Category Archives: Amazon

Amazon

[VIC – 115] Want to see Jeff Bezos do a handstand?!? đŸ€ž đŸ€ž

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A handstand is the perfect balance of strength, balance, focus, and discipline. And while I, unfortunately, don’t have a funny video for you, a free-standing handstand captures well many ideas inherent in Amazon’s culture (which is why Bezos mentioned them in his latest letter to shareholders). And given that Amazon is my largest public equity position, I thought it prudent to spend time this week reflecting on the letter.

Business & Money

Looking at the “Marketplace” section, I think it’s worth pointing out a common misconception. Many people I speak with seem to have this idea that Amazon is “killing the little guy.” In other words, making it incredibly hard for small businesses to compete. But I think reality says the exact opposite. In 2017, over 300,000 SMBs started selling on Amazon Marketplace. In just one day, Prime Day 2017 to be specific, SMBs sold 40 million items on Amazon, an increase of 60% YOY. 140,000 of the SMBs selling on Amazon surpassed $100,000 in sales last year.

The fact of the matter is that Amazon enables SMB merchants in a way that the world has never seen (of course Alibaba and JD have quickly followed suit for the Chines market, Mercado Libre in Latin America, etc).

If you want to defend main street, or point fingers at big companies, you’re better served looking at Walmart or Costco.

Now whether those SMBs will ever reach meaningful scale is another question. The definition of meaningful is, of course, completely subjective. But I’m talking about tens or hundreds of millions in revenue. For any SMB starting to reach serious scale, I think it’s fairly obvious that you have to go direct to consumer. Because if you don’t, Amazon will be ruthless about creating a private label version of whatever you sell and trying to take the market.

Human Progress & Philosophy

In software development, you have the concepts of features and bugs.

A feature is something deliberately built into the product that adds value to the user. Filters on Instagram are a feature that allow users to post better pictures.

Bugs are mistakes; a flaw in the code that detracts from the user experience. When we first released DogsterApp, pictures posted to the feed were often stretched and distorted depending on dimensions of the picture. Clearly a bug.

But sometimes it’s less clear whether something is a feature or a bug. Take this section from the shareholder letter:

One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’.

In high growth technology companies, the rapid rate of development, deployment, and iteration is a feature. You have to move fast if you want to stay ahead of the market and keep up with customer expectations.

In life more broadly, the process by which ‘yesterday’s wow becomes tomorrow’s ordinary’ might be considered a bug. It’s often referred to as the hedonic treadmill, or the tendency for humans to remain at a relatively stable level of happiness despite positive or negative events or circumstances. So when you get that big promotion, you get a momentary spike in happiness, but then you return to your normal baseline.

You might think of it in terms of happiness vs pleasure.

I’ve always thought of pleasure as fleeting and temporary. There’s an element of striving, an element of hedonism. Scientifically, you might think of it in terms of increased dopamine levels.

While happiness is more persistent, a satisfaction or contentment with what you already have, vs striving for more.

And while business and commerce might always be driven by an element of pleasure-seeking, it feels like living a good life might reside on the other side of that equation.

My Latest Discovery

I absolutely love Career Choice!

For hourly associates with more than one year of tenure, we pre-pay 95% of tuition, fees, and textbooks (up to $12,000) for certificates and associate degrees in high-demand occupations such as aircraft mechanics, computer-aided design, machine tool technologies, medical lab technologies, and nursing. We fund education in areas that are in high demand and do so regardless of whether those skills are relevant to a career at Amazon.

Especially that part about “regardless of whether those skills are relevant to a career at Amazon.” You’re all fully aware of my stance on continual learning, and I think more companies would be served by adopting a similar approach.

I think some executives might say “what is the return on investment, particularly if those employees leave and apply those skills elsewhere?” And it’s a reasonable critique. But it seems that having employees with a natural thirst for learning is better than not.

Amazon, Berkshire Hathaway, Healthcare, Sharing Economy 2 Comments

[VIC – 106] AHS – Amazon Health Services đŸ˜· . Avoiding exploitation in the sharing economy. To understand > to reply. Hostess with the mostest đŸ© .

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Business & Money

A few days ago there was an announcement that Amazon, Berkshire Hathaway, and JPMorgan Chase are creating a joint healthcare venture. The press release is pretty vague, but intriguing nonetheless.

