Curated Insights 2017.12.03

A dynamic knowledge tool to understand the issues and forces driving transformational change across economies, industries, global issues and the Forum’s system initiatives.

How to tame Google, Facebook, Amazon, and Apple

The problem with price regulation is that Google doesn’t charge high prices—at least not to consumers, the traditional victims in monopoly cases. The company initially helped wipe out the profitability of newspapers and magazines, in part, by undercutting the price of print advertising. These days, however, Google can charge hefty prices to advertisers because it controls so much inventory and user data. Advertisers can feel they have no choice but to pay up, while consumers pay precisely zero to do searches or send emails.

Amazon is a “cheetelephant,” said one analyst: an elephant that runs as fast as a cheetah. It’s considerably faster than the regulators and lawmakers who have been caught flat-footed and are now wondering what, if anything, to do about its increasing market power, from books to groceries to moviemaking.

“If you look at the business models of these firms, none of these is a predatory pricing model. These firms are making a lot of money doing what they’re currently doing,” said Penn’s Hovenkamp. Besides, he said, “there are constantly new entrants” that would prevent a company from earning monopolistic profits. For antitrust enforcers, the problem is that by the time you know for sure whether a company predatorily drove rivals out of business, it’s too late to prevent it.

Facebook, in other words, is damned if it does censor and damned if it doesn’t. How is this likely to evolve? One possibility is that Facebook will tire of taking the heat and voluntarily submit to government regulation. A regulated Facebook would still have to employ people and algorithms to scour its website of forbidden materials, as it does today, but at least it could point the finger at lawmakers and regulators if questioned about its choices. The same would go for Google and some companies not covered here, such as Twitter.

It’s a good bet that there will be more such orders in coming years. Governments want money, and the four tech giants have a lot of it. In the meantime, while trying to come up with a better tax system, Europe is toying with the idea of taxing the tech companies’ revenue rather than their profits. The reasoning is that revenue is harder to manipulate. But revenue is a crude measure of a company’s ability to pay taxes. Revenue-based taxation would be too hard on companies with lots of revenue but little profit, and too easy on companies with little revenue but lots of profit.

Under an apportionment system, each country is still permitted to set its corporate tax rate however it chooses. But it will be able to charge its rate only on its little slice of the company’s global profit—a slice that’s determined by an agreed-upon formula. A country can no longer grab a bigger piece of a shrinking corporate-tax pie by cutting its rate below other countries’. In one stroke, the race to the bottom in tax rates is cut short.

Getting low-tax countries to go along with an apportionment system would be tough, though. No country wants to give up what makes it special. So something like the current tax system, albeit with fewer loopholes, is likely to persist for at least awhile. Apple, Google, Facebook and Amazon will keep finding ways to pit countries against one another.


Why Tencent Could Become an Advertising Powerhouse Like Facebook

Tencent’s ad revenue could more than double to $11.4 billion by 2019, according to researcher eMarketer. The company is estimated to increase its market share in China’s digital ad space to 15 percent from about 9 percent, eMarketer said.

Social advertising, which relies on information from a user’s network, is still a nascent business in China. The model that drives Facebook only accounts for about 10 percent of mainland digital marketing with e-commerce and search ads still taking the lion’s share. Lau expects that to change. “Social advertising can play a larger role,” said Lau. “In China, we are kind of pioneering the categories” of that.

So Tencent’s chosen to exercise restraint, usually showing just one ad per day on WeChat’s “Moments”, a function similar to Facebook’s news feed, capping inventory by intention. That’s why it earns just $2.10 per daily active user on WeChat, versus Facebook’s $30.10, Morgan Stanley estimates.

To do that, it’s enlisted an army of more than 250 computer scientists to expand in artificial intelligence, focusing on natural language processing, image recognition and user behavior prediction. That investment is showing up in some areas: Tencent worked with BMW to target high-end users based on their friends and location logs, sending them WeChat ads through which they could book test drives. The end game is converting ads into purchases, which is why the company’s exploring also hotels, dining and property, Lau said.


How Tencent could help Snapchat

Integrating gaming into Snapchat might be a good idea – not just because it creates more ways to generate revenue, but also because it can enhance user engagement. Globally, more people watch gaming videos and streams than HBO, Netflix, ESPN, and Hulu combined. As Snapchat strives to add users globally, it would be smart to tap into the millions of gamers worldwide who are already spending hours each day playing games, many of which Tencent has invested in.

“There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term. We’re willing to take that risk for what we believe are substantial long-term benefits to our business.”


