⓵ Jeff’s Asia Tech Class
🎙 Airbnb Is Going to Get Crushed in Asia. Rethink Your Valuation. (59) Dec 7 2020
Wow, I've forgotten what 2012 looked like!
Airbnb in Asia 🌏
You don't really see much of that story when you start to look at Asia. I mean, we have lots of local players. We have lots of low priced hotels. We don't have as many hosts for one. They're not that common in China. They're there but it's not that many places you can stay. It doesn't really offer you the same savings you get like when you check into an Airbnb in New York, you save a lot of money.
Their biggest lever is really lower price. It's number of available locations. And then, it's a lower price relative to other options, which is pretty much the phrase they use in the S1. They're just weaker on the consumer side in a lot of these markets. We don't see that same picture of, you know, big brand big network effect, like we do in North America.
Airbnb is So Cool, Bbbbut
I think Airbnb is cooler as a services marketplace than people are giving them credit for. So if they're so cool, which I think they are, why are they going to get crushed in Asia? Well, not to be mean but their management is super slow, and they don't seem to be able to innovate, or don't seem interested in innovating at all. I mean, you put Airbnb up against any of China's tech companies, and they're going to get pounded.
I read the Airbnb S1. I feel like I'm traveling back in time. I feel like: Wow, I've forgotten what 2012 looked like! I mean, the platform business model they launched in 2007-ish was very cool at the time, and then it was in place pretty quick and they've just sort of stayed frozen there. It's a really simple services marketplace. That's a good eight years behind five to eight years behind what we see in China Asia. Let me give you some examples like: Why haven't they built out like tools for their hosts? Why haven't they expanded and offered new tools and services to their hosts?
Alibaba Services and Tools 🛠
When Alibaba - this is one of my favorite things of the last couple of months - when the Alibaba CFO was speaking about the total addressable market for Taobao and Tmall, their e-commerce platform, she described the total addressable market on the consumer side - obviously is the share of wallet - how much money to Chinese consumers have.
But on the merchant side, she described the total addressable market as how much value they could add to the income statement of a typical merchant. And they put up an income statement of a merchant that would be selling on Taobao - they have marketing spend; they have logistics spend; they have GMA; they have all the various costs of running this small business. They are trying to add services to every part of their income statement to add value to them; to make them more efficient; to make them more effective; to make them more productive; to save them money. And within the value they create for the merchant, at every level of their business, they know that they will take a small percentage of the value created.
Airbnb’s Asia Bet 🤔
You’re gonna put this slow completely non-innovative company up against any of them [China super-apps], sorry, but I think they're gonna get KO’d in round one. Why are they so sluggish? I don't know. I kind of wonder if it's because they don't have any competition really. I mean they've had some competition, but they haven't been in any bruising fight for your life battle in a long, long time. I mean, they've had a fairly non-bloody existence. And I often think about this - about a lot of the Silicon Valley companies - is they just don't have enough competition. And they're stagnating. I don't know. Anyways, overall, Airbnb looks to me like a company stuck in time. They are unable or unwilling to move out of their original lane and beyond a fairly basic marketplace platform for services, and they're definitely not pushing the frontiers of hospitality on the consumer side or on the host side. So put head-to-head with a real innovator, one of these gladiators of Asia, Digital China that sort of stuff, and I think they're going down.
Pot’s Take:
What your greatest strength is can also be your greatest Achilles’ heel.
Jeff delves deep into Airbnb’s network effect vs Uber’s. Worth the full listen 🎧.
Extra Takeaways
I have long pointed to middle class families in Asia as sort of the great secular trend of our time.
The future of Asia is interconnected. That's when it gets really interesting. It's not just that it's big. It's that it's interconnected in trade and capital, of course; but increasingly, people, tourism, data, and talent.
I think Asia is large enough as a region that you can get players at scale, just by winning in Asia. Anyone who wins in Asia will be big enough to compete globally, without getting the rest of the world.
