also here: https://time.com/6317339/rooftop-solar-power-failure/
Solar panel for some = Financial products that don’t work
And this disappoints customers.
As a product, it fail too easy and too often.
Too sales driven and customers feel they got tricked.
Uber Mobility had ~$70bn gross booking in 2023, and recorded $20bn revenue.
Drivers should earn ~70%, or $49bn, as Uber Mobility’s revenue margin is ~29%.
Based on drivers’ feedbacks, it seems that net earnings after expenses are roughly 2/3.
Then what self-driving can replace is 2/3 of that $49bn, or $32bn per year.
This doesn’t include UberEats (Delivery).
Uber had about $3.6bn operating cash flow in 2023; it made ~$2bn adj. EBITDA after SBC.
That $32bn net “savings” can lift Uber’s profitability by 10-fold.
What’s missing?
The additional insurance needed for self-driving as software can make mistakes?
The job losses around the world?
If can solve self-driving at night, it would be great! We human beings need to sleep.
It might not be that surprising, but many sponsors of major China local (provincial) soccer clubs in the Chinese Super League didn’t do well after naming the team.
Dalian Wanda and Dalian Shide were the names for Dalian’s soccer club. Dalian is only a city in Liaoning, but Dalian Shide was a strong team in the Chinese Super League. Dalian Aerbin is another club in Liaoning; the boss tried to acquire Dalian Shide.
More people might have heard about Evergrande. Evergrande purchased Guangzhou soccer club in 2010. Guangzhou Evergrande won seven consecutive Chinese Super League titles from 2011 to 2017.
Similar stories could be found for teams across cities/provinces, e.g. Jiangsu, Beijing, Shanghai, etc.
I am not sure if this is common globally. I can think about FTX, which sponsored the Mercedes F1 team and Golden State Warriors. But it’s not something consistently happening on the global stage.
Maybe it’s due to the business model. Property developers were very profitable and can benefit from broader audience with the clubs’ naming. Usually male watch those soccer matches more often, and those who have time and money to watch sports could be wealthier and thus homebuyers.
Search is a two side product.
You need to provide that “10 blue links” to serve consumers. Hopefully consumers can find what they need (have the answer) as fast as they can (no need to go to the next 10 search results).
You also need to serve the advertisers to market or grow their business.
Baidu seems to be challenged in both ways.
Sometimes, the most up-to-date information (with details) is found in Xiaohongshu and Douyin, where users upload tons of posts and videos. User-generated content can carry much more info than official news, as official news is well controlled by gov in China. There are basically not news other than official news.
For business owners, Baidu doesn’t offer much growth. Merchants shall spend more on e-commerce sites directly (which was mainly search-driven before recommendation rose). Douyin and Xiaohongshu may help “create the desire to buy” that search can’t. Some services can be banned from making advertisement (like after-school education). For some other businesses (toB etc.) – Moutai (liquor) is a more efficient sales spending. More importantly, search results are mostly webpages; but webpages are less useful in China vs. the US – a Weibo Account and a WeChat Public Account is more useful.
This actually leads to another interesting thing – I feel independent websites are dying in China. They are not important at all. Maybe China is preferring mobile over PC due to real name, and mobile phone number is the easiest way to fulfill that requirements, but websites don’t necessarily need a mobile phone number. This topic should be explored more.
Link: https://www.acquired.fm/episodes/visa
Three major pieces of technology
1/ authorization network letting banks talk to banks
2/ automated clearing house
3/ digitized point of the transaction
Very interesting timing of the IPO (2008) that gives selling banks an important lifeline.
A fair problem raised – this “regressive tax” on transactions as merchants raise price for all customers but rewards are higher for premium customers.
Two is much better Three in terms of market competition / dynamics.
Visa and Mastercard is are two giants in payment network.
WeChat and AliPay are two leading mobile payment providers in China.
Global PD-1 market has two leading drugs – Keytruda and Opdivo
Differentiated “two” is also good.
Android and iOS are two mobile operating systems with differentiated business models.
CATL and BYD are two leading Chinese battery makers with differentiated business models.
Three is a different picture.
US has three big automakers, Stellantis, GM, and Ford.
