284: Amazon Excess Capacity, Elastic + AWS, Weaponized Starvation, Shopify's Tobi Lütke, Cloudflare's Evolving Bundle, and Fertility

"the whole thing is a metaphor"

Patience is a competitive advantage.

In a surprising number of fields, you can find success if you are simply willing to do the reasonable thing longer than most people.

— James Clear

🏃‍♂️📖 To fortify my motivation to run, I started reading ‘Born to Run’ by Christopher McDougall. It’s quite a page-turner so far (I’m about halfway through).

As an aside, what a tragic mini-story from the book:

FinTwit is apparently full of runners. When I mentioned reading the book, I got all kinds of tips & recommendations. Here are a few book recs:

• Natural Born Heroes, also by McDougall

• Running & Being, by Dr. George Sheehan

• Meb for Mortals, by Meb Keflezighi

I’ve also been enjoying this podcast of Dr. Andy Galpin by Andrew Huberman, covering a lot of the bases on strength and endurance training.

I also gotta learn more about ‘zone 2’. Apparently, it’s the place to be.

💚 🥃 ❓🙋‍♂️🙋‍♀️❓Back in edition #279, I did a survey (I hope you answered! It’s not too late, I’ll still see your responses).

Here are some highlights:

Interesting to see the power-law distribution in each… The biggest slice is at least twice as big as the second bigger and so on.

I’m guessing the person who said they live in Antarctica was just having fun, but you never know on the internet… Hello to any Antarctic researcher reading this 👋🥶

I got a lot of very valuable suggestions in the write-in sections — I’ve been thinking about how to implement some of them. Thank you for that!

Only one person was a total dick, everybody else was very nice and constructive. That’s as good a ratio as you can expect in the real world, so I’m impressed.

I always say that I don’t want the most readers, I want the best ones, and so far so good!

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Investing & Business

Amazon trying to offload excess capacity… 📦📦📦📦

[Amazon] is looking to sublet at least 10 million square feet of space and could vacate even more by ending leases with landlords [...]

The excess capacity includes warehouses in New York, New Jersey, Southern California and Atlanta, said the people, who requested anonymity because they’re not authorized to speak about the deals. The surfeit of space could far exceed 10 million square feet, two of the people said, with one saying it could be triple that. Another person close to the deliberations said a final estimate on the square footage to be vacated hasn’t been reached and that the figure remains in flux.

Amazon could try to negotiate lease terminations with existing landlords, including Prologis Inc., an industrial real estate developer

This sounds like a lot, but at Amazon scale (Amazcale™️), it’s not that much:

the 10 million square feet the company is looking to sublet is roughly equivalent to about 12 of its largest fulfillment centers or about 5% of the square footage added during the pandemic. (Source)

Life is trade-offs.

As I discussed in edition #275, Amazon could’ve taken a different path and had less excess capacity, but without a crystal ball, this would have had different downsides that may have been worse for the business over the long-term:

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. [...]

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.

Elastic ❤️ AWS (?)

Amazon has been competing directly with Elastic for a while (at least since 2015).

This pressure ultimately led Elastic to change their license so that the open-source core would have proprietary features built around it (like a moat, if you will), which in turn pushed Amazon to fully fork the codebase to try to recreate many of the now-missing features, then there’s the trademark lawsuit that Elastic won, etc…

But there seems to be a thawing of relations between the companies:

Building on a commitment last month to make AWS and Elastic work even better together, Elastic and AWS today announced an even deeper collaboration, to “build, market and deliver” frictionless access to Elastic Cloud on AWS. In essence, this means that the two companies will go full-throttle on their “go-to-market” sales and marketing strategies — this includes a new free 7-day trial for customers wanting to test-drive Elastic Cloud directly from the AWS Marketplace.

On top of that, AWS has committed to working with Elastic to generate new business across Amazon’s various cloud-focused sales organizations — this is a direct result of Elastic joining the AWS ISV Accelerate program. (Source)

Clearly, this is a more general trend in the space, with hyperscalers deepening partnerships with independent software companies — it’s hard to beat someone whose whole reason of being is one thing when it’s just a side-project for you.

Instead, the big clouds are happy to get paid app store commissions and for the compute and storage, without having to spend as much on R&D and SG&A, which is required to compete head-on.

