289: Costco vs Sam’s Club, Heico, Crowdstrike, Spotify, Nokia & RIM vs Apple, Oil Demand Destruction, India's Baby Bust, Trained Rats, and DALL-E 2's Taste
289: Costco vs Sam’s Club, Heico, Crowdstrike, Spotify, Nokia & RIM vs Apple, Oil Demand Destruction, India's Baby Bust, Trained Rats, and DALL-E 2's Taste
"Effectiveness always matters more than impressive numbers"
Don’t be so humble—you’re not that great.
—Golda Meir
🛀 👩💻 Early web: Let's liberate ourselves from the shackles and constraints of the physical world to build something better! Freedom & abundance!
Current web: Let's recreate physical constraints, enforce scarcity, and prevent people from doing XYZ!
(I know things aren’t that simple, but it’s a joke that wrote itself)
📱 Nokia and RIM (now Blackberry) spent a lot more on mobile phone R&D than Apple in 2005-2006, and they had thousands of “domain experts” on payroll.
It’s not always about the money. The right vision, concentration of talent, the right foundation to build on, the right leadership, etc.
Effectiveness always matters more than impressive numbers on a spreadsheet and high headcounts.
🛀 🐳 🐬 When you really think about it, it’s kind of wild that whales and dolphins are mammals, just like us.
It’s a ‘fact’ that everybody knows, but knowing the words and thinking deeply about the implications for more than 2 minutes are very different.
🤘🎸 James Hetfield is turning 59 in a couple of months. Masters of Puppets will soon be considered ‘Classic Rock’, if it isn’t already. Time marches on relentlessly.
The kids of today should remember that what’s ‘cool’ and ‘rebellious’ to them will one day be looked at as quaint oldies by their own kids. So it goes…
💚 🥃 Right now, 96.1% of subs of this newsletter aren’t supporting the project, and 3.9% are paid supporters.
I’d love to get back to at least 5% to make it sustainable for me. This is a full-time project and I can’t do it without your help. Thank you.
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Investing & Business
Costco vs Sam’s Club, average revenue per warehouse
Graph by friend-of-the-show Alex Morris. COST 0.00%↑ WMT 0.00%↑
The mood at Heico + Customer anecdote 🛩 🛰
This is from their Q1 (fiscal Q2, ugh) transcript:
a little anecdote. I was at the MRO Conference in Dallas a couple of weeks ago. And actually, we had a major airline that everybody would be very, very familiar with, I can't mention the name, and they brought all of their senior leadership to frankly thank HEICO. In all of my years, I've never had a meeting quite like this where they brought their senior leadership to thank HEICO one for coming up with our new product solutions and helping them with all sorts of stuff that others wouldn't; and number two, not taking advantage of them and not doing what other people are doing.
And they called out a number of other manufacturers, and they said that HEICO really differentiated itself and was going to be rewarded with not only increased business on products that we currently offer, but increased business on new stuff that they wanted us to develop for them. So I think as a result of treating our customers right, this is going to work… most importantly, we will keep our customers happy because there's a huge amount of opportunity for us.
This was an interesting contrast to a lot of bearish commentary lately (Jamie Dimon’s hurricane! 🌪):
all of our business areas in which Flight Support operates, we are, in my opinion, gaining market share.
I have never seen in my 32.5 years at HEICO, I have never seen this level of enthusiasm from our people. And it is absolutely across the board. It's in PMA parts, component repair, distribution, specialty manufacturing, defense sustainment. It is just completely across the board.
We’ll see how that translates to the actual business going forward, but they’re pumped!
We're very active in the M&A area, incredibly busy, busier than we've ever been. We remain disciplined. We recognize that the market is where the market is, and we've got to be competitive. But yes, I think that there are plenty of opportunities, and we're working them very, very aggressively.
Sounds like they may be able to take advantage of that 0.28x net debt-to-EBITDA ratio… HEI 0.00%↑
🥱 White noise podcaster making $18,000/month on Spotify with nothing but noise… 🛏 😴
While the top of the podcast charts on Spotify and Apple are still dominated by garrulous, jawboning hosts, these days you can also reliably find a smattering of white noise shows appearing in the mix.
Who is behind the popular offerings is a bit of a mystery. [...]
at time when most podcasters clamor for public attention, the white noise podcast creators remain a relatively tight-lipped group. Requests to speak with multiple shows, even those with a contact form, were declined or went unanswered.
I understand them not wanting attention. As long as few people realize how lucrative this is, competition remains lower, but if the cat’s out of the bag…
Most recordings seem to be 8-9h loops of white noise, wave sounds, box fans, rain, etc. Sometimes a mix of multiple of these together.
Not a bad gig if you can get it:
Because Moore doesn’t want to interrupt the calming aura of his show, he opts to include only pre-roll ads.
Anchor manages the commercial load and pays Moore $12.25 per thousand listens, which adds up to about $612.50 per day, or around $18,375 per month. (Source)
That’s just one example. There could be much bigger ‘white noise’ podcasters out there, making millions. I mean, if someone gets used to sleeping with white noise and plays some ad-supported ‘podcast’ daily, it adds up over time!