To start, let’s look at AWS to get an idea of how the Amazon model works. As Amazon was scaling in the mid-2000s, it decided to build an easy-to-use interface that developers across the company could use to spin up cloud servers, build applications, and access the necessary compute and storage resources as-a-service. And once this system got to scale internally, it offered the whole thing as-a-service to external developers. So now anyone in the world can leverage the front end that Amazon has built (aws.amazon.com), leverage all of the back-end technology (servers, data centers, etc) to deploy whatever app they’re working on far faster and far cheaper than would otherwise be possible.

It’s the same story with e-commerce. Want to sell something? Leverage the interface at Amazon.com and all of the back end tech (fulfillment centers, logistics networks, etc) to be up and running in no time.

So I imagine this will be the plan for healthcare. Build a front-end interface for Amazon employees (and those at Berkshire and JPMorgan) to easily access insurance information, pharmacy benefit managers, pharmacies, and any other players in the ecosystem, while also building the back-end infrastructure to make the whole thing possible. And once they have that figured out, of course, open the floodgates by offering that same interface+infrastructure to other employers and maybe even individuals at some distant point in the future.

The really interesting thing to me is that, while this is all playing out, all of the healthcare suppliers (insurers, pharmacies, etc) will likely be modularized in the process. If Amazon becomes the front end, then it won’t matter to the consumer what insurance company is behind the scenes paying the bills or what pharmacy fills a prescription. And I think it’s this idea that explains why healthcare stocks across the board sold off when the announcement hit the wire. The writing is on the wall.

Now if this hypothetical scenario does play out, it would do so over a very long period of time. Maybe 10, 20, or even 30 years. So the short-term selloff is likely a bit of an overreaction in the immediate term. I imagine short-term traders are taking advantage as we speak.

But speaking of how long this will take, I think that explains why the aforementioned companies are partnering on this initiative. Nothing I’ve mentioned to this point requires anything from Berkshire or JPMorgan. The strategy, approach, and time horizon is purely and quintessentially Amazonian.

However, Berkshire brings something interesting and unique to the table. While they do not play in healthcare insurance directly, they are one of the largest reinsurers in the game. That is, they provide insurance for the health insurance companies. So they wouldn’t be at risk of being modularized by this new platform, but would instead provide a vital piece to the puzzle.

And finally, we have JPMorgan. What are they doing here? Well, one of the lines from the press release says that the new venture will be “free from profit-making incentives and constraints.” First off, I think it’s highly unlikely that these guys are building a non-profit (if you disagree, I’d love to hear your perspective). Instead, I think that sentence reflects the long-term perspective of the partnership. This won’t be a money-making endeavor anytime soon. If they can be successful with this, and that’s a massive IF, this will take many many years and many many dollars to unfold. And as such, access to capital markets and financing will be a critical component to the long-term strategy. And who better than JPMorgan to fill that role.

Human Progress

The sharing economy fascinates me. It’s incredible how, over a very short span of time, entrepreneurs across the globe have identified ways to better utilize and monetize existing resources.

On the employment front, this brings many new and exciting opportunities to the table. Workers have a new found flexibility to define the nature of work for themselves. Individuals that may have otherwise had limited opportunities can now easily become market participants. And sharing economy platforms generally have the ability to scale in a way that traditional businesses cannot (low fixed costs, network effects, etc). As such, the net benefit to job creation can be massive.

That said, the moral and ethical implications are also significant. There is a chance that workers become completely commoditized by these platforms. When you think of a company like Uber, it’s hard not to think about the low bargaining power of drivers which leads to serious exploitation. We’ve all read about how drivers can be penalized for shutting off the app, the gamification elements that lead to long hours, and how long it took to get tipping implemented. And given that sharing economy laborers are often contractors (as opposed to employees), their ability to collectively bargains is basically non-existent.

So how can we ensure that we benefit from this incredible new business model, without allowing the negative externalities to run amuck?

To start, I think it’s important to think about how the reputation systems are employed. All sharing economy platforms use them, but all are not created equal. For example, let’s look at Airbnb. If you’re a host with great reviews, your listing gets prioritized in search results and you have the opportunity to make more money. So the platform leverages the system to create more economic opportunity for participants. Uber, on the other hand, leverages their reputation system to remove bad actors. I can’t find any evidence that higher rated drivers are more likely to get more fares. Instead, as long as your reputation is high enough to remain on the platform, you are matched based on location and pick-up times. What if riders could see these rating ahead of time and select drivers based on them? That small change might provide more incentive for safe driving and better reward the top drivers on the platform with more fares and more money.

