Categories
Learning by Proxy

Learning by Proxy | Antitrust – Travel – Economy

Whenever the stock markets have reached historic peaks only one thing has followed – a humongous collapse. Most markets across the world are either past or flirting with historic highs. When will the bottom fall out? 

It is a little more complicated. Apple posted a record quarter, that too in the middle of the pandemic. Amazon is posting sales numbers that would be considered “too good” for Christmas.

I think it is panic buying and the demand caused by work from home. Christmas this year won’t be like Christmas.

When will the bottom fall out? My bet is January 2021, when do you think it will be?

There is a lot of ground to cover this week, let us dive in.

Antitrust

Two years ago, Scott Galloway wrote a book called ‘The Four’; which breaks down the extent to which Google, Facebook, Amazon and Apple had taken over our lives. If you are not into reading watch this video – 90 slides in 15 mins – from the DLD Conference. 

The four companies together are today worth about 4.25 Trillion or about 1.5 times the GDP of India. Being in that position of power is bound to result in some abuse. Acquisitions are their favourite weapon and Shares are their preferred ammunition; issue as many as it takes to absorb the nearest innovator. 

The CEOs were called in to appear before the congress. It did not go too well. Some of the evidence presented was damaging.

“If someone came to me with an idea for a website or a web service today, I would tell them to run. Run as far away from the web as possible,” said Celebrity Net Worth founder Brian Warner about Google, which he accused of scraping his information and presenting it as its own. “Launch a lawn care business or a dog-grooming business—something Google can’t take away as soon as he or she is thriving.”

[…]

Mark Zuckerberg had expressed an interest in buying the photo-sharing app. “Will he go into destroy mode if I say no?” Systrom asked. Cohler replied: “Probably.” This chat is one of several exchanges that shed light on the lead-up to Facebook’s $1 billion purchase of Instagram in April 2012.

Source: Wired

And

Google’s promotion of its own content on its search results, or how the price of a box of diapers changed after Amazon acquired the parent company of Diapers.com—but the true target was lack of accountability as an operating principle of these companies. And that has a particular bite during a period of global crisis, during which their digital tools have helped us endure trying circumstances while simultaneously promoting the kind of isolation and misunderstanding that can make emerging from them even harder.

Source: Wired

Not like Apple was faultless. While Apple is not in the data business, they do make app developers bend to their will on the app store and charge them 30% commission to sell on the app store. If you do not agree, you have to get the user to go to your website get an account and pay before coming back to use the app. The trouble is not even that; it is that Apple will not allow you to explain why it is such a pain to use the app as mentioned beautifully by John Gruber.

This was just round one and it is not over. I think the four of them would be mighty relieved that Elizabeth Warren is not the Democratic candidate or even being considered for VP. If this could happen with Republicans in power imagine if a Democrat is elected! 

Wednesday’s hearing was a major milestone for the House’s investigation, but far from the finale. Given the chaotic nature of the four-way hearing, it would be great to see separate one-on-one hearings with each CEO. But that’s unlikely. The next step is most likely the subcommittee’s final report, due out sometime in August or September. Wednesday’s hearing made clear that the report will have some real substance to it. Whether it will fire up the American public—or spur real governmental action—remains to be seen.

Source: Wired

Also, in case you are interested, you can go through all of the evidence that was submitted as part of the hearing at this link.

In the meantime, Facebook would like you to think that they are small fish.

Sure, Facebook is a big deal in social media, this thinking goes, but what about videoconferencing, telephones, birthday cards, backyard barbecues, kickball leagues, and friends who insist on playing matchmaker? They all connect people, too, and if you add up all that activity, surely Facebook makes up a more reasonable share of the market.

Source: Quartz

Also, Facebook has so many large competitors in oil and gas, banking, e-commerce, space travel and even tax collection – those fools call themselves the government. 

Travel no more

Travel is one of the largest industries that creates a lot of employment throughout the world. When you travel to a new city, you create jobs in transportation (airline, railways, bus, cabs), transportation infrastructure (airports, stations), hotels, restaurants (you may not Swiggy or Doordash in a new city), Museums, Guides, Tours, Souvenir shops. 

