224: Shopify Logistics, Flexport CEO on Global Supply Chain SNAFU, Constellation Software, Buffett's Apple, ASML, OpenSea Freezes, and Band of Brothers Sequel
"armies of people pushing paper, duct taping the system together"
I try to be very careful about who I steal from. Only steal from the best!
💬 Lately, a frequent reminder of the power of network effects is Signal.
It’s the messaging app I wish I could use with most people in my life, but it’s the one that almost nobody I know is on ¯\_(ツ)_/¯
🛀 I was thinking about how many times my kids (3yo and 7yo) have to hear something before they internalize it and create a new habit (saying “please” and “thanks”, etc).
Humanity would probably have colonized the stars by now if we could “get” things after just one or two times. 🚀🧑🚀🪐
I’m not talking about just kids. We adults like to think we’re so much better, but it also takes us a long time and/or much repetition to update.
🏎 Speaking of faster iteration cycles, I like this ode to speed by James Somers:
Thanks to my friend MBI (💎 🐕) for sending it to me.
Like most good essays, each part is the foundation for what comes next, so when sections are taken in isolation, they aren’t as strong as in context — which is why I’ll just recommend that you read it rather than try to put highlights here.
The point that resonates most with me is about how speed *directly* leads to becoming better, because you can iterate so many more times, and encourages experimentation and exploration because you know it won’t take you forever every time to try something new. It reduces the activation energy required.
These benefits are often overlooked, and the balance goes too far in the other direction when we’re encouraged to slow down, take our time, quality only happens when we’re really deliberate, etc.
There’s a lot of truth to that too, but I think the ideal balance is a mix of speed *and* slowing down, each used at the right time and for the right thing. Stronger together ☯️
😷 🦠 🎬 My wife and I started watching The White Lotus (HBO, 2021).
The first episode begins in an airport, with everything like it was pre-pandemic.
It made me wonder if TVs and movies will ever incorporate COVID-19 pandemic stuff casually, not as a central plot element but just background color, or is Hollywood going to always pretend it never happened.
💚 🥃 If you make just one good decision per year because of something you learn here (or avoid one bad decision — don’t forget preventing negatives!), it'll pay for multiple years of subscriptions (or multiple lifetimes):
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Investing & Business
Constellation Software M&A During 2021
capital deployed to a record $1.3b, more than 2x the $531m deployed in 2020. We estimate that the businesses acquired generate $1.1b annual revenue, which is 18% accretive to adj. EPS.
h/t My friend Jerry Capital (💎 🐕)
Is Shopify Reducing its Logistics Ambitions?
It feels a bit like Inception because I’m writing about someone writing about someone who wrote about someone else (3 levels down), but here’s friend-of-the-show and supporter (💚 🥃) Brad Slingerlend:
Businessweek’s Brad Stone wrote a profile on Shopify founder Tobi Lütke. I was disappointed to learn that after announcing, in 2019, the Shopify Fulfillment Network and the acquisition of 6 River robotic warehouse technology, Shopify seems to be walking back its fulfillment ambitions. [...]
Lütke’s apparent conclusion is that running a logistics network requires a “ruthless, Amazon-style efficiency” that’s incompatible with Shopify’s culture. He suggests Shopify will do logistics differently, but it's not clear what that means. If I take Lütke’s comments at face value, it seems like the real-world problems of drivers, vans, traffic, and the extreme efficiency needed to get to a sustainable delivery cost per box is too messy of a problem compared to writing ecommerce software. That’s a shame, because it would be a bummer if we end up with only Buy-n-Large controlling most of retail. [...]
[Shopify] continued to emphasize that their merchants don’t need faster than two-day shipping, and that consumers are very happy to pay for shipping. Even if that’s true, it likely applies to an increasingly small number of very long tail items. Why pay and wait when the alternative is free and fast? It’s possible Shopify is still committed to logistics, but, at this point, anything short of a decades-long multi-$10B investment probably won’t be enough to keep Amazon from accreting market share like an ecommerce black hole. The question is whether the value is in the ecommerce software, the shipping capabilities, or both? One day, many of Shopify’s merchants will be using fulfillment by Amazon when FedEx and UPS have priced themselves out of ecommerce delivery, and it may make more sense for them to ditch Shopify’s software in favor of Amazon
If it’s the case, it’s too bad, because there was real logic to aggregating the shipping needs of the long-tail of merchants into a mass large enough to eventually be competitive with Amazon Logistics (if not in raw speed and cost, at least in ease-of-use, as a kind of “atoms” API).