Didi Chuxing - the Uber of China. If you look at the app that they give for their drivers, it's got like 30 services now. I've gone through all the services. It's amazing. It's like, you can get discounted gas if you're a Didi driver because they have negotiated with the gas stations of China to get a discounted rate for their tens of millions of drivers. You need discounted rates on repair services for your car? You can get special insurance. You can file all your government registration docs in the app. There's maps of every toilet you can use street by street in every city in China. You can chat with the other drivers in real time, and they actually have teams - they work in teams, not individually. You can get financing for your car. There's a whole suite of services and tools they have built out for their drivers. Airbnb could do the same thing for these hosts.
Meituan has transportation, food delivery, movie tickets, beauty services, and hotels. Why not have all of them? Why not expand beyond this traditional definition? Because, the first thing it lets you do is it lets you start to pair low frequency services like hotels with high frequency services like buying food every day.
They created one very simple version of a marketplace platform 10 years ago. And then they took a stab at Experiences, and that's it in a decade.
I view it [e.g. WeChat] as multiple complimentary platforms, or linked business models, that effectively become the operating system for your digital life.
⓶ Capital Allocators with Ted Seides
🎙 Chamath Palihapitiya – The Social Capital Flywheel Dec 7 2020
I wanted to build Berkshire 2.0 and that was always my ambition
Berkshire 2.0
Chamath: I wanted to build Berkshire 2.0 and that was always my ambition. And the problem with wanting to build Berkshire 2.0 is many people don't respect capital allocation; they don't think it's a skill. And many people think it's not doing anything, and when Warren Buffett describes his job every day as reading and thinking, I think a lot of people think like: What a checked out dilettante. How dare he read and think all day? That's not a job. And I just think it's so further from the truth because in many ways, what Buffett was able to do, and this is me imposing my own narrative now looking backwards, but he was able to use capital to accelerate his worldview. And a lot of his worldview was around American exceptionalism and American GDP, and the belief in the American consumer and the American economy. And so whether that's Precision Castparts or BNSF, or Geico or See's Candy, he'd done incredible things to move the American economic engine forward. He was voting with his dollars around businesses and ideas that were really critical parts of the American infrastructure for American middle class success. I would like to reimagine what that means for the next 50 years.
Good Investing According to Chamath
Chamath: I actually think that companies are basically just they're all the same. Meaning, a two day old company or a 200 year old company, are all the same. The variables are the same. It's just that the weights are different. And, I actually think that there are really only three or four weights that matter. And I think good investing is about figuring out what the weights are at any point in time.
So the four things that matter to me are number one is product market fit. And you could have a product on day two, or year 200 that has simple product market fit or absolutely incredible product market fit. And so what is that weight in any point in time is an important consideration. The second is the integrity of management. And, again, it's just the way, and it's either high or low or in between. And it could change but it exists at a two day old company or a 200 year old company. The third is sort of what I would call headwinds or tailwinds, which is that - is it working on something that has better future prospects and is poorly described by the past. And then the fourth is political infanticide, which is how dysfunctionally fucked up is this company. And you can get that by looking at things like Glassdoor; listening to the political correctness of the CEO in their earnings calls; or in more candid situations, try to get a read on their body language. In my opinion, those four things comprise success because if you find a company with great product market fit, who have relatively good tailwinds, a high integrity CEO a team with very low politics, I mean, you have incredible incredible opportunities.
In Planet ZIRP 👽
Chamath: When rates are zero [ZIRP], there are so many businesses that are just unfortunately relatively worthless. And so you are forced to be imaginative and creative. You're forced to understand technology more, right? Because technology is all about the compounding rate of its capability. Meaning: How is Okta compounding its Single Sign-On platform? What does that even mean? It's much easier to say: How is Occidental Petroleum compounding its capital investment into the number of wells? That's so much easier to answer. How fast is Atlassian’s open-source, architecture generating scale? What the fuck are you talking about? How do you reduce that into a number? Where is that in cell D 38 in your model? So, it forces an extreme amount of creativity that otherwise isn't required when risk free rates are high.