We’ll see if the truce holds and if AWS eventually puts OpenSearch in maintenance mode and goes fully behind Elastic the way that I think Azure and GCP have…

🛒 Cloudflare on Bundling ⛅️

Here’s Matthew Prince, the CEO and co-founder, on why bundling can be so powerful:

[Compared to Zscaler] we can deliver a much higher ROI. Because we have this broad diversity of products, we can often bundle things together in such a way that we can say, listen, you're willing to pay extra Zscaler. We'll give you exactly the same functionality that they have for exactly the same price but will throw in DDoS mitigation or WAF or something else for free. I think great companies that are in the SaaS space they go from the tens of billions of dollars of market cap to the hundreds of billions of dollars of market cap, do it all in one way, and it's bundling products together. And every single platform that does it figures that out.

Most people have to do it through a series of acquisitions.

I think what's unique about Cloudflare is we've been able to organically build that platform that has the sufficient breadth that allows us to do that bundling strategy. And that's a really tough thing if you're a Zscaler to compete with. Like if we just say, listen, we'll give Zscaler away for free if you buy DDoS right? That's a move that we can make in the same way that Microsoft uses their E5 license in order to take on some of the folks that they are there. So I think that's going to be a huge part of our story.

This only works if your own marginal cost of throwing more products in the bundle is very low — which is another advantage of Cloudflare’s extremely efficient network with plenty of extra capacity and very high gross margins/low costs.

I'll tell you what we're bad at. We have not yet really mastered what Zscaler is amazing at, which is partnerships. Like that's, I think, a place which is a big opportunity for us to continue to invest. [...]

it's actually one of the sort of secret benefits really of us buying Area 1 Security. They had almost all of their sales were channel-based sales. They really knew how to do that well. We're absorbing that DNA.

Gotta appreciate a CEO who tells you his company’s weak points without being asked.

🎧 Interview: Tobi Lütke, Shopify CEO & Founder

Good interview of Shopify’s founder & CEO by Patrick O’Shaughnessy (🍀):

• Tobi Lutke - Embrace the Unexpected

The discussion of finite vs infinite games is very important, and a good framework to make long-term decisions about your life. I still haven’t read the book by James Carse, but I’ve read so much about the concept from other sources that I almost feel like I have.

I also like the discussion on infrastructure, both digital and physical.

There’s so much leverage for society in having a high-quality platform on top of which more can be built, it deserves a lot more attention than it has been getting, at least in many of the countries that I’m more familiar with (the roads here are so terrible! Everybody’s paying for them through taxes AND wear & tear on their cars..).

🇷🇺 ‘Russia is weaponizing starvation’ 👨‍🌾 🚜🌾 💀

Vladimir Putin’s most powerful weapon is not in his military arsenal. It is the threat of migration and unrest provoked by disrupting food supplies to Africa and the Middle East.

Ukraine is the breadbasket of the world. In a normal year, it grows enough food (mostly wheat, maize, and cooking oil) to feed 400 million people. Nine-tenths of that is shipped through the Black Sea. This year nothing is moving by sea, and not much by land. The war has also hit fertilizer exports.

That directly affects 1.7 billion people in more than 100 countries, according to the United Nations. Of these 43 million are on the brink of famine, and 570,000 face starvation. [...]

The planting season is disrupted. Ukrainian farms have been pillaged and destroyed by the occupiers. Many of the men are fighting. Many women are in exile. Full reconstruction will take years, not weeks. Famine already stalks Yemen. It will march onwards.

Moreover, forcing Ukraine to surrender to Russia would not bring peace. It will merely postpone the Kremlin’s next military adventure. (Source)

More victims of the Russian dictator.

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Science & Technology

🌎 Falling over the fertility cliff… 🤰👶 👶 👨‍👩‍👧 🧓🏻👴🏻

The fertility rate in the U.S. has been below replacement (2.1/woman) since the mid-1970s (thank you immigration for helping with that!), Japan is melting away, and the world has been rapidly transitioning to having fewer kids, as the chart above shows.