Amazon focuses on machine learning to beat cloud rivals

The industry has turned into a race to provide customers tools and functions to use that data in new ways. Those tools are helping speed the transition to the cloud, since companies that don’t have access to them will be at a competitive disadvantage, Jassy said. “We are in a transition stage right now. Relatively few companies will own their own data centers, and those who do will have significantly smaller footprints. That means all of that data is moving to the cloud.”

The cloud computing market will grow to $89 billion in 2021, up from $35 billion today, according to technology research firm Gartner Inc.


Amazon AWS: Is that what the second headquarters is about? Asks Goldman

“While Amazon has never discussed any plans for a spin or any HQ2 plans relative to AWS, it is possible that the location of the new headquarters could provide some insight into the way management is thinking about the positioning of AWS.”

Terry’s curiosity is piqued by the fact that Amazon increasingly competes in the same industries that are customers for AWS, including gaming, healthcare and life sciences. Presumably, a separation of AWS might lessen the conflict there. Terry sees AWS being worth $430 billion, on a sum-of-the-parts basis, equaling 60% of Amazon’s enterprise value.


Broadcom could bid as much as $100 for Qualcomm and still see a payoff, says Canaccord

We assume Qualcomm settles its licensing dispute with Apple with Apple paying roughly half of what it previously paid Qualcomm for iPhone royalties. We also assume Qualcomm settles its dispute with Huawei or the other large OEM currently not paying Qualcomm royalties. We believe Broadcom management has solutions for Qualcomm’s disputes as part of its reasoning to make a bid for Qualcomm, but we have used these assumptions based on our Qualcomm scenario analysis used for our Qualcomm price target in our last published Qualcomm note. We also assume $500M in synergies achieved between Qualcomm and NXP in our scenario analysis including NXP. Further, we assume a 4% interest rate on combined debt for an acquisition with NXP and 3.5% for an acquisition without NXP given larger debt levels needed if the acquisition includes NXP. We also assume $1.5B in F2019 synergies between Broadcom in Qualcomm and a combined company tax rate of 15%.


Beyond Tesla’s semi truck: The future of trucking and transportation

We are currently entering a period of a rapid change in our transportation systems. And as I see it, it’s the innovator’s dilemma playing out in the wild: Incumbents like General Motors are moving too slowly to adapt to an all-electric future—wasting billions of dollars on stock buybacks—while upstarts like Tesla, unencumbered by legacy business models, are forging a path into a clean, fully-electric, fully-autonomous future. (GM has spent almost $17 billion in the last several years buying back its stock, three times what Tesla has spent building Gigafactories.)

One is that the cost of trucking falls by at least 50%, if not more. No driver, double the passive productivity, and in essence, you eliminate most of the safety problems. And by the way, if you apply this [autonomous] technology, many of the concerns we have from a safety standpoint about large trucks go away and you can make the trucks bigger. So, the costs fall at least in half. Transit time falls at half too, because you’re not waiting.

Let’s look at it from a technical standpoint. There are two competencies that keep trucking firms alive. The first one is their ability to match demand and supply; which is very important, and the second is their ability to manage drivers. There’s a modest competency with respect to equipment, but it’s not that important. Well, in the first place, if you if you eliminate the drivers, you eliminate half of the value-added that the trucker provides. And second, if you go to integrated big data, the business of matching capacity to demand becomes much easier. So, what it does is it either eliminates, or dramatically changes the principal competencies of whatever we call this entity which we now call “trucker” provides to the marketplace. So it’s big, big changes.


Why Tesla’s fuel efficiency advantage won’t last

At the early part of the 2000’s trucks getting 5 mpg were common. Today’s fleet is more like 7 mpg. That two miles per gallon increase means diesel used falls from 20,000 gallons a year down to under 15,000 gallons. Best-in-class trucks today might approach 9-10 miles per gallon. That three mpg increase versus fleet average (presumably what Tesla used in its cost calculator) is another 30% drop in fuel use, down to 10,000 gallons. The SuperTruck programs that get 12 or more mpg, (using many of the same aero techniques that Tesla’s Semi uses) would use around 8,000 gallons of fuel. In other words the opportunity to lower the Tesla cost of ownership with fuel savings is currently 15,000 diesel gallons a year, but will soon enough be only half that, using current line-of-sight technologies. At current fleet average diesel costs the savings opportunity on 100,000 miles per year is $37,500 per truck. At current best-in-class the available pool of offset-able fuel cost is $25,000. On future trucks, perhaps not too far distant from Tesla’s launch, is only $20,000 per year. All this assumes you can run a truck 100,000 miles a year in 300 to 500 mile increments.

