275: Thoughts on Amazon, Why Pessimism Sounds Smart, Scale of Big Tech, Flexport 101, China's COVID-Zero Folly, Diablo Canyon, Gloomy Europe, and WOTS

"It’s possible for both sides to be irrational!!!"

When someone tells you about the peak year of human history, the period of time when things were good before things went downhill, it will always be the years of when they were 10 years old — which is the peak of any human’s existence.

–Kevin Kelly

🦾🤖 I’d be curious to read the anti-automation arguments that were no doubt made around the time when washing machines, dryers, and dishwashers first came out…

📈📉🪦🕺 When something that has been doing well for a long time, getting accolades and high-fives, starts doing badly, you can expect a lot of schadenfreude hot takes and premature grave-dancing.

This is just a sign that there’s always pent-up demand to crap on the top dog(s) in any area of life.

I bet you’re thinking of something specific as you’re reading this, but it applies more widely — keep your antenna tuned for the phenomenon, because it’s often a good display of irrationality that can be learned from…

But it’s not because that’s sometimes irrational that the reverse was rational. It’s possible for both sides to be irrational!!!

(yes, that deserved three exclamation marks — if not that sentence, what else?)

🪴 Follow-up to edition #274 about growing green onions in a glass: reader Mikel shared this interesting ‘how to/best practice’ video. Some really good tips in there. I may soon have more free green onion than I know what to do with ¯\_(ツ)_/¯

🎥 💵 Zoom keeps tightening the screws... 1-on-1 calls used to be free and unlimited in duration. Only calls with >2 people had a limit of 40 minutes.

That changed 2 days ago, and I found out in a really inconvenient way: I was having a conversation with friend-of-the-show and supporter (💚 🥃 🇸🇬) Cedric Chin, and we were recording it (look for it soon on the podcast feed)…

Mid-sentence, I got a distracting pop-up that asked me to upgrade, with a 10-minute countdown. There was a better way to do this, Zoom. Ugh 🤬

I guess they have to get that revenue growth back on track…

🛀 Aiming for the right goal(s) is incredibly powerful, especially when so many others aren't…

💚 🥃 🎂 For the price of one alcoholic drink, you get 12 emails per month (plus 𝕤𝕡𝕖𝕔𝕚𝕒𝕝 𝕖𝕕𝕚𝕥𝕚𝕠𝕟𝕤 and podcasts!) full of eclectic ideas and investing/tech analysis.

That’s pennies per edition for the Serendipity Engine!

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).

You can even sign up in single digits seconds on your phone with Apple/Google Pay by clicking the button below (if you don’t see paid options, it’s because you’re not logged into your Substack account):

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📦📦📦 Thoughts on Amazon Q1 📦📦📦

I won’t go into detail on Amazon’s Q1 and transcript, because it seems like everybody has already read ‘em. But I had some thoughts on how fast it seems like price is driving narrative.

From being considered an indestructible, inevitable business not long ago to a constant stream of worried posts about how e-commerce is a terrible business and AWS will be commoditized (despite growing 37% at a $74bn run rate with 35.3% operating margins…). I’m getting whiplash here!

Let’s look at the choice that Amazon was faced with on the e-commerce side in the past couple years.

First, I don’t think the very weird environment we’ve been in is representative of what we’re going to see long-term. We won’t have never-ending global pandemics that reshuffle almost everything around us every few years (let’s hope!)…

But faced with it in 2020, Amazon had some choices, and unlike in the digital world where it’s fairly easy to make quick changes, in the world of atoms, there are long lead times, and most things are baked in 1-2 years in advance.

Seeing the spike in demand, the disruptions in supply chains, the labor shortages and productivity hits from COVID measures/people staying home because they were sick, Amazon could’ve decided to manage it more prudently. That would’ve meant slower investments in capacity, not hiring quite as fast, etc.

The price for this would’ve been externalized to customers and merchants.