Another thing to consider is whether these platforms encourage repeat transactions between the same buyer and seller. For example, when I was running DogsterApp, I used LawTrades as my platform for legal services. It matches you with qualified lawyers based on what services you need. And when you find the right lawyer, you can basically pay a flat monthly fee for a block of that specific lawyer’s time. It’s like a dedicated and on-demand general counsel. And over time, I can build a relationship with a specific person based multiple interactions and trust. I think this encouragement of repeat transactions between the same people empowers suppliers (the lawyers in this case) to build reputation, a loyal customer base, and again, increases their earning potential. Contrast that with platforms like TaskRabbit where you are just matched with a different random person each time you use the platform. The latter leads to commoditization of labor and exploitation, just like the Uber drivers.

Finally, I think the ability to set the price has a lot to do with the quality of the experience for workers on these platforms. For example, you can use a platform like Thumbtack to secure local services like house cleaning or carpentry, and the workers have the ability to offer their services at whatever price they decide. That type of flexibility allows greater freedom and agency for suppliers, while not allowing the platform to control their earning potential.

These are just a few things to consider, but perhaps we need some form of regulatory checklist by which to evaluate the merits of these platforms and determine if they will produce a net benefit to society.

Philosophy

For the longest time, when other people would speak, I would always listen with the intention of replying. As I took words in, I was simultaneously figuring out what I was going to say next in response. And it makes logical sense. A conversation is an interchange between two people wherein they take turns speaking.

And in sales, it seemed to make even more sense than in normal conversation. When an existing or potential customer speaks, it’s often about why their current situation is working and why they don’t need any help. It’s about how they made an investment with a competitor and their needs are being met. So logically it was my job to find cracks in the story, respond with how our feature set was superior, or elicit fear, which might encourage them to make a change.

But at some point, in both work settings and my personal life, I made a change. I stopped listening with the intention to reply, but rather listening with the intention to understand. I mean really understand.

And funny things happen when you make that change.

First, the pace of conversations tends to slow down. There are often pauses after the other person stops speaking. And I think that’s a good thing. It makes conversations more thoughtful, deliberate, and insightful. (But the silence does take some getting used to.)

Second, I found that my replies, more often than not, would be another question, rather than an answer or statement of fact. Because in reality, only so much can be said with a couple sentences. Word choice matters. Tone of voice matters. Body language matters. And when you really listen and make a genuine attempt at understanding, you start to get curious about why a person uses one words versus another. You start to get curious about what underlying emotions and drives might be coloring the conversation. And everything in life really comes down memories and motives. To past experiences and future desires. The more you can understand those things, it seems the better you can influence or motivate a desired action.

And finally, you end up with deeper and higher quality relationships, whether business or personal. And things basically boil down to relationships, so this seems to be a good outcome.

My Latest Discovery

Last week I touched on the fact that many companies have been giving out these one-off bonuses in response to tax reform. And every example that I had seen to that point was basically the same. Here’s a $1,000 bonus check, spend it wisely!

But this week, I stumbled upon a press release from Hostess.

“Hostess Brands, Inc. today announced that, following the recently enacted tax legislation, the snack cake maker will be providing bonuses totaling $1,250 to its 1,036 hourly bakery and corporate employees. The bonuses will include $750 in cash and a $500 401k contribution.”

I love the 401k contribution angle. Think about it. For hourly workers in retail or manufacturing, there’s a fairly high likelihood that they might not be the most highly educated employee base. And as such, a $1,250 cash infusion might fly out of their checking accounts just as quickly as it arrived.

This is a great example of long-term thinking from the executive team at Hostess and real investment in its people. Good Stuff Hostess! (That doesn’t mean I’ll be eating any of their manufactured poison anytime soon)

Amazon, Data, Tax 2 Comments

[VIC – 105] One more thing on the tax plan. Bye bye cashiers. The happy man that cleans my office. Our World in Data.

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Business & Money

Reading through the new tax legislation is woefully boring, so I think I’ll give it a rest pretty soon. But before I do, I’ll just say this. The new tax law was sold to the American people as a job creator and a boon for US investment. I’m not so sure.

On the jobs front, unemployment is near record lows hovering around 4.1%. For the uninitiated, that means we’re closing in on what’s termed “full employment.” So even if US firms invest heavily and create a ton of jobs, where will the new workers come from? And if there aren’t many workers to fill the new jobs, will companies really expand US operations and build new factories?