The future difference between Tesla’s astonishing 19 mpg equivalent and the SuperTruck 12 mpg is only 3,000 gallons a year of diesel equivalent. Compared with the 7,000 gallons per truck per year already in the diesel improvement pipeline, that 3,000 gallons doesn’t look as compelling.


Inside the revolution at Etsy

Inside Etsy, Mr. Silverman’s reorganization has upended parts of the company once considered sacrosanct. Last month, Etsy changed its mission statement. Gone was a verbose commitment “to reimagine commerce in ways that build a more fulfilling and lasting world.” Instead, the mission was reduced to just three words, “Keep commerce human,” accompanied by a spreadsheet outlining its goals for economic, social and ecological impact. And because remaining a B Corp would require the company to change its legal standing in Delaware, where it is incorporated, Etsy will let that certification lapse.


Paytm aims to become largest full-service digital bank

“Digital payments was our entry point, we want to become a vertically-integrated financial services company.”

Payments banks can accept deposits and remittances but cannot lend. Paytm is one of less than a dozen entities that got permits to start payments banks to bring financial services within easy reach of about a fifth of India’s 1.3 billion people who do not have access to organized financial services.

Paytm Payments Bank is majority-owned by Sharma. One97 Communications, which is backed by Alibaba Group Holding, Ant Financial Services and others, holds the remaining 49 percent. The payments bank morphed out of Paytm’s digital wallet which got a huge boost and amassed over a hundred million customers after India took its high currency bills, totaling nearly 90 percent of the value of cash, out of circulation last November.

Sharma may have found a way around the regulatory hurdles that bar lending. One97 Communications will introduce a charge card and offer monthly installment-based loans, he said. “We will launch share trading and insurance products very soon,” said Sharma. “We want to become an Internet-age financial services company.”

Business lessons from Ben Thompson of Stratechery

“Zero distribution costs. Zero marginal costs. Zero transactions. This is what the Internet enables, and it is completely transforming not just technology companies but companies in every single industry.” “Aggregation Theory is a completely new way to understand business in the Internet age.”

“instead of some companies serving the high end of a market with a superior experience while others serve the low-end with a “good-enough” offering, one company can serve everyone…. it makes sense to start at the high-end with customers who have a greater willingness-to-pay, and from there scale downwards, decreasing your price along with the decrease in your per-customer cost base (because of scale) as you go (and again, without accruing material marginal costs). Many of the most important new companies, including Google, Facebook, Amazon, Netflix, Snapchat, Uber, Airbnb and more are winning not by giving good-enough solutions to over-served low-end customers, but rather by delivering a superior experience that begins at the top of a market and works its way down…”

“Apple and Amazon do have businesses that qualify as aggregators, at least to a degree: for Apple, it is the App Store (as well as the Google Play Store). Apple owns the user relationship, incurs zero marginal costs in serving that user, and has a network of App Developers continually improving supply in response to demand. Amazon, meanwhile, has Amazon Merchant Services, which is a two-sided network where Amazon owns the end user and passes all marginal costs to merchants (i.e. suppliers).”

“Once an aggregator has gained some number of end users, suppliers will come onto the aggregator’s platform on the aggregator’s terms, effectively commoditizing and modularizing themselves. Those additional suppliers then make the aggregator more attractive to more users, which in turn draws more suppliers, in a virtuous cycle. This means that for aggregators, customer acquisition costs decrease over time; marginal customers are attracted to the platform by virtue of the increasing number of suppliers.”

“Breaking up a formerly integrated system — commoditizing and modularizing it — destroys incumbent value while simultaneously allowing a new entrant to integrate a different part of the value chain and thus capture new value.”


Active vs. passive vs. Amazon et al.

“Sectors such as finance, information technology, media, and pharmaceuticals — which have the highest margins — are developing a winner-take-all dynamic, with a wide gap between the most profitable companies and everyone else.”

“I have long described Amazon as a Field of Dreams company, one that goes for higher revenues first and then thinks about ways of converting those revenues into profits; if you build it, they will come. In coining this description, I am not being derisive but arguing that the market’s willingness to be patient with the company is largely a result of the consistency with [which] Jeff Bezos has told the same story for the company, since 1997, and acted in accordance with it.”

