Geopolitics

#1 Twitter Locks Out Chinese Embassy in U.S. Over Post on Uighurs

Twitter Inc.

Read the rest “Tidbits #30”

Competing Against the Past, Competing Against the Future

Three years ago, Capital Flywheels wrote a post titled “Why Amazon is so Hard to Compete Against“.

Specifically, I argued that Amazon’s greatest advantage is not the commonly cited ones of scale or cash flow or brilliant management…

(those things make it even harder to compete against Amazon)

…but rather Amazon’s greatest advantage is that competitors never actually compete against Amazon at all but instead compete against Amazon’s past.Read the rest “Competing Against the Past, Competing Against the Future”

Tidbits #20 – Finish Line in Sight

Here’s a selection of what I found most interesting recently. I started experimenting with some design changes in recent editions of Tidbits…the design changes don’t come through all that well via WordPress’ default email feature, and I’m not confident I will figure out a better alternative to the default email feature soon. May be better to read directly in the browser while I continue to experiment.… Read the rest “Tidbits #20 – Finish Line in Sight”

Tidbits #16 – Skipping the Elephant in the Room

I sensed October was going to get really crazy, but it got crazy, faster than I thought. You know what I’m talking about. Since the whole world already knows what happened yesterday, I’m just going to skip mentioning the elephant in the room because you and I know I have no useful commentary to add there at all.

Let’s see how well I can take your mind off of that topic and onto other things.… Read the rest “Tidbits #16 – Skipping the Elephant in the Room”

Tidbits #7 – Strong Balance Sheets in Motion

Now that we are several months into the COVID19 pandemic, many companies have gotten over the initial stage of shock.

Many (weak) companies have already declared bankruptcy. Like JC Penney. Like Nieman Marcus. Like J Crew.

But, there’s another side to the coin. As discussed in a recent post, companies with strong balance sheets are not only defensive in periods of stress, but strong balance sheets can be deployed offensively to aggressively box out weaker competitors during periods of stress.… Read the rest “Tidbits #7 – Strong Balance Sheets in Motion”

Hardware, Software, and Platforms

The recent Wework debacle seems to have opened up a bit of soul-searching within tech companies and among investors. Cynics are largely looking for ways to say, “I told you so,” with the main conclusion being we have somehow gone full circle back to the cash-burning bubble experienced back in 2000.

While reflection and soul-searching is indeed needed, I think the cynics’ conclusions will likely prove to be the wrong ones when we reflect on this period in the future.… Read the rest “Hardware, Software, and Platforms”

Paper Portfolio – December Update

During November, the paper portfolio outperformed the S&P500 by 0.92%. This number, however, masks the underlying strength of the portfolio since ~40% of the value is still allocated to cash. The stock-only portion of the portfolio outperformed the S&P500 by 3.89% with significant strength across almost all holdings except for Uber, Match, and Activision Blizzard.

Despite significant strength across most of the stocks in the portfolio, all of them continue to look undervalued over a longer time horizon.… Read the rest “Paper Portfolio – December Update”

Open Sesame

According to Wikipedia, Ali Baba opens the mouth of a treasure cave using the magical phrase “open sesame” in the story of “Ali Baba and the Forty Thieves”.

In similar ways, our Alibaba has been making incredible progress in opening a multitude of modern treasure caves…

Caves such as…

Single’s Day. Just a few days ago, Alibaba announced >$38 billion of GMV for their Single’s Day shopping festival (note that the RMB has weakened over the past year, which further obscures the incredible growth in riches they continue to find in this Single’s Day cave).… Read the rest “Open Sesame”

Attacking Adjacencies + Loss Leaders

Every tech/internet company today that has accumulated immense market power seems to have done it using two simple strategies: 1) Leverage a successful core customer base or asset to attack an adjacent market, and 2) Using a loss leader to encourage adoption.

Neither of these strategies are original and have been used effectively by some of the most successful offline businesses before.… Read the rest “Attacking Adjacencies + Loss Leaders”

“Arming the rebels of the commerce industry”

Shopify announced quarterly results yesterday and raised guidance. Although the market appeared to be more short-sighted and reacted poorly largely because the results were “good but not good enough”, the company continues to execute well on its long term vision.