Personally, I use a physical white noise machine that I’m quite happy with. It’s this model.
⚡️🔌 🚗🔋 Electric Vehicle Oil Demand Destruction 🛢🛢
As much as passenger vehicle EVs are starting to make a little dent in oil demand (still small, but fast-growing), I was surprised to see how much larger the impact of 2-3 wheel electric vehicles is:
Two- and three-wheeled EVs accounted for 67% of the oil demand avoided in 2021. This is due to their rapid adoption particularly in Asia.
On the passenger vehicle front:
Globally, EVs accounted for 13% of passenger vehicle sales in 4Q 2021, or 9% when excluding plug-in hybrids. If plug-in hybrids are included, countries such as Norway (97%), Sweden (60%), Netherlands (51%) and Denmark (49%) have reached very high sales penetrations as of 4Q 2021
How much does this add up to?
Global oil demand in road transport reached roughly 43.7 million barrels per day in 2021, a slight increase since 2015.
The adoption of electric vehicles and fuel cell vehicles avoided almost 1.5 millions of barrels of oil per day in 2021 – about 3.3% of total demand. (Source)
This may not seem like much (yet), but think about how non-linear the impacts of a slight change in demand/supply in either direction can be… Oil prices went *negative* in 2020 and went up like a rocket because of the invasion of Ukraine.
If demand was 1.5m barrels/day higher, it certainly wouldn’t help!
This “avoided oil consumption/demand destruction” more than doubled in the past 6 years, from ~725k barrels/day in 2015.
🦅 Crowdstrike’s Modules 🧱
I wrote all the way back in edition #69, during the Mesoproterozoic era, about how Crowdstrike basically made close to 100% incremental gross margins on additional modules sold to existing customers.
The idea is that all the costs come from the initial CAC and getting someone to install a software agent on their devices, and then gathering all the data sent by these agents inside of data-centers where it is stored and processed.
Well, once the agents are installed, the data is gathered, stored, and processed, additional software modules mostly just mean additional compute. This isn’t very expensive!
Knowing this, it makes Crowdstrike’s cross-selling freight train is very impressive:
In Q1, subscription customers with 4 or more, 5 or more and 6 or more modules increased to 71%, 59% and 35%, respectively. Given subscription customers with 4 or more modules surpassed the 70% milestone and is now commonplace, we are retiring this disclosure and raising the bar by introducing a new metric customers with 7 or more modules, which reached 19% at the end of Q1.
One out of five of their customers is using 7+ modules!
Many companies would do a happy dance if they could just get 20% of their customers to use 3+ products 🕺 CRWD 0.00%↑
Science & Technology
‘Though still quite poor, India has joined the baby bust.’
Who’s psyched for some demographics talk today? Yea, I know, right! 🤜 🤛
One of the most consequential statistic passed by without much noise. India's total fertility rate fell below population replacement rate to 2.0, with many states far below that level, thanks to effective campaigns around family planning & contraception.
More details here. (headline quote is by Noah Smith)
Meanwhile in the rest of Asia:
Japan was once known for ultra-low birthrates. Though still low, it now actually has the highest fertility rate in developed E. Asia, and is tied with China, where fertility is still tumbling.
This feels very… consequential!
One more reason to invest more in curing the diseases of aging so the people *we do have* stay healthy longer!
h/t Mike Bird
Rats with backpacks trained to find survivors in collapsed buildings 🧱🧀🐀
That’s just cool (and adorable):
h/t Generativist
The Arts & History
OpenAI’s DALL-E 2 generates images of Kermit The Frog in various films 🤖🎨 🤯 🔥
This is literally mind-blowing to me. This is great, funny art, that I’d think was particularly good if a human had done it, but it’s generated entirely by a machine.
DALL-E 2 can somehow extract what makes a film or TV show recognizable stylistically and apply that to generating something that *isn’t* that source, and *isn’t* Kermit the Frog as an AI could perceive it to be if it just looked up a bunch of Kermit photos, but represents a synthesis of the two with an editorial flair that makes perfect sense to us humans. 🤯 🤯 🤯
I’m blown away by this. Imagine if you had been commissioned with creating images of, say, ‘Bart Simpsons’ in the style of a list of films… How many subtle decisions would it take to make the images ‘feel’ right and be instantly recognizable?
The lighting on some of the images, it’s almost like DALL-E was 3D renderings with ray tracing, but it *doesn’t do that*!
The Star Wars one has nothing generally recognizable as SW — no lasers or Tie Fighters — yet it works.
You can click on the image above to see a larger version, but this isn’t even all of them. I just picked 6 that I liked. There’s many more in this thread.
Gogoro (https://www.gogoro.com recently public $GGR) is an interesting company leading 2-wheel EV adoption. I've been following them since the early days, and although it's taken some time, their dominance in Taiwan ("It currently powers 97% of all EV two-wheelers in Taiwan") has proven the model.
"James Hetfield is turning 59 in a couple of months. Masters of Puppets will soon be considered ‘Classic Rock’, if it isn’t already. Time marches on relentlessly." Ouch! That one stings a bit. 🤣