“These models have an in-built structure where they are going to tip into winner-take-all areas. The cost of adding a new user gets smaller and smaller the bigger you get. [This starts] creating a competitive advantage that gets harder and harder to bridge.”

It’s not unusual for a few stocks to drive broader market performance in a given year, but we would be foolish to ignore that it has been the same several stocks quite frequently in recent years. Facebook, Apple, Amazon, Netflix, and Google are responsible for roughly 20% of the S&P 500’s performance this year, and generated more than the entire return of the index in 2015.


The secret to tech’s next big breakthroughs? Stacking chips

The advantage is simple physics: When electrons have to travel long distances through copper wires, it takes more power, produces heat and reduces bandwidth. Stacked chips are more efficient, run cooler and communicate across much shorter interconnections at lightning speed.

Chip stacking enables totally new capabilities too. Some phone cameras stack an image sensor directly on top of the chip that processes the image. The extra speed means they can grab multiple exposures of an image and fuse them together, capturing more light for dim scenes.

But Mr. Dixon-Warren says the spread of 3-D chips is rapid and their takeover inevitable. A decade ago, this technology was limited almost exclusively to university labs; five or six years ago, it was still hard to find commercial examples. But now it’s popping up all over, in applications like networking and high-performance computing and in high-end wearables like the Apple Watch.


How does Costco sell 18-year-old single malt Scotch for $38?

“Costco has a volume deal with [spirits] companies including Edrington and Diageo. They agree to buy a certain amount of product at a certain price, which is far lower than everyone else is paying. For products like Johnnie Walker Blue or Macallan, it’s virtually impossible to beat Costco on price.”

“If Costco can control the importation of the whisky, get someone to distribute it to them at cost (or at very slim single-digit margins due to high volume) and then sell it at very low margins, then they’re golden.”

Finally, one reason rarely considered for why Costco might be able to offer better pricing is proof. Typically, whisky connoisseurs would want that 25-year-old Scotch to have some decent heft after all those years of concentrating in barrel. Alcohol is a conduit for flavor, after all. But all Kirkland Signature Scotches are sold at 80 proof, meaning that these whiskies are watered down to the absolute lowest legal limit and, thus, Costco is able to empty barrels into way more bottles.


Big oil and auto makers throw a lifeline to the combustion engine

The new lubricants are meant to help auto makers build smaller, turbocharged engines that are still quite powerful, resulting in efficiency gains close to 15% compared with older models. Optimizing internal combustion engines could boost efficiency by an additional 25%—a calculation that might tempt auto makers from spending more on electric-vehicle technology. Other efforts to enhance performance include adding gears to transmissions and making vehicles more aerodynamic.

The gains from engine oil alone are limited, however. Industry experts say the latest lubricants typically boost fuel economy by less than 1%, primarily by reducing the amount of energy needed to pump a piston. Even so, it is a highly cost-effective solution that adds up when spread across millions of vehicles.


‘It’s beautiful’: This Toronto startup is investors’ secret weapon to beating the market

Legal experts say investors may be risking more than their capital when using such alternative data since case law hasn’t yet determined what crosses the line into privacy violations or insider trading, but it’s a risk a growing number of financial institutions are willing to take, especially since in Apache’s case, and many others, it has paid off.

“That is the original alpha source, knowing something the market doesn’t know. It’s beautiful,” he said. “If you can come to them with a genuine information advantage, where they can know something their peers in the market do not know that’s tradable, that’s hugely valuable.”

Quandl is particularly interested in companies that produce what it calls “exhaust” data, or data collected as part of a company’s normal operations without intending to turn it into a revenue source. For example, insurance companies keep records of how many new car insurance policies they sell, as well as which vehicle manufacturer’s model is being insured, which happens to be a great predictor of new car sales before the automakers release the data themselves.

But Quandl faces a dilemma after convincing suppliers to sell their data: the more clients the company sells the data to, the less of an investing edge it provides, making it less valuable. To solve that problem, Quandl uses the data to build a predictive model to make an educated guess about how much money could be invested before the data loses its advantage and then sells it to a limited number of clients accordingly.


About 11% of land in Japan is unclaimed

That’s about 41,000 square kilometers (16,000 square miles), which is equivalent to the size of Japan’s southwestern island of Kyushu, or almost as large as Denmark. By 2040, land equivalent to Japan’s second-largest island of Hokkaido will be unclaimed or abandoned, according to a panel of experts and government representatives. This will cost the nation roughly 6 trillion yen ($54 billion) over the period 2017-2040, including lost development opportunities and uncollected taxes, the panel says.