🛤 📦 🛳 Interview: Ryan Petersen, Flexport CEO & Founder, on the Supply Chain SNAFU ⚠️ 🚚 🚧
Noah Smith has a great interview. Some highlights:
as city after city started enforcing lockdowns and restrictions, people started spending a lot more goods and not services. You’ve got to get your dopamine somewhere. So what we saw was an unprecedented increase in imports from China—as much as 20% more containers entering the United States than were leaving our ports since the start of the pandemic. It turns out, our infrastructure is just not made to scale this fast, and by infrastructure what we mean is the entire ecosystem: The number of container ships in the world, the number of containers available, the throughput of our ports, the availability of trucks and truck drivers, the availability of chassis (the trailers that haul containers around), the entire system is overwhelmed and clogged. We simply don't have enough of these essential supply chain elements, or resilient systems that are agile enough to shift the supply of these assets to where they're needed.
Not only ‘how much’ and ‘what’, but also *how* via the shift to e-commerce:
e-commerce logistics networks are fundamentally different in their geographical and physical space than that of traditional retail. They're more complicated because you are edge caching your inventory to be closest to your users instead of positioning everything in a distribution center in a single hub. You now have to position your warehouses all over the United States, making it exponentially more complicated.
On top of that, the U.S. infrastructure is in pretty bad shape:
getting held back by dilapidated port infrastructure, by congestion, non-automated ports, and bad rail connections to the ports. We're just recognizing the pain of 20 years of not investing in our infrastructure.
Some places to look for solutions?
One thing to remember here is that in America, the ports are owned by the local city that they're in. Therefore, they're not managed as a strategic national asset, which they clearly are. We’re realizing the implications of this right now. [...] The mayor of Oakland has a lot of local issues to focus on and probably won’t prioritize multi-billion-dollar investments in their port as the city simply can't afford it.
Physical assets that have such a large impact on the whole country’s economy shouldn’t be left to municipal politics…
Almost no logistics companies can show you where your freight is in real-time on a map. Most data is exchanged in unstructured email messages with attachments. There are almost no logistics APIs to speak of.
Technology and automation have helped modernize and increase the efficiency of ports in other countries like the port of Rotterdam in the Netherlands, but that’s because it’s managed as a strategic asset for the country. It has been a fully automated operation for over 20 years so the technology exists, but we still have a lack of investment to implement those changes in the United States.
We want to make global logistics as reliable as the electrical grid. When you flip a light switch, you just get power. You take it for granted. But what's actually happening is an incredibly complex coordination where a power plant somewhere in the world is getting slightly hotter just to provide you that extra dose of electricity that you need. It’s the same thing people expect when they buy something in a store or online, that there’s an incredibly sophisticated logistics network orchestrating things in the background to make sure that product arrives at your door. That's not actually how it works today. There are armies of people pushing paper, duct taping the system together, making phone calls and sending emails, and it's almost a miracle that any of it works.
The cloud computing moment for global logistics? Can’t come soon enough…
🍏 Buffett’s Apple Investment 🍎
🇩🇪 🏭 🔥 Fire at ASML German Factory
A reminder of how so much of the world’s economy is dependent on a few companies’ operations & supply chains staying intact…
ASML Holding NV on Monday said there has been a fire at a factory it owns in Berlin, Germany, adding that no one was injured and that it is too early to assess the impact on its operations. [...]
The factory, the former Berliner Glas, makes components for ASML's lithography systems, large machines which are used to create the circuitry of computer chips. Berliner Glas makes equipment including "wafer tables, reticle chucks and mirror blocks," ASML said in a statement. (Source)
So now every time someone sneezes at TSMC or has heartburn at ASML, everybody has to hold their breath…
🧊 OpenSea freezes $2.2M of stolen NFTs 🦍
A frozen sea? Maybe just a patch of ice… an iceberg?
NFT marketplace OpenSea has frozen 16 Bored Ape and Mutant Ape nonfungible tokens (NFT) after they were reportedly stolen yesterday from a New York art gallery operator.
In total, one Clonex, seven Mutant Ape Yacht Club, and eight Bored Ape Yacht Club NFTs currently valued at about 615 ETH ($2.28 million) were stolen and are now not able to be traded on OpenSea. (Source)
One more example of the difference between theory and practice (which, in theory are the same, but in practice are different…), and of the old adage of “careful what you wish for”.