Along with results, the company released a new report highlighting the impact of their business, which is worth reading. Shopify disclosed that they crossed 1 million merchants running on the platform.… Read the rest ““Arming the rebels of the commerce industry””

Alibaba Ramping Up Efforts in the US?

Looks like I’ve neglected to post in quite a while.

The past year has certainly been a blur with both market and geopolitical disruptions domestically and abroad. What started out as my good intention to take the market disruption as an opportunity to do more work on a number of companies I’ve long admired (largely within e-commerce and internet space), quickly lengthened into a years-long journey exploring new areas/industries such as payments, SaaS software, and biotechnology.… Read the rest “Alibaba Ramping Up Efforts in the US?”

The Future of Ecommerce: Utilitarian vs Social

When people think about ecommerce today, they likely think about ecommerce along the lines of C2C (consumer-to-consumer), B2C (business-to-consumer), or B2B (business-to-business) – in other words, classification by type of buyers and sellers.

Or perhaps people think about 1P (1st party) vs 3P (3rd party), depending on whether the ecommerce platform itself engages in the direct buying and selling of goods.… Read the rest “The Future of Ecommerce: Utilitarian vs Social”

The Other Supply Chain Gorilla That May One Day Challenge Amazon

As detailed in my recent post, Amazon has built up quite a formidable competitive advantage through Fulfillment by Amazon (FBA). Not just on the demand side, which every happy Prime subscriber is already familiar with, but also on the supply side.

In that post I concluded the following:

Fulfillment is clearly beneficial on the demand side, but has a lot of supply side advantages as well.

Read the rest “The Other Supply Chain Gorilla That May One Day Challenge Amazon”

Why Amazon is so Hard to Compete Against

Amazon has clearly become an absolute juggernaut. There are likely only a handful of companies today that have the resource and scale to compete with Amazon directly. But most of the companies that do have the resources to compete generally don’t operate ecommerce platforms, leaving the field mostly wide open for Amazon to continue to grow unabated.

I have been trying to grapple with the question of why it has been and continues to be so hard to compete against Amazon.… Read the rest “Why Amazon is so Hard to Compete Against”

Supply Side Advantages of Fulfillment (by Amazon)

I wish I had spent more time analyzing Amazon in earnest years ago. But late is better than never. I’ll console myself with the fact that e-commerce penetration in the US is still <10% of all retail sales…and relative to that statistic, even the word “late” seems a bit premature.

Having spent a number of months learning more about Amazon’s history, assets, business model(s), and philosophy, one thing I’ve realized is that Fulfillment by Amazon (FBA) affords the company immense advantages on the supply side that I think are largely glossed over in mainstream media and investor dialogue.… Read the rest “Supply Side Advantages of Fulfillment (by Amazon)”

The World’s Most Valuable E-Commerce Company

Is possibly going to be Alibaba very soon.

Amazon vs BABA

For a long while following it’s IPO in 2014, investors were highly skeptical of Alibaba. Many still are, but many more are starting to recognize Alibaba’s incredible dominance in China. More importantly, as mentioned briefly in my post Tencent vs Alibaba on the Quest to Go Global, the company stands a fairly good chance of going global.… Read the rest “The World’s Most Valuable E-Commerce Company”

Amazon’s Capital Market Dependence

Lately, there’s been no shortage of positive coverage on Amazon – and for good reasons. The vast majority of retail is struggling with declining same-store-sales, yet, Amazon continues to post a torrid pace of growth despite its size. In FY16, Amazon grew North America segment sales by 25%, and that growth came at the expense of the rest of the retail industry.… Read the rest “Amazon’s Capital Market Dependence”

The Importance of Focusing on Business Models

“Investment is most intelligent when it is most businesslike.” – Benjamin Graham

“I am a better investor because I am a businessman and a better businessman because I am an investor.” – Warren Buffett

Most investors define themselves along a couple of axes: Technical vs fundamental, value vs growth, long vs (and/or) short, contrarian vs momentum, large cap vs small cap, etc. … Read the rest “The Importance of Focusing on Business Models”