“Land prices are falling in the depopulating regions,” Yamanome said. “Not only is it impossible to make money by owning some land, but also you can’t get rid of it because regional real estate markets are stale.”


Great products vs. great businesses

A product is something that solves someone’s problem. A business is a product that works so well that people will pay more than it costs to produce.

But losses come in different flavors. There is a difference between a company that loses money because it’s investing in the infrastructure needed to become a profitable company, and a company that loses money because it can’t charge customers a price that reflects what it costs to run the business. But we often conflate the two, treating all loss-making startups with a sense of, “It’s OK, they’re growing.”

Companies are staying private longer than they used to. So venture investors that specialize in the early phase of big-losses-because-we’re-investing-in-what-it-takes-to-build-a-profitable-business have found themselves holding mature companies that in a different era would have been passed onto investors who demanded a sustainable business model with profits. In any other era, Uber, Airbnb, Pinterest, and others all would have been public companies by now. And public markets almost certainly wouldn’t let losses pile up for as long as they have. We’ve seen this with Blue Apron and Snap, whose shares have fallen between 50% and 70% since going public just months ago. Both make amazing products that attracted armies of users, which VC investors oogled over. But public investors took one look at their business models and said, “What the hell is this?!” Who knows what that means for their future as standalone companies.


Pricing power: Delighting customers vs mortgaging your moat

The problem with this source of pricing power is that it comes with an off balance sheet liability. A sort of “negative goodwill” that grows every time you increase prices. While the profits might roll in for awhile, one day the customers will revolt. At the very least, the perceived excessive pricing of the well water will create a huge incentive for customers to try any new competitor that comes to town. While the high pricing makes it look like the company has a competitive advantage, in fact the excess returns are being created by a process that increases the likelihood of a successful competitive assault sometime in the future.


Lessons from a legendary short seller

“Because I never wanted to get up in the morning hoping that things would be getting worse. All intellectuals I think — and I don’t use that as a particularly flattering term — but all intellectuals tend to have a pessimistic streak.”

“I would forget the shorting. I think it’s over. It’s over for one simple reason: If shorts start working, that is, stocks go down for any sustained period of time, a great many people who are not now shorting will start shorting. There is a limited supply of stocks to borrow to sell short. Those stocks that are good shorts tend to be very obvious. As I’ve often said, I can predict with confidence that you’ll die. I cannot predict that you’ll be born, and so failure is analytically obvious and everybody piles into the same short. . . . I do believe if shorting really becomes profitable again, it’s going to become so crowded that most people won’t be able to borrow stock.”

Pulling iron from brain may offer hope in Alzheimer’s fight

The familiar metal is key to numerous brain functions, but too much of it is toxic. Researchers in Melbourne showed two years ago that iron levels in the brain can predict when people will get Alzheimer’s disease. Now, the team aims to show how removing excessive amounts with a drug called deferiprone can stave off the memory-robbing disorder.


Laptops are great. But not during a lecture or a meeting.

Laptops distract from learning, both for users and for those around them. It’s not much of a leap to expect that electronics also undermine learning in high school classrooms or that they hurt productivity in meetings in all kinds of workplaces.


Curated Insights 2017.08.06

The data that transformed AI research—and possibly the world

Today, many consider ImageNet solved—the error rate is incredibly low at around 2%. But that’s for classification, or identifying which object is in an image. This doesn’t mean an algorithm knows the properties of that object, where it comes from, what it’s used for, who made it, or how it interacts with its surroundings. In short, it doesn’t actually understand what it’s seeing. This is mirrored in speech recognition, and even in much of natural language processing. While our AI today is fantastic at knowing what things are, understanding these objects in the context of the world is next. How AI researchers will get there is still unclear.

“One thing ImageNet changed in the field of AI is suddenly people realized the thankless work of making a dataset was at the core of AI research,” Li said. “People really recognize the importance the dataset is front and center in the research as much as algorithms.”

Apple Glasses are inevitable

There is room for Apple to create value by controlling both the hardware and software comprising AR glasses. The sum will be greater than its parts. Apple’s big bet on AR will represent the catalyst for turning glasses and sunglasses into something more. An engaged base of iOS developers experimenting with ARKit will give Apple Glasses a hospitable app environment.

Apple’s success with Apple Watch has done much to calm some of my fears and hesitation regarding face wearables. With 29 million Apple Watches sold to date, Apple has turned the dynamic of tech meeting fashion on its head. Apple has been able to get people to wear an item that was increasingly losing its place in a smartphone world.