And now we have all of these companies giving out raises and bonuses after the bill was passed. But I’m not sure I buy the idea that companies are just giving away money out of kindness and generosity.  Feels more like well tuned and well-timed work from PR executives.

And besides, how much money are we even talking about? Maybe a couple percentage points of profitability? It seems to me that these bonuses could have been handed out a long time ago without much trouble. But better late than never, I guess.

So PR coverage, rainbows, and butterflies aside, corporations operate to maximize profits. And their motivations won’t be changing anytime soon.

And oh yea, all of these cry babies complaining about our massive deficit, what do tax cuts mean? An even higher deficit.

Human Progress

Earlier this month, the Amazon Go concept store opened in Seattle. It is the quintessential image of technology and innovation. It is sensors, and IOT, and computer vision, and mobile payments, and cloud computing, and who knows what else.

But then you have the detractors. “What about all those cashiers,” they ask. The Bureau of Labor Statistics puts cashiers in the US around 3.4 million. And another 4.6 million working in retail sales more broadly. Safe to say many of those will disappear.

And as much as that sucks, it is simply the way that human progress works.

Karl Marx would probably be rolling in his grave if he knew about Amazon Go. He’d claim this was another case of labor being subjugated by capital. He’d encourage the cashiers and retail workers to revolt and overthrow the tech bourgeoisie. But like the Luddites and factory workers of the industrial revolution, they don’t stand a chance.

But it’s not all bad news. Despite government shutdowns and “my button is bigger than your button” commentary, we can still have hope. In fact, I’d say that 2017 was the best year in human history.

“A smaller share of the world’s people were hungry, impoverished or illiterate than at any time before. A smaller proportion of children died than ever before. The proportion disfigured by leprosy, blinded by diseases like trachoma or suffering from other ailments also fell
. Every day, the number of people around the world living in extreme poverty (less than about $2 a day) goes down by 217,000
 Every day, 325,000 more people gain access to electricity. And 300,000 more gain access to clean drinking water.”

Go humanity, go!

Philosophy

There’s this Hispanic man that comes to my office every afternoon to clean. Every day, he waltzes in with a bubbly demeanor and a big smile on his face. If I happen to walk by him in the kitchen or the bathroom, he always makes genuine eye contact followed by a “what’s up buddy, how are you?” And it’s not one of those “just saying hi because you happen to be two feet away from me” greetings. He stands there and waits for a reply. I think he actually wants to know how I’m doing.

I point this out because he doesn’t have to be that away. I won’t guess at his hourly rate, but I imagine it’s not very much. And I also imagine that my office isn’t the only one he cleans on a given day. He probably bounces from office to office mopping floors, cleaning toilets, and emptying trash cans.

Meanwhile, when I think about walking to the office from the subway in the morning, you see so many people with angry and disgruntled looks on there faces. They don’t say excuse me, they bump into you without as much as a glance, and they definitely do everything they can to avoid eye contact. And most of them are not on their way to clean toilets. They are founders of companies, lawyers, investors, VPs of something or another, or otherwise successful people.

I point this dichotomy our for two reasons.

First, human beings have this uncanny ability to magnify the scope of their own problems, while basically ignoring those of others. And that is irrespective of your station in life. The problems might be vastly different, but the emotional and psychological pain caused by them is the same.

Second, and I believe more importantly, it is completely up to you how you choose to respond to a given situation. You often don’t have control over what happens, but you DO have control over your response. You can smile and whistle while cleaning toilets, and you can be completely miserable and empty inside while wearing a $5,000 suit and drinking a $5 cup of coffee. It’s simply up to you.

My Latest Discovery

If you clicked on the link in the Human Progress section, you may have noticed that the article linked to another site called Our World in Data. It’s absolutely fascinating. You can basically find any subject you’re interested in, and the site offers up tons of statistics and data visualizations about that subject.

If you read VIC 102, I wrote about rising costs in healthcare. This chart, and the associated research, captures that pretty clearly:

Amazon, Food

[VIC – 100] Don’t talk đŸ’© . Heeeeeem (heme). The right questions. Samsung soundbar.