Sounds to me like places that are lucky enough to be desirable to immigrants should welcome them with open arms instead of turning them away and making it so hard to legally move there for highly talented individuals (*cough* 🇺🇸 *cough*), but that’s not a cure-all that works everywhere.

There are two high-level ways of getting out of this, and we’re likely to need a mix of the two:

1. You can reduce the rate at which population shrinks by losing fewer people each year. I’ve already written about the need to fight the diseases of aging and extend healthy lifespan (or healthspan, if you will).

2. You can change incentives to make it easier for those who want kids to have them. This means putting more focus on everything related to this: I always find it incredible when I see hospital bills for having kids in the US. Then there’s parental leave (my wife had 50 weeks here in Canada — in the US, you’re apparently expected to be back at work about as fast as if you had a bad case of the flu), daycare, flexible family/sick days, etc.

If as a society we’re fine with investing hundreds of billions in weapons, but we can’t find a way to invest more in the future of human civilization, something’s terribly wrong.

Of course, when you start thinking about this stuff, you’re led down all kinds of other mind-paths. For example, we need to decouple population size from various measures of pollution and environmental degradation.

The Earth’s carrying capacity isn’t fixed, it depends heavily on whether we’re an advanced civilization running on clean energy sources with highly efficient systems to grow meat without animals/factory farmings and closed-loop recycling systems and such, or if we’re still burning lots of coal and oil per capita, cutting down rainforest for cattle herds, overfishing the oceans, etc.

But the Earth’s a really big place, and with a sufficiently clean system, it could easily carry tens and tens of billions of people. Because of non-linear network effects, this would help humanity be a lot more innovative and creative, etc.

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The Arts & History

😲 Everything Everywhere All at Once (2022) 🤯 🥯

To all those who haven’t seen it yet, all you need to know is that I recommend it.

I can’t say more, because the less you know going in, the better it is (kind of like with Palm Springs). Just know it isn’t for kids, and whatever you may expect, it *isn’t* that.

*spoilers below*

*spoilers below*

*spoilers below*

*spoilers below*

I went into it knowing almost nothing about it. I knew it was kind of about alternative timelines or different realities, multi-verse type stuff, but that was about it. I didn’t even know there was any fighting in it.

That was the best way to experience it, and I hope you watched that way too (if you’re reading this without having seen it, last chance to stop! Go watch it!).

Evelyn’s arc reminds me a bit of Wikus in District 9 (2009), another film that I went in blind.

Both actors were very good at playing a “regular” person that undergoes a massive transformation, such that by the end of the film, they’ve grown tremendously and are almost unrecognizable in many ways.

I wasn’t familiar with Michelle Yeoh, I’ve never seen Crouching Tiger, Hidden Dragon (2000). I had no idea she had done kung fu films — in a great parallel with one of her multiverse timelines in the film — and so when she transforms into a badass, she made it looks effortless and believable. They didn’t have to resort to cheesy fast-cutting and shaky-cam to hide that she couldn’t move, because *she could*.

Same for Ke Huy Quan, who’s probably best known for his child actor role in Indiana Jones and the Temple of Doom. Since then, he’s been working behind the camera as a stunt and martial arts choreographer. While he’s a good actor, he can sell the transformation from mild-mannered googly-eye fan to fanny-pack fighter.

And what can I say about Stephanie Hsu as Joy? I love her performance, and the hallway fight scene with the cops may be the high point of the film for me. Visually, and her delivery of the antagonist’s speech… Wow.

The whole thing is almost too mad to be believed as something that was actually made, and the more you dig into the backstory, the more impressive it is. For example:

All the VFX for this film was done by 9 people, including the two directors, with the majority of the shots being done by a core group of 5 people. None of the VFX team went to school for VFX. They were all friends who taught themselves with tutorials they found online for free.

It’s not the most subtle film in the world, but I like how they use misdirection in the first half of the film to make you think it’s a classic “must stop the bad guy from destroying the world”, only to then make you realize that Joy just wants to destroy *herself*, and the whole thing is a metaphor for how the members of a family are having trouble connecting and understanding each other, but they have to fight for each other.

A wild ride, I’m glad I saw it.

Not a perfect movie by any means, but it’s incredible that it worked as well as it did considering how much they packed into it (how many different genres of films can you count in this kaleidoscope?).