The idea of a product having a “killer app” has been misconstrued over the years. The iPhone really doesn’t have a killer app. Instead, the device itself has turned into the killer app – the most valuable computer in our lives. In addition, the iPhone’s role in our lives has evolved over time – a true sign of value. Apple Glasses would provide an improved view of the world to its user. For some, this will come in the form of clearer vision plus additional context. Others will gain value just from receiving additional context.


The Priceline party, the world’s largest online-travel company

Over the past decade Priceline’s pre-tax earnings have grown at a compound annual rate of 42%, faster than Apple, Amazon, Netflix and Alphabet. It also boasts a 96% gross margin. Its share price has risen by more than 50% over the past 12 months, about four times faster than the broader stockmarket. On July 26th the firm’s market value rose above $100bn.

Priceline’s focus on accommodation helps explain why it is more profitable and more highly valued than Expedia, a rival online-travel company that operates sites such as Orbitz, Travelocity, Trivago and Hotels.com. Expedia does more business booking flights, but these are not as lucrative. Online-travel firms take a meaty commission of 15-18% of a hotel room’s price, compared with a slim 3-4% for airfares.

The most dangerous rival, however, may well come from somewhere else entirely. “We’re all waiting for the moment when a big Chinese company comes in and tries to take market share,” says Erik Blachford, a former boss of Expedia. Ctrip, a giant based in Shanghai and worth an estimated $30bn, is the obvious candidate. But if it indeed makes a move, Priceline will not necessarily suffer. Not only is its Chinese business growing nicely, but it has also invested nearly $2bn in Ctrip’s debt and equity. Small wonder that some analysts consider Priceline the best-run internet company after Amazon.


Why Alibaba could double in two years

China online advertising is $50 billion market, currently Alibaba has about 20% market share. Entire online advertising market will grow at 15% to 20% for next eight years, I expect Alibaba to take incremental share and possibly increase to 30%+ market share of online ads in five years.

AliCloud is No. 1 in China by a huge margin.

Alibaba has a ton of equity investments made over the years. Core holdings include a 33% stake in Ant Financial, 30% stake in Weibo, and 47% in logistics network operator Cainiao.


Amazon moves into self-distribution with Woody Allen’s ‘Wonder Wheel’

Amazon is moving into self-distributing its own movies, putting it on the path to becoming a full-fledged film studio.

With their deep pockets and big ambitions, Amazon and Netflix have upended the film distribution landscape, although they have taken different approaches. Netflix is solely focused on servicing its streaming service subscribers. Amazon believes in premiering movies in theaters before offering them on its Prime digital service. With the move into self-distribution, Amazon now offers all of the services that a traditional film studio boasts — from financing to production to rolling out a picture in cinemas.


Amazon’s ‘Beehive’, drone-carrying trains reinforce focus on logistics tech

CB Insights’ analysis shows that the retail giant has been focused on shortening the distance between warehouses and consumers for some time. They have considered various formats for expanded warehouse networks, including flying warehouses, mobile truck-based mini warehouses, underwater warehouses, local re-stocking stations for drones, and a multi-level drone-docking fulfillment center.


This Amazon threat just got even more real

Already, the price transparency that’s characteristic of Amazon’s consumer e-commerce platform has exposed major flaws in Grainger’s model, forcing the company to roll out price cuts that have squeezed its margins and darkened its EPS outlook. In the face of Amazon’s staggering customer growth, Grainger CEO DG Macpherson’s admission earlier this year that the company hasn’t been able to acquire a new customer under its namesake brand in years and has struggled to use digital marketing to draw business becomes even more worrisome.


Foursquare eyes Amazon Alexa partnership as its tech is quietly built into Snapchat and Apple Maps

In the past four years, the company has been shopping its technology around to other companies, a task that turned out to be surprisingly easy. In an interesting development, Foursquare has found that a lot of companies looking for data or location tech come to Foursquare before Facebook or Alphabet’s Google because those two giants are trying to kill those companies who need help. “We’re like the independent broker of this awesome technology and you’re not tying yourself to Google or Facebook, yet you get these great tools to build competitive products,” Crowley explained.