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Business & Money

I was listening to an episode of a podcast called Industry Focus this week about Fedex (FDX) and UPS (ticker is the same). Basically the conversation was about whether or not these two stocks might offer attractive return profiles in light of the explosion in global shipping volumes (grew by 48% from 2014 to 2016 across 13 major global markets).
During the 30-minute conversation, the following question was posed, “With Amazon entering the shipping and fulfillment market, do you think they pose a threat to FedEx and UPS?”
One of the analysts on the line responded with, “FedEx and UPS have pretty big moats in terms of the sorting centers they have and fleets they operate. That’s not to say that Amazon couldn’t enter the business. They’ve shown over the years that they’re willing to spend billions when Bezos decides to enter a new market. But I think that FedEx and UPS have massive moats nonetheless, and not too much to worry about.”
I literally laughed out loud as I was walking on the sidewalk.
First off, to doubt Bezos is to dig your own grave. When all is said and done, he may be in the running for the greatest business person of all time.
Secondly, we’ve seen this movie before. Analysts and incumbents making foot-in-mouth statements about startup competitors, only to later fall into obscurity at the hands of those same companies.
In fact, here is FedEx’s Executive VP Mike Glenn talking about Amazon:
“While recent stories and reports of a new entity competing with the three major carriers in the United States grabs headlines, the reality is it would be a daunting task requiring tens of billions of dollars in capital and years to build sufficient scale and density to replicate existing networks like FedEx.”
Or remember back when Siebel was the king of CRM. Thomas Siebel of Siebel Systems told Bloomberg in 2003, “Microsoft will roll [Salesforce] over. They get Zambonied.” I used Siebel when I was AT&T, before adopting Salesforce when I moved to AdRoll. It’s unfathomable to me how Siebel owned that market.
And we can’t forget about Blockbuster CEO Jim Keyes when he said “Neither RedBox nor Netflix are even on the radar screen in terms of competition. It’s more Wal-Mart and Apple.”
You almost wince at the incredible hubris coming from these guys and gals. The lesson is simple. Stop talking shit and heed the lessons of history!

Human Progress

All animals either eat other animals, plant matter, or a mixture of the two. As you move down the food chain, it’s primarily plants for food, and perhaps bugs. And same goes for bugs. They either it other bugs, plant matter, or a mixture of the two. So it’s fair to say, if you follow the chain, all of the nutrients start with plants.
It’s a pretty basic idea when you really think about it. So there really shouldn’t be anything that we can’t get from plants, from a nutritional standpoint.
But then why is meat consumption so pervasive? First off, it’s been culturally baked in. Our food pyramids have it, our holidays and celebrations are centered around it, you usually have to call ahead to ask about vegetarian options at restaurants. It’s just the default.
Secondly, and more importantly for most people, it’s delicious! But if we go back to our core idea, there shouldn’t be any reason we can’t recreate that taste with plans. If the cows are consuming a purely vegetarian diet, then it’s only the chemical reactions and bacteria throughout their digestive systems that’s responsible for converting the plant matter into meat. I’m not a biology major so I’m just trying to oversimply this matter for sake of conversation.
In any case, it turns out that a specific molecule called heme is a key catalyst in the chemical reactions that take simple nutrients (fats, amino acids, etc) and turn them into the unique explosion of flavor, aroma, and juicy-ness that is the meat we love. This fact was discovered by Patrick Brown and his team from Impossible Foods, a startup making burgers that look, feel, and taste like the real things, but are made solely from plants.
Patrick recently spoke at Stanford about what they’re up to and thought you guys might like to check it out:

Philosophy

I recently had a friend ask me whether I was for or against net neutrality. Easy answer. I’m for net neutrality. A fair and open internet is a no-brainer. It’s key to innovation, economic growth, fair markets, and much more.
But that’s not really the right question. What’s really at issue is how internet companies (ISPs, tech giants, etc) should be regulated and whether Title II of the Communications Act is the right approach. That’s a much harder question to answer with tons of grey areas. And I don’t want to get into that here, but rather to point out that it’s important to focus on the right question.
Let’s frame it differently. Are you for or against killing human beings? Stupid question. Killing people is wrong. But then again, you could get into tons of conversations about capital punishment, assisted suicide, and self-defense. Another poorly framed question.
The framing of questions is so immensely important, and often not given enough attention. I’d even venture to say that this might be one of the most important challenges we face in everyday life.
Are you a democrat or republican?
What religion are you?
Are you for or against Black Lives Matter?
These simple and surface-level questions often lead to equally simple and surface-level responses, that then result in snap judgments, misunderstanding, and polarization. If only people could spend more time asking thoughtful and well-framed questions.