A lot more items would’ve been out of stock, there would’ve been more shipping delays, merchants would’ve lost more sales, warehouse capacity wouldn’t have been enough to meet demand and FBA rates would’ve likely increased more, people who depend on Amazon for a lot of life’s necessities during lockdowns, when physical stores were closed, would’ve had a harder time, etc.

Instead, the company decided to take on the risk of over-capacity and — very on-brand — put customers first and invested MASSIVELY to try to keep things running as smoothly as possible during this crazy time. This is when Bezos came back to run the business day-to-day. They basically doubled the e-commerce footprint in less than two years and hired hundreds of thousands of employees, in part to make sure they always had enough workers even when many were sick.

Life is trade-offs. This was a costly bet, but the question is, did it position them better for the long-term than if they had not made that choice?

It looked great as long as demand was spiking, but as soon as it slowed down, the long lead time on the physical infrastructure meant that it was almost impossible not to overshoot a bit. Now we’re seeing those costs, but I think it was probably the right thing to do.

We can’t have the alternate history scenario, but it seems to me like Amazon got a lot of new customers during the past two years that will stick around, especially new Prime members. Many merchants also became more dependent on FBA, as other supply chains didn’t perform as well. They widened their logistics moat and now have the capacity to do things like ‘Pay with Prime + FBA’ for external merchants, etc.

It’ll take them some time to fully optimize and grow into this capacity, but having seen some of their past investment cycles, I have little doubt that they’ll do it.

In other words, decisions have to be kept in their context, with the information that was available at the time, and crazy times shouldn’t be extrapolated from too much.

‘Why pessimism sounds smart’ 😨

Interesting piece by the excellent Jason Crawford:

I’ve realized a new reason why pessimism sounds smart: optimism often requires believing in unknown, unspecified future breakthroughs—which seems fanciful and naive. If you very soberly, wisely, prudently stick to the known and the proven, you will necessarily be pessimistic.

This is so true.

You can point to problems — there! Look at that horrible situation! — but you mostly can’t point to solutions, *because if they were already here, the problems would’ve been solved already*…

In just the same way, it can seem that we’re running out of ideas—that all our technologies and industries are plateauing. Technologies do run a natural S-curve, just like oil fields. But when some breakthrough insight creates an entirely new field, it opens an entire new orchard of low-hanging fruit to pick. Focusing only on established sectors and proven fields thus naturally leads to pessimism. To be an optimist, you have to believe that at least some current wild-eyed speculation will come true. [...]

But if progress is a primarily matter of agency, then whether it continues is up to us.

How big is Big Tech?

Source: chartr

🌏 Flexport 101 🚚 ⚓️ ✈️ 📦📦📦📦

Interesting overview of Flexport by Mario Gabriele (🦊).

It’s a company I’ve been interested in since I first heard a podcast interview with Ryan Petersen many years ago. I just liked the way he thought about things and had a feeling he would make interesting stuff happen.

I love when entrepreneurs try to solve *big* problems in the world of *atoms* — there’s already plenty of fresh neurons working on digital problems, we need more on the other side.

Global logistics is as big as it gets:

In simple terms, Flexport wants to create Flight Control for the whole world – every ship, truck, plane, and train carrying freight depicted in near real-time with visibility down to the package level. 

The less you know about logistics, the more realistic this sounds. You might think it already exists. The reality is rather different. Documentation exists in dozens of formats and languages, often stubbornly offline. Stakeholders may not communicate with each other or do so in tricky-to-track formats like phone calls or fax. Ports and warehouses have different owners, hours of operations, and designs. [...]

Flexport is devoting serious resources to digitizing global trade documents. Ingesting data from different languages and formats is the first step in building a library of “facts” around a shipment [...]

Flexport is developing models to predict when a shipment will arrive to be unloaded at a given port. Getting seemingly simple things right can have meaningful downstream effects. Knowing when a ship is ready to be unloaded influences when a truck should arrive, for example. This, in turn, impacts how a warehouse might organize its space. Just as snafus in one part of the supply chain can lead to misery elsewhere, improvements can create secondary and tertiary efficiencies. 