The partnerships take different formats, with Foursquare sharing its tech in exchange for exposure, revenue or partnership deals, he explained. Facebook and Google haven’t teamed up with Foursquare due to competing products and because the Silicon Valley players have built up their own ecosystems, he said. But that’s a rare exception. Snapchat, Twitter, Uber, and Pinterest are using a version of its geotagging tech. Samsung’s new Galaxy S8 phone, launched in April, has Foursquare baked in to tell users where their photo was taken and what it was taken of. Finally, Apple is using Foursquare in its Apple Maps product.


Redfin set out to disrupt real estate—it was harder than it looked

Zillow and Trulia make money by referring customers to independent real estate brokers. Redfin, in contrast, aimed to disrupt the real estate business by becoming a real estate brokerage itself.

In a traditional real estate transaction, the agent on each side of the deal gets a three percent commission. Redfin offered a do-it-yourself model where buyers would do more of the work themselves, lowering Redfin’s costs and allowing it to pay thousands of dollars in rebates.

This approach sounded great in theory, but there was a big problem: customers hated it. Buying or selling a home is a complex, stressful, and often once-in-a-lifetime transaction. People wanted a personal agent who had plenty of time to understand their situation, answer questions, and guide them through the steps of the home-buying process. Redfin’s early approach—with an ever-changing cast of agents showing homes and writing offers but not doing much else—left most customers unsatisfied.

…some of the biggest opportunities for innovation were on the seller’s side of the market, because sellers ultimately set the terms of real estate transactions. And because home sellers tend to be older and more risk-averse, it has taken longer for Redfin to build up a customer base on the seller’s side of the market.


A look back in IPO: Google, the profit machine

Sources are saying that Microsoft was previously courting Google, pursuing options ranging from a kind of merger to an outright takeover. It appears that their overtures failed to materialize any deal, so now the Redmond will have to wait; Google is headed in the IPO direction, and if there’s a merger to be had, it’s likely going to be with a post-IPO Google.

“It’s still expensive at these levels,” said Will Dunbar, managing director with Core Capital Partners, a venture capital firm with no stake in Google. “There will be substantial competition in the near future and that’s one of the things that gives me pause about the price.”

Janco’s Pyykkonen adds that he was hearing it was difficult for traders interested in short-selling Google to find shares to borrow from the banks and brokers involved in the auction.

And according to an informal poll on CNN/Money, 85 percent of more than 23,000 respondents said that they did not plan on buying shares of Google once it began trading.

Inside Jeffrey Katzenberg’s plan to revolutionize entertainment on mobile screens

Katzenberg’s plan involves nothing less than the creation of a whole new species of entertainment targeting 18- to 34-year-olds: short-form video series produced with budgets and production values you might expect from primetime TV, along with top-shelf creatives on both sides of the camera. For example, imagine a drama akin to “Empire” or “Scandal” but shrunk to 10-minute episodes made for mobile consumption. Or a five-minute talk show, or a two-minute newscast — all with high-profile talent attached.

Disney CEO Bob Iger, whose company is considering producing for what Katzenberg has tentatively dubbed New TV, sees the merits in the idea. “The explosion of short-form video is obvious to all of us, but a lot of what we’ve seen is the production of amateurs — user-generated content,” Iger says. “Taking a professional approach to this kind of content, we haven’t seen that yet in a concerted way, and I think that’s a smart thing to try.”


Alphabet wants to fix renewable energy’s storage problem — with salt

It can be located almost anywhere, has the potential to last longer than lithium-ion batteries and compete on price with new hydroelectric plants and other existing clean energy storage methods. “If the moonshot factory gives up on a big, important problem like climate change, then maybe it will never get solved,” said Obi Felten, a director at X. “If we do start solving it, there are trillions and trillions of dollars in market opportunity.”

X is stepping into a market that could see about $40 billion in investment by 2024, according Bloomberg New Energy Finance. Roughly 790 megawatts of energy will be stored this year and overall capacity is expected to hit 45 gigawatts in seven years, BNEF estimates. Existing electrical grids struggle with renewable energy, a vexing problem that’s driving demand for new storage methods. Solar panels and wind farms churn out energy around midday and at night when demand lulls. This forces utilities to discard it in favor of more predictable oil and coal plants and more controllable natural gas “peaker” plants.

A new book ranks the top 100 solutions to climate change. The results are surprising.

The number one solution, in terms of potential impact? A combination of educating girls and family planning, which together could reduce 120 gigatons of CO2-equivalent by 2050 — more than on- and offshore wind power combined (99 GT). Also sitting atop the list, with an impact that dwarfs any single energy source: refrigerant management. Both reduced food waste and plant-rich diets, on their own, beat solar farms and rooftop solar combined.