My Latest Discovery

I was recently in market for a soundbar + subwoofer combination for my living room. The speakers on the TV seemed to be on the fritz, but it’s a great TV and not yet ready to be replaced. After a bit of searching, I landed on this one:

It has far exceeded my expectations and I would highly recommend it! Great bang for not so many bucks.

Amazon, Apple, Investing, Netflix 2 Comments

[VIC – 95] Coughing on the froth. (Lack of) progress in corporate taxation. It seems to me. AirPods are dope!

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Business & Money

Netflix is an incredible company. I don’t spend much time in front of the TV these days, but when I do, Netflix is often what I’m using. From an equity perspective, the stock has also been good to me. Very good.
BUT.
I sold my entire position this week. Let me explain why.
In 2007, Abbey (the UK’s 2nd largest mortgage lender) increased the amount that it was willing to lend homeowners to 5X their annual salary. The historical benchmark was 3.5X.
Just this past June, Argentina issued $2.75 billion of century bonds at an interest rate of 8%. And this was just as it was coming out of default. Actually, Argentina has defaulted on its debt 5 times in the last century, and 8 times in the last 2 centuries. What’s more, this most recent bond issue was heavily oversubscribed.
I point out these 2 examples because we are in the “this time is different” phase of the current bull market. People are forgetting what happens when debt markets get frothy. And right now, the froth is so deep you can swim in it.
To bring it back to Netflix, they’ve just announced a new (junk) bond issue to raise $1.6 billion to fuel its content spending machine (planning to spend $7 – $8 billion on content next year). COUGH COUGH. Please excuse me, I was chocking on the froth for a moment.
And the new debt sits on top many other concerning facts. The company burns cash faster than a California wildfire and has had negative free cash flow forever. The cost per subscriber is climbing faster than the revenue per subscriber. If there’s one company that might overcome all of this, it’s Netflix. But I’m not willing to make that bet, especially in this market climate.
It’s possible that we have a ways to go in this bull market. And perhaps I will miss out on a solid portion of the upside for Netflix in the near term. But those that rise the highest during bull markets will fall the farthest in bear markets. And that is exacerbated when you have shaky fundamentals.
And don’t forget, there’s nothing stopping me from getting back in when things come back down to earth.
I’ll remind you, THIS TIME IS NOT DIFFERENT!

Human Progress

Amazon has made nearly $470 billion in revenues over the last 5 years. They’ve paid $2.4 billion in corporate income taxes over the same period. That doesn’t seem right.
Bezos and his executive team are getting incredibly rich, they’re creating a ton of shareholder value, but it seems society should see some of this value creation. We have public schools, infrastructure, social security, and many other things that we’ve agreed as a population are important.
Amazon has been making incredible progress over the years in cloud computing, automation, machine learning, and e-commerce. But their business model has also revealed a glaring lack of progress in how we look at corporate income tax. It doesn’t seem right that you can run a business at break even and avoid paying taxes, while also enjoying cheap access to capital like it has never been seen before.
And I’m not at all proposing that there exists an easy solution. But I think we need to start getting creative and trying new things. Perhaps businesses above a certain market cap could be taxed based on a percentage of revenues. Perhaps that percentage could change based on industry and/or fixed vs variable cost structures. Perhaps taxation could show up higher on the income statement before R&D expenses are taken out.
Who knows.
But I do believe that there are tons of people way smarter than I am that could spend a bit more time with this one.