China has three SOE automakers, 一汽, 上汽 and 广汽. There were three private automakers, Great Wall, Geely and BYD. Three are three US-listed new energy vehicle startups, Nio, Li Auto and XPEV. [3 x 3…]
Three are three major airlines with alliances, Star Alliance (United), Oneworld (American), SkyTeam (Delta). There are three low-cost carriers (although nowadays the line is blurry) SouthWest, Alaska, and JetBlue. There are three ULCC, Allegiant, Frontier and Spirit. [3 x 3…]
China has three SOE airlines, 国航, 东航 and 南航. Each joined one of the three alliances.
One is rare.
Two is good; differentiated two is even better.
Three is hard; three times three is very hard.
Growing out of three is amazing.
BYD is an example.
Equinix capex for 2024 is ~$3bn
Digital Reality capex for 2024 is close to $3bn
The largest independent data center GDS operator only has rmb 6.5bn (less than $1bn) capex for 2024, of which rmb 4bn is outside of mainland China.
GPU shortage is the key, which limits the development and usage of AI.
Overall weak demand in China is also the key, as main internet companies need a surge in net income or cash flow first to support a surge in capex.
2025/26 could be interesting. If US feels the lead in AI is firm, and the H800 etc. is more of a legacy chip, and Huawei develops better AI chips, it doesn’t hurt to sell some Nvidia chips to Chinese customers.
$EQIX capex guide
$DLR capex guide
Personal experience:
It was cool to hold a Starbucks drink in hand, but less so in recent years.
The cool factor is diluted with %Arabica (82 stores), Blue Bottle (5 stores), and Peet’s (over 200 stores).
Blue Bottle can drive me to a shopping mall that wasn’t on my plan. Starbucks has less effect these days.
I rarely buy Luckin coffee, unless it’s a hit product like Moutai coffee. Mostm Luckin items don’t taste like coffee but more like sugar drinks to me.
I have tried other domestic brands like M Stand (350 stores). I think that tastes more on par with Starbucks.
Manner (1000 stores) is not on par with Starbucks, but the minimalist style looks appealing than Luckin for certain customers.
Other international brands like Tim’s (912 stores) is not a bad choice. But the store is less sophisticated than Starbucks (lack of charging).
In terms of drinks, I think Starbucks is less differentiated among premium brands like %arabica, Blue Bottle, Peet’s.
In terms of services, Starbucks is differentiated with charging outlets. And I like the option of ordering without a phone, although I mostly order on phone.
In terms of branding, it’s less “cool” compared with %Arabica and Blue Bottle, unless it’s a Starbucks Reserve coffee.
I think Starbucks’ problem in China is more of a positioning problem. How it can target different segments with a single brand? Different customers want different things and they are just too different in China.
I am sure in some cities, Starbucks shall still enjoy a “cool” factor for some time, but can fade over the years if other foreign brands enter.
%Arabica Shanghai
Blue Bottle Shanghai
MSFT capex saw 41% increase in CY2023 and 79% increase in the first quarter of 2024. And MSFT expects material sequential increase in capex, which could mean 50-60% increase yoy.
Alphabet capex saw 2% increase in 2023 and 91% increase in the first quarter of 2024. The company expects similar amounts in the following quarters, which points to 50% yoy increase in 2024 capex.
Meta capex saw 12% decline in 2023 and 5% decline in 2024q1, but the company upgrades capex guidance for 2024 to be $35-40bn, which indicates a 33% yoy increase at midpoint.
Adding the 3 above would be $150bn combined capex already, up from ~$100bn in 2023 for those three.
What did US homebuilders do in 2008? Residential property market was really bad.
D.R. Horton revenue dropped by 41% yoy in 2008; loss of $2.6bn (more than 2x of 2006 net income) was incurred. Book value was only $2.8bn at 2008 YE.
But D.R. Horton maintained positive cash flows, scaling back expansion and selling inventories.
D.R. Horton started to pay down some debt in 2007 and did so in 2008 as well. It continued to do so until 2011. In 2012, it started to take on more debt.
Similarly for Lennar – revenue dropped 55% yoy in 2008 and incurred loss of $1.1bn. Book value was $2.6bn at 2008 YE.
It maintained positive operating cash flow, reducing supply (deliveries dropped 68% from 2006), pausing expansion and selling inventories.
It didn’t take new debts, but focusing on paying back.