Our models include a lot of things that were excluded from other models. One is land use. It’s given passing reference, but hasn’t been given much credibility by the IPCC. They don’t include, for example, farmland restoration — over a billion hectares of abandoned land all over the world. We know how to regenerate that, using animals, using cover, using no-till. Is there a transition cost? Yeah. But it’s a big sink.

First of all, let’s be honest: The US has never led in this area. Ever. When they’ve tried on an executive level, they’ve never been supported by Congress. States have led, cities have led, but never the federal government. Now the federal government is what it is. When [Trump] was elected, I went over every one [of the Drawdown solutions]. I said, “What can the [US federal] government do?” And it really isn’t that much.


The world’s first floating wind farm could be a game changer for renewable power

The first floating wind turbine has been placed about 20 km (12 miles) off the coast of Peterhead in Scotland. Another four turbines will be added to the farm, which together will generate enough energy to power 20,000 households.

Floating wind turbines cannot currently compete with fixed turbines, which have seen their cost plummet by more than 30% since 2012. However, Statoil believes that as floating wind farms are built at scale, they will soon be able to compete with traditional offshore wind turbines without subsidies.


It goes completely against what most believe, but out of all major energy sources, nuclear is the safest

Based on historical and current figures of deaths related to energy production, nuclear appears to have caused by far the least harm of the current major energy sources. This empirical reality is largely at odds with public perceptions, where public support for nuclear energy is often low as a result of safety concerns.

Whilst the share of energy production from renewable technologies is slowly growing, 96 percent of global energy production is produced from fossil fuels, nuclear and traditional biomass sources. Our global transition to renewable energy systems will be a process which takes time—an extensive period during which we must make important choices on bridging sources of energy production.

 

In fund management, churn is not necessarily burn

What may be more surprising is that we found no evidence of any relationship across all other styles of US equity fund, even in small-caps where the costs of trading are noticeably higher. On average, high turnover US equity funds have been able to add at least enough value to offset the additional transaction costs they incur. The moral is that pursuing a reduction in transaction costs without considering the consequences is misguided. Consistency between investment process and turnover is more important than the level of turnover itself.


Cities’ success leaves them vulnerable in the next downturn

But the specialization of high-end jobs and wealth in cities could end up being their undoing. The city model of old was like a grocery store — a balanced mix of all types of different products, from milk and bread to a pharmacy to some splurge items like cupcakes and Champagne. In tough times, cupcake and Champagne sales might fall, but people are still going to buy their milk, bread and toiletries, keeping the store afloat.

Cities today increasingly resemble endless aisles of Champagne and cupcakes. If tough times strike again — perhaps in a tech downturn, or in a stock market crash — the pain will be concentrated here. And while the well-paying white-collar jobs migrating to cities now are coveted, there’s no guarantee the best jobs will always be urban. The next economic cycle may well bring a different pattern.


Many Indians don’t know the real architect behind the country’s economic reforms

On that monsoon day in Hyderabad in 2015, no one could recall that a long-time inhabitant of that city, Pamulaparthi Venkata Narasimha Rao, PV as he was always known to the Telugus, was, in fact, the author of the most radical shift in India’s economic policy since Jawaharlal Nehru’s famous Industrial Policy Resolution of 1956. Nehru’s resolution had declared that India would strive to establish a “socialistic pattern of society”. In 1991 PV moved away from that pattern to unleash private enterprise.

PV was India’s first “accidental” prime minister, and a path-breaking one. He took charge of the national government and restored political stability; assumed leadership of the Congress, proving that there was hope beyond the Nehru-Gandhi dynasty; pushed through significant economic reforms; and steered India through the uncharted waters of the post-Cold War world.


NASA has a way to cut your flight time in half

…NASA will begin taking bids for construction of a demo model of a plane able to reduce the sonic boom to something like the hum you’d hear inside a Mercedes-Benz on the interstate. The agency’s researchers say their design, a smaller-scale model of which was successfully tested in a wind tunnel at the end of June, should cut the six-hour flight time from New York to Los Angeles in half.

Over the next decade, growth in air transportation and distances flown “will drive the demand for broadly available faster air travel,” says Peter Coen, project manager for NASA’s commercial supersonic research team. “That’s going to make it possible for companies to offer competitive products in the future.” NASA plans to share the technology resulting from the tests with U.S. plane makers, meaning a head start for the likes of Lockheed Martin, General Dynamics, Boeing, and startups such as Boom Technology and billionaire Robert Bass’s Aerion.