Philosophy

I came upon a quote this week that read “great musicians know when they are out of tune. Poor musicians do not.” To use different language, I read it as “it’s easy for smart people to say ‘I don’t know.’ Stupid people think they know everything.”
I once read an article from Albert Einstein from the time when he was first formulating his ideas that would lead to the birth of quantum theory. The article begins,
“It seems to me that the observations associated with blackbody radiation, fluorescence, the production of cathode rays by ultraviolet light, and other related phenomena connected with the emission or transformation of light are more readily understood if one assumes that the energy of light is discontinuously distributed in space.”
I love the way that it begins with “it seems to me.” Here is one of the most brilliant minds to ever grace the earth stumbling upon one of THE transformative ideas in modern science, and he hesitates with the humility that only a great man can have.
I think this happens because the more one reads and learns about the world, the more apparent it becomes how little we actually know and understand about how things work.
Further, there’s this concept in science known as an “effective theory”. That is, a theory that applies in practice and is observable in everyday life. Since we’ve mentioned quantum theory, we can stay on this subject. Before quantum theory, Newton’s laws were the end-all-be-all in terms of describing the motion of objects. But if you zoom in enough, these laws will start to break down, and quantum mechanics takes over. That, however, doesn’t make Newton’s laws any less true. These laws make up an “effective theory” in that they work well to describe reality with regards to human experience. Quantum mechanics is simply more fundamental, more granular if you will.
Personally, I believe it makes sense to approach everything I know as an effective theory. Here is what I’ve learned and here is how it applies. But, at some future juncture, it’s likely that I’ll learn a new piece of information or idea that allows for a more precise understanding of how things work. And that new knowledge will allow me to go beyond my previous limitations, and thus should be welcomed when it arrives.

My Latest Discovery

Apple AirPods are incredible for so many reasons.
First off, no more dealing with a tangled cord after retrieving them from my backpack.
Second, the pairing with my watch, phone, and computer are seamless. I no longer have to pair and un-pair multiple times per day.
Third, the AirPods themselves hold a great charge and, given you toss them in the case when you’re not using them, they’re constantly being recharged (though constant charging is generally not great for long-term battery life, so we’ll see where this one nets out).
With AirPods, you can really start to see a future where you don’t need to bring a phone every time you leave the house.

Amazon, artificial intelligence, Identity, Machine Learning, Ride Sharing 2 Comments

[VIC – 68] Amazon vs the 🌎. Mnuchin off his 💊💊. Let her finish. Via 🚙.. Which identity comes first❓❓

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Business & Money

Amazon has an incredible business model. Start by building an e-commerce platform to sell books. Once at scale, allow anyone selling anything to leverage that platform to sell their own goods for a nominal fee. In the process of building this massive marketplace, create a powerhouse of a logistics network (warehouses, software, supply chain expertise, etc) to facilitate all of this activity. Once at scale, allow manufacturers and retailers to leverage these same logistics services and facilities for a nominal fee. In the process thereof, build out world-class cloud infrastructure for all of your own storage, processing, and computing needs. Once at scale with these efforts, allow any other company to leverage these same cloud services for a nominal fee.
It’s an absolutely genius model that continues to pour more and more gasoline on the fire that fuels growth. One hell of a flywheel!
This model shows no signs of slowing down. You may have read about how Amazon is experimenting with physical grocery stores where customers can simply walk in, grab what they want, and leave without stopping at a cash register. Or perhaps you’ve come across the fact that they’re leasing planes and investing in their own cargo hub in Kentucky. I’d say it’s pretty safe to assume that, once they figure out the model, the self-checkout technology will be offered to other retailers and the cargo hub will service the other logistics companies (of course for that not so nominal fee).
So, despite Amazon shares being crazy expensive (P/E ratio of 180.56), it may yet be undervalued. The company accounts for only 5% of retail sales (half the share of Walmart) and e-commerce still accounts for a single-digit percentage of all retail sales.
If you couldn’t tell, I am looooong Amazon!