If the goal of crypto/web3 is to be democratized and have billions of users, it’s hard to imagine that regular people who aren’t tech-savvy early-adopter will have a good experience with no customer-support or recourse when they are hacked or scammed, or simply make honest mistakes.
As it currently stands, the crypto world seems very centralized, both in who holds the wealth, and who has de facto control and influence over many things.
That may change over time, but it just is what it is right now.
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Science & Technology
Making a Plasma Coil Bottle Launcher
This things looks great in action. Check out the first few moments of the video to see it fire in slow-motion, and if that piques your curiosity, the rest of the video explains how it works.
Peter Attia Podcast on Omicron: Facts, Opinions, Policies
Wide-ranging discussion between 3 docs, Peter along with Marty Makary and Zubin Damania (aka ZDoggMD).
They cover what is known scientifically, what some of the scientific and policy failures have been, what’s the end-game going forward, etc.
#189 – COVID-19: Current state of affairs, Omicron, and a search for the end game (recorded on December 27, 2021)
Plenty of blame for various authorities to be had here, no pulled punches.
A good reminder to always update as we discover more and/or the facts on the ground change (ie. very different when we know little and there’s no vaccines and therapeutics than when we know a lot and there are prophylactics).
Dr. Makary also wrote a post about COVID19 and younger people here:
In other words, a total of 803 American children have died from Covid or with Covid over the last two years. That’s less than the number of total deaths from both influenza and RSV infection in a typical year before the pandemic. A recent study of children in Germany found that no healthy child between the ages of 5 and 17 died of Covid during a 15-month period when nearly all were unvaccinated. Zero. In the whole country. [...]
Last week, the CDC reported that weekly deaths in people age 18-29 has decreased to zero from one in five million the week prior. That’s lower than the number of deaths from car accidents, suicide, and firearms in young people. So why are we imposing a kind of martial law on students to ever so slightly reduce the chance that they develop a mild illness? [...]
It’s time to learn to live with Covid by using some common sense practices: If you’re sick, stay home. If you’re around someone vulnerable, be careful. If you’ve been exposed, wear a real, quality, N95 mask. For the young who have natural or vaccinated immunity, it’s a mild virus that will circulate for the rest of their lives.
Earlier in the pandemic, when vulnerable older people couldn’t be vaccinated, we had no therapeutics, there was A LOT more uncertainty about the virus, and there was relatively little of it in circulation (hope of containment) and it was a lot less contagious; back then it made sense to try to prevent anyone getting it, even kids, because they could bring it back to parents. The hope was buying time until vaccines could save tens of millions of vulnerable people.
But now that we have extremely effective vaccines (when it comes to severity) AND a much much much much more contagious virus that everyone will be exposed to anyway, the draconian measures for young people don’t make sense.
Their costs — psychological, economic, lost time, etc — are higher than benefits.
‘fragmentation of academia, as measured by co-citations’
I haven’t looked up the exact methodology of how this conceptual map was created, but the general idea certainly rings true.
You can find a lot of interesting things by digging deep in one field, all the way to the edge of knowledge, and then trying to advance a bit further.
But you can also find gems at the intersections of different fields, where specialists rarely have the time or inclination to venture.
The low hanging fruits are probably at the intersection of fields that rarely interact, or by connecting more than two fields that are rarely connected together.
h/t David Perell (✍️)
Boston Wastewater Analysis for Viral RNA 🚀🌙
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The Arts & History
‘Band of Brothers’ Sequel ‘Masters of the Air’ 🛫☁️
Apple TV+ has outbid HBO on this one:
The very expensive production is rumored to have a $250 million budget for its 10 episodes [...]
Based on Donald L. Miller's 2006 history, "Masters of the Air: America's Bomber Boys Who Fought the Air War Against Nazi Germany," the series was developed originally for HBO as the third program in a trilogy with “Band of Brothers” (2001) and “The Pacific” (2010). HBO execs supposedly balked at the price tag, and Apple swooped in to make the financial commitment. (Source)
I hope this ends up being on the level of the extremely good ‘Band of Brothers’ (I liked both the book and mini-series), and doesn’t disappoint me the way ‘The Pacific’ did (though I LOVE the books on which the TV series is based — ‘With the Old Breed’ by E.B. Sledge is a must-read).