Curated Insights 2019.03.29

How concentration affects portfolio performance

Vanguard calculated the returns of Russell 3000 stocks over the last 30 years and found that 47% of stocks were unprofitable investments and almost 30% lost more than half their value. They also found, and this is the big one, that 7% of stocks had cumulative returns over 1,000%.

What is Amazon?

We’ve seen the strategy that Amazon takes when it sees a regulatory threat looming on the horizon; it voluntarily started collecting sales tax in many states before states could force it to do so, and adopted a $15 minimum wage before it drew the full ire of a populist movement. With multiple headquarters distributed across multiples cities and outside access provisioned for all of its key products and services, Amazon seems more likely to break itself up – along its own preferred lines – than it is to be forcibly disassembled by regulators.

Recall Bezos’s 2002 edict: 1) All teams will henceforth expose their data and functionality through interfaces, 2) teams must communicate with each other through these interfaces, 3) all interfaces, without exception, must be designed from the ground up to be exposed to developers in the outside world, and 4) anyone who doesn’t do this will be fired.

If every meaningful Amazon product or service is exposed to outside developers via an interface, what does it matter whether Amazon is one single company or many? Antitrust action to break it apart could do nothing that it has not done to itself already; this is no doubt by design.

JD vs Alibaba in the last mile: what’s happening behind the Great Wall

China has more internet users than any other nation in the world, but there’s still plenty of room for e-commerce to grow. The Chinese e-commerce market is growing at an unfathomable rate: from 160 million online shoppers in 2010 to 530 million in 2017. This drove parcel growth of 28%, to over 100 million per day. Despite the current slowdown in economic growth, China’s e-commerce boom is likely to continue.

Consider this: 70% of packages in China are delivered same-day. This speed of delivery contributes to the success of e-commerce in China. Speed of delivery and customer experience are key, and China has both.

Alibaba holds a controlling interest in logistics operator Cainiao, which was set up in 2013 and is a collaboration including warehousing, trucking and the last mile. It’s essentially a massive, asset-light, data-sharing platform, with Alibaba owning very little of the infrastructure.

One of the prime drivers for the creation of Cainiao was to ensure capacity for Alibaba deliveries, but Alibaba and Cainiao depend on all the carriers, such as SF, ZTO and YTO. It now has over two million delivery drivers in the network.

JD has a completely different logistics strategy – it does it all itself. There are over 515 warehouses in its nationwide transportation network. Over 90% of orders from are delivered same-day or next-day by JD’s own fleet, which now comprises 65,000 drivers.

Forget Photoshop. Adobe is a marketing company now

Factor it all in, and Chief Executive Officer Shantanu Narayen has upended Adobe’s business model and quietly transformed it into that of a marketing company. Adobe has been working full crank to track every interaction a consumer has with a brand: tallying her visits to a brick-and-mortar store and what she buys; using cookies to monitor her web activity and figure out how many devices she has; analyzing her interest in emails about sales or promotions; and incorporating social media monitoring to see what she says about a brand. Adobe can combine all of this with other companies’ data about a person’s income and demographics to try to predict the triggers that would make her buy a new phone or pair of shoes. In essence, Adobe is trying to know a consumer’s decision-making process better than she may know it herself.

Demystifying aviation economics

Despite the narrow-body jets being relatively unattractive from a long-haul fuel efficiency perspective, budget airlines removed first class and were able to pack quite a bit more seats on the plane, lowering unit level economics to being competitive with the best wide-body planes today. Over the past four years, according to the International Council on Clean Transportation (ICCT), usage of narrow-body planes on the transatlantic route has more the tripled to nearly 40% of capacity.

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