Human Progress

Steve Mnuchin, the Treasury Secretary of the US, might be off his 💊💊.
“I think that is so far in the future – in terms of artificial intelligence taking over American jobs – I think we’re like so far away from that, that uh [it’s] not even on my radar screen. Far enough that it’s 50 or 100 years away.”
Are you f*&%$* kidding me??? I don’t think I’ve ever disagreed more with a single statement. This guy must be off his rocker.
Now, I don’t want to spend valuable time deriding this guy, but let’s focus on the crux of the issue. Why is artificial intelligence, or machine learning (ML) more specifically, important? Computer scientists have been touting its power and potential for decades and we have nothing to show for it except for movie recommendation algorithms and autonomous vacuum cleaners. Why is this time different?
I’ll tell you why this time is different. It has to do with something very fundamental to where we are with regards to this technology.
First, a definition. Now, I’m no engineer or machine learning expert, so I won’t even attempt to get technical here. In my own laymen terms, ML involves computers learning from lots and lots of data. You’ve likely taken a basic statistics class at some point. Do you remember covering probability? Simply calculating the likelihood of a future event based on historical data points? For all intents and purposes, that’s ML. Whether you want to talk about facial recognition, translation, product recommendations, self-driving cars, or anything else. It’s just looking at a bunch of data and past events, and using that to predict the future.
With that out of the way, we can get back to why this time is different. Throughout the history of technology, we’ve been building machines to work for us. Steam engines, the printing press, cars
 All of these things burn fuel to do work so that we don’t have to and faster than we would be able to on our own. But, as wonderful as they all are, these machines are not “creators.” By that I mean, they have no ability to create anything outside of what is hard coded by human beings. Once you turn on the printing press, it will continually print things exactly the same way over and over again until the energy source is depleted or the machine breaks down. At no point will the machine figure out a better way to print something. Only a human being can design a better machine to replace the old one. This has been the model for technology since time immemorial.
With machine learning this changes. Take speech translation for example. When early translation programs were developed, the software was very simple. Here is the English dictionary. Here is the Spanish dictionary. Replace each word with its equivalent in the opposite language and voila. Translation! Of course, this fails because that is not how translation works. It isn’t a word for word type of thing. Different languages have different ways of conveying tone, capturing tense, etc. With the latest incarnation of Google translate, however, we have a whole separate ball game. The algorithm can look the entire library of books, articles, speeches, web pages, etc that have been translated into another language and start to predict how a sentence should be translated. What’s more, as the system takes in more translation examples and receives feedback, the algorithm can actually learn and improve mid-flight. That is, without human intervention, the translation service actually improves over time. That’s bananas!! 🍌🍌🍌🍌🍌
This is what Mr. Mnuchin is not understanding. This is not like other technologies where we invented something new that was better at doing a job. We have computers getting “smarter” by themselves.
Now I don’t want to overstate this. The capabilities are still very narrow. Each ML system is very good at one specific thing, but completely incompetent with regards to every other domain. None the less, this is a big deal.
Further, in addition to the fundamental difference just described, the speed of proliferation will be unprecedented. If we go back to the printing press and steam engine example, once these technologies were developed, it might take years or decades for the technology to spread across the globe. In the digital era, this is not the case. When talking about software and other digital goods, things can spread instantaneously, the cost of distribution is 0, and the marginal cost of creating another unit, also 0. When a new algorithm or application is created, you click a button and it is available in every corner of the globe. Again, 🍌🍌🍌🍌🍌!!
With these two fundamental differences, that is the machines playing the “creator” role and the speed at which these things can spread, we’re in uncharted territory.

Philosophy

A few days ago my fiancĂ© made Tteok-bokki (pronounced “duck-bogi”). It’s a stir-fried Korean dish with fish cakes, rice cakes, boiled eggs, onions, and red pepper paste (among other things).

While she was cooking, she was multitasking with a few other things, so asked me to stir the pan. As I began to stir, the dish seemed overly watery. I opened my mouth to ask the question, “It’s a bit watery, no?” But then I paused. There was a slight a fear of being punched in the face, but more so, a realization that I should wait to ask the question. She’s made this dish countless times and perhaps it congeals as it cooks.
That’s exactly what happened. it was absolutely perfect. In fact, probably the best she has ever made!
This got me thinking about asking questions more generally. There are many times when I’m in a meeting at work or having a discussion with a friend and something that’s said doesn’t sit well with me. I either don’t fully understand or I simply disagree. But, usually, it serves me well to let someone fully articulate an idea or complete a thought before butting in with a question. Often times the idea makes a lot more sense in the full context of what’s being said, or at least you can see the other’s perspective with more clarity.

My Latest Discovery

I’ve been using the Via ride sharing app as of late. It’s essentially Uber Pool or Lyft Line, without the option to take a ride by yourself. It’s “ride sharing” in it’s purest form. They operate a fleet of Mercedes vans that seat up to 6 passengers. Due to the purely “shared” model, prices are far lower than they are with Uber & Lyft. It cost me $8 for a ride from Long Island City to the Flatiron district. The only downside is that you occasionally have to walk a few blocks for pickup in order to best optimize routing. Not a big deal if you ask me. If you’d like $10 in free ride credit and want to help me out as well 😊, my referral code is “jeremy2e7”.

Question Of The Week

We all have so many identities. I myself am a friend, soon-to-be husband, dog parent, salesperson, black, American (purposely separated those 2), student, NYC resident, etc.
How do you prioritize your various identities? Is there a rank order? What happens when two of these are in conflict?

 

Looking forward to hearing your thoughts! Onwards and upwards amigos(as)!