Of course, there’s no magic to this, they can’t just snap their fingers and create some kind of fully digital API for the global logistics network, and I’m sure they aren’t the only ones trying. But I sure am glad that they are.

Chinas ‘COVID-Zero’ Folly 🇨🇳 🦠🦠🦠🦠

This is depressing:

• «China's Leadership Is Prisoner of Its Own Narrative»

So much unnecessary suffering… How can anyone, anywhere who has been paying any attention the past 2 years believe that it’s possible to achieve COVID ZERO at this point?! This is why democracy matters, for all its faults…

🐈‍⬛ Gotta think like a cat/customer/user 🐈

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🧪🔬 Liberty Labs 🧬 🔭

☢️ Hope for the Diablo Canyon Nuclear Power Plant? 🤨

Newsom told the L.A. Times editorial board Thursday that the state would seek out a share of $6 billion in federal funds meant to rescue nuclear reactors facing closure, money the Biden administration announced this month. Diablo Canyon owner Pacific Gas & Electric is preparing to shutter the plant — which generated 6% of the state’s power last year — by 2025.

“The requirement is by May 19 to submit an application, or you miss the opportunity to draw down any federal funds if you want to extend the life of that plant,” Newsom said. “We would be remiss not to put that on the table as an option.”

He said state officials could decide later whether to pursue that option. And a spokesperson for the governor clarified that Newsom still wants to see the facility shut down long term. [...]

The governor said he’s been thinking about keeping Diablo open longer since August 2020, when California’s main electric grid operator was forced to implement rolling blackouts during an intense heat wave. (Source)

Nuclear power plants are Ships of Theseus, or axes of Lincoln (where the handle and head have been replaced multiple times).

Some plants may have been built in 197x, but if you carefully monitor, maintain, refurbish, and replace every part multiple times over the years, how old is the plant really?

What matters is not the date on the birth certificate, but whether it is operating well and safe.

If it’s the case, why tie your hands behind your back by shutting down assets that were extremely expensive and long to build and produce large quantities of scarce baseload clean energy?

☀️😎 ‘Americans simply cannot conceive of how gloomy Europe is’ 🇪🇺🌥😕

“the only places in the entire continental US that receive as little sun as the UK are a tiny chunk of Maine and the gloomiest tip of Washington”

Via apex hern, h/t Ryan Petersen (⚓️)

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Episode 1 & 2: ‘We Own This City’ (HBO, David Simon, 2022)

I don’t care if everybody high-brow loves him too, David Simon is one of my favorite directors, and not just for ‘The Wire’ (btw, if you are a fan, you *have* to read ‘All the Pieces Matter: The Inside Story of The Wire’ by Jonathan Abrams — it’s amazing!).

‘Generation Kill’ (HBO, 2008) is one of my fave mini-series (and the book was good too), ‘Show Me a Hero’ (HBO, 2015) was great, and I’m soon re-watching ‘Treme’ (HBO, 2010) for the 3rd time…

I was excited when I saw that ‘We Own This City’ — a new mini-series set in Baltimore, based on true events — was coming out, and the first episode didn’t disappoint.

*mild mild spoilers below this, mostly just my opinion, no plot points*

It’s vintage Simon, and a lot of Wire alumns are playing roles.

It’s a bit strange to see actors who played drug dealers play cops, but they do a great job and it’s not distracting (Marlo!).

As expected with Simon (and Ed Burns & George Pelecanos, regular Simon collabs), there’s no hand-holding, so things can be a bit confusing at first, but I trust that he’s putting all the pieces on the board and that it’ll become clearer as we go.

So far it’s a fun ride — scenes are well-acted, well-written, well-shot… What more can I ask for? I’m looking forward to episode 2.

Update: After writing the above, my wife and I watched episode 2, and I really liked it too.

Most of what I wrote above still applies, but there’s one thing we noticed, and without spoiling it, I’ll just say: Watch the end credits.

It’s a small thing, so don’t expect too much, but once we figured out what they were doing, we watched them all, and by the end, we were laughing out loud.

Maybe we’re just dorks ¯\_(ツ)_/¯