The Starlink service density piece reminded me of a video you linked in edition 234 "How Cell Service Actually Works". In that video they mentioned in the early days "only 32 people in a city could use their cell phones simultaneously". We've come a long way since then
It feels like we think about technology as a single S curve when it's really S curves on top of S curves. We were supposed to witness the death of Moore's law, peak oil etc. Just when you get to the flat part of the curve we find some new discovery. Directional drilling and fracking, EUV lithography...........
I know less than nothing about he topic and may be wrong for reasons obvious to an expert, but I wonder if we look back in 5 years and have an order of magnitude more users in a service area than we thought possible today. Human ingenuity never ceases to amaze me.
Thanks. Watched most of his argument at 2x, but in the end, I remain unconvinced. I think there's a fundamental misunderstanding of how the business works behind his claims.
"They offer you something for free, but it costs money, so they have to scam someone else out of it!"
Fact is, Amazon makes money selling stuff (especially in mature markets and mature categories.. they only seem unprofitable if you take into account their growth investments in new markets and categories), and Prime members buy a lot more stuff than non-prime members, so part of the money to serve "free shipping" comes from the membership itself, part comes from the larger profit pool from ordering way more, and part of it is economics of scale since the logistics costs are largely fixed costs, not variable (ie. once a truck is going on a route, whether it has 400 packages or 600 packages doesn't change the cost that much), so as Amazon is driving way more volume through its network from the hundreds of millions of Prime members, its cost per unit delivered goes down, making it hard to compete with for smaller-scale competitors (Shopify is finding that out with its recent logistics investments).
No scam necessary. Kind of like asking how Costco can offer free shipping if you order more than $75 of stuff, and how Costco can offer lower prices than competitors, etc. Well, they're very operationally efficient, they have huge purchasing scale, and they have enough volume to pay very little per unit to move stuff around, on top of recurring membership fees that are basically 100% gross margin and help pay for a lot of this (the other stuff that Amazon bundles with Prime is also digital stuff, so the fact that the market value of it is high doesn't mean that the costs to Amazon are high).
In short, I don't see a scam, just a clever business that generates value for customers and for Amazon.
Liberty, this episode has so much good stuff in it, I am still working through it 3 days later!!
Thanks, glad you like it! I'd rather give too much than too little 💚 🥃
The Starlink service density piece reminded me of a video you linked in edition 234 "How Cell Service Actually Works". In that video they mentioned in the early days "only 32 people in a city could use their cell phones simultaneously". We've come a long way since then
It feels like we think about technology as a single S curve when it's really S curves on top of S curves. We were supposed to witness the death of Moore's law, peak oil etc. Just when you get to the flat part of the curve we find some new discovery. Directional drilling and fracking, EUV lithography...........
I know less than nothing about he topic and may be wrong for reasons obvious to an expert, but I wonder if we look back in 5 years and have an order of magnitude more users in a service area than we thought possible today. Human ingenuity never ceases to amaze me.
It's what makes the future exciting!
Couldn't agree more
I think you'd find this interesting given that you provide great commentary on Amazon: https://www.youtube.com/watch?v=O8Jk7zuwOxg&ab_channel=BreakingPoints
Thanks. Watched most of his argument at 2x, but in the end, I remain unconvinced. I think there's a fundamental misunderstanding of how the business works behind his claims.
"They offer you something for free, but it costs money, so they have to scam someone else out of it!"
Fact is, Amazon makes money selling stuff (especially in mature markets and mature categories.. they only seem unprofitable if you take into account their growth investments in new markets and categories), and Prime members buy a lot more stuff than non-prime members, so part of the money to serve "free shipping" comes from the membership itself, part comes from the larger profit pool from ordering way more, and part of it is economics of scale since the logistics costs are largely fixed costs, not variable (ie. once a truck is going on a route, whether it has 400 packages or 600 packages doesn't change the cost that much), so as Amazon is driving way more volume through its network from the hundreds of millions of Prime members, its cost per unit delivered goes down, making it hard to compete with for smaller-scale competitors (Shopify is finding that out with its recent logistics investments).
No scam necessary. Kind of like asking how Costco can offer free shipping if you order more than $75 of stuff, and how Costco can offer lower prices than competitors, etc. Well, they're very operationally efficient, they have huge purchasing scale, and they have enough volume to pay very little per unit to move stuff around, on top of recurring membership fees that are basically 100% gross margin and help pay for a lot of this (the other stuff that Amazon bundles with Prime is also digital stuff, so the fact that the market value of it is high doesn't mean that the costs to Amazon are high).
In short, I don't see a scam, just a clever business that generates value for customers and for Amazon.