Category: lenS & thoughtS

Evidence of deflation in China – %Arabica coffee

I met %Arabica Coffee in Hong Kong.

I liked it, especially the design of the coffee shop; I still kept its physical customer loyalty program card.

The coffee chain expanded in mainland China in 2018.

I have been to several of its stores in mainland China and it’s one of my favorites.

In mainland China, the %Arabica coffee loyalty program is more digital (I am using its mini-program on WeChat) and ran separately from the HK one.

The mini-program kept my previous purchases and the Grande Ice Americano is 35 rmb.

You know what, I am buying the %Arabica Grande Ice Americano with delivery to my door for 24 rmb (on weekend) !

As Meituan should also take a cut, the net price for %Arabica is much lower than 23 rmb.

That’s 1/3 cut for consumers and 40-50% cut for %Arabica!

 

That even makes the housing price decline in China “normal” and “not sufficient”.

Best AI

The best AI is the AI that can learn the best after being created.

Education is college is pre-training.

Humans with the best grades in college is probably not the best humans afterwards.

Even you add post-training, which is like internship or few years of work experience, that is still not the best part.

The best AI/human can keep compound on itself.

That is especially true for AI as it can live much longer.

Alibaba’s 3-year payback period

In Alibaba’s earnings call, it touted 3 years of payback and could improve that to 2.5 years or even 2 years.

That sounds strong.. but if you compare, that is nothing.

Even Luckin claims its franchisees have 1.5 – 2 years of payback periods.

And SpaceX said during recent 2q26 earnings that it has <1 year of payback period.

Nebius’s payback period is now 1 year and 10 months, down from 2-3 years, disclosed in 2q26 earnings.

 

Diverging path: Baidu vs. Google

In Q2 2026, Baidu online marketing revenue fell 19% YoY to RMB13.1bn, after falling 22% in Q1.

And AI-native ads doesn’t seem impressive.

Meanwhile Google Search & Other revenue grew 17% YoY to $63.3bn in 2q26.

Google search revenue didn’t feel much impact from growing usage of chat AI.

One difference, probably unrelated to AI-era, is that content sits inside giant closed ecosystems, much of which Baidu either can’t index properly or isn’t the natural starting point for.

Consumers can go directly to vertical apps. This is especially true when mobile is more important than web in China.

Baidu is simply not the end of a discovery journal, while Google still is.

Even if you chat with AI, you might still go to Google to do final checks or to look for places to do the transaction.

Another issue is that Google AI Overview seems more successful in monetization.

Baidu management says it is “deliberately holding back” AI-search monetization.

Google previously disclosed that queries showing AI Overviews monetized at approximately the same rate as traditional Search, and in Q2’26 said it continued to be encouraged by AI Overview monetization even as it expanded into more commercial queries.

 

Governments, tax, shareholders

Isn’t governments the invisible shareholder of all corporations?

Say tax is 25% , essentially gov will take 25 of 100 profit before tax, and the rest $75 are called profit after tax and is distributed to shareholders.

Does it sound odd?

Isn’t governments essentially a permanent 25% shareholder of the company, and the ratio is net by itself.

How convenient.

Btw, shareholders are should give their shares a 25% hair cut.. if they own 50% of a company, they just own 37.5% in case of 25% tax.

Nvidia and BTC

Following the previous post that Nvidia is the central bank, Nvidia also has an interesting relation with BTC.

As Nvidia and compute technology improve, miners buy newer and more expensive machines to stay competitive. Because everyone can access the same better technology, the advantage is quickly competed away through higher hash rates and mining difficulty.

As a result, miners collectively spend more capital to compete for the same fixed amount of new Bitcoin. Higher industry-wide mining costs mean miners require higher BTC prices to justify that investment, creating upward pressure on the Bitcoin price.

The better the Nvidia mining revenue, the higher the BTC price!

In previous mode: larger nominal economy + more dollars + higher price level -> higher nominal gold price

How similar!

Nvidia is the central bank

Token is an asset.

Your account has a number – the number of tokens you can use.

Those tokens can be used to do anything. You either get what you want from tokens, or you make something out of tokens and sell / exchange it for other stuff.

It’s an asset that is so versatile that is like “money”.

In accounting, money is an asset.

In economy, money is the medium of exchange.

Tokens are like money in those regards.

Token factories are like banks.

The factory prints tokens with electricity.

Nvidia’s servers, at the frontier, determines the speed of inflation.

If Nvidia’s next gen servers are too good and sells cheap, token can be printed fast! Thus the token on hand can be depreciated.

In that sense, Nvdia is like Fed that controls inflation.

Thoughts from people more than 75 year ago

Where is our thought leader these days?

Moreover, if we move in the direction of making machines which learn and whose behavior is modified by experience, we must face the fact that every degree of independence we give the machine is a degree of possible defiance of our wishes. The genie in the bottle will not willingly go back in the bottle, nor have we any reason to expect them to be well disposed to us.

Wiener_Norbert_The_Machine_Age_v3_1949

Meanwhile,

I think affluent middle class is key to a lot of things, especially for the US.

The rise of cheap Chinese open-weight models is a shock, if not an “attack”.

“Middle class” that is merely existing without a lot of options in life is not affluent middle class. Free will doesn’t prevail in this case.