Pot’s Take:
DCF + LSD^10 = HOW TO INVEST IN 2020
Extra Takeaways
I think foundations and charitable investing is largely an outcropping of Western guilt. And the reason is because everything here has to have a name.
So I just find when I see labels on buildings just so so stupid and insecure.
I think of social capital as this economic engine.
I think that incredible opportunities abound in a world of zero rates, because it forces you to have a very very unique viewpoint on future returns.
What we've seen in terms of technological advancement from 2005 through 2011, in those six years, some critical ingredient technologies got to a certain amount of scale: Amazon AWS, Apple's iOS, and Google's Android. And if you think about the trillions of dollars of value that's been created, it's been enabled by those three layers of infrastructure.
I think that people hate in others what they hate in themselves. 🤦♀️ 🤦♂️
⓷ Business Casual
🎙 Who owns our electric future? Dec 8 2020
Legacy does not give you a right to win; being new doesn't give you a right to win
Interview with Mary Barra - CEO of GM 🚙
Business Casual: Why do we need to shift to electric vehicles? Why is this shift so necessary?
Mary Barra: Well, we General Motors and I personally believe in climate change. Climate change is real. And so, we have to address the impact that vehicles have on our environment. And we believe shifting to an electric future is the right thing to do, and we've got the technology to enable it for everyone.
BC: Electric vehicles have existed for such a long time. How come right now is when we're seeing the shift actually happen. What was the impetus?
Mary: I think there's several factors. One, we're seeing customer interest. I think customer interest is coming because we're getting vehicles now that have a range of over 300 miles and that's kind of a sweet spot where you lose range anxiety. We also see the charging infrastructure, developing rapidly, and that takes care of away that charging anxiety issue. So we're solving the issues that in the past have been barriers to electrification ownership. I think what is also key is getting battery cost down so EVs can be affordable, and so it's all of that coming together that is making now the time.
BC: Why is it that Tesla, a relatively young company, and not just for General Motors for any automaker right now, is the one to beat. This is what everybody's after. How come the chips fell in such a way?
Mary: Well, I think, you know, what the interest in Tesla shows the commitment, and the interest and the excitement around electric vehicles. And that's all they're doing. We can leverage - I don't think people realize how much of a traditional internal combustion engine vehicle can be leveraged to accelerate our ability to do EVs. So when I look at the excitement, I see is just endorsing our strategy - that this is a huge growth opportunity. That's why we're investing; that's why we have been investing; and, people will see it as we move forward.
BC: Do you think if Tesla had never been founded - that the electric vehicle conversation would be where it is today?
Mary: I generally hesitate to guess on those types of things, but what I can tell you is, you know, we were already on an EV path. We already had the Chevrolet Bolt and frankly the Chevrolet Bolt EV was really the first affordable, with a very respectable range over around 250 several years ago. So it was a path we were on and we were committed to. It's hard to say, you know, what are the puts and takes of where we are. But I'm more focused on where we're going - and that's fighting until we are number one in North America with volume or with market share.
BC: Do you think any “non-legacy, quote unquote, automakers” will join you in that Big Three classification?
Mary: It's going to be who executes well, who delights the customer. Legacy does not give you a right to win; being new doesn't give you a right win. At the end of the day, when you get to that level, is because you're executing beautiful vehicles that people want to have; that they can afford to have; and an ownership experience that there's no disadvantages. That's who will be the Big Three is the people who do that best.
Pot’s Take:
Can Godzillas become Pikachus? 🦖 ➡ 😼 (pika!)
Extra Takeaways
Well, when you look at some of the other markets China and Europe. for example, a lot of what is driving it is regulatory.
I don't know if I'm going to be able to convince somebody who doesn't believe in climate change. There's probably better people than me to do that. I'm just going to give them such a great product that they want it.
Well, our goal is between China in the United States to have over a million [EV] vehicles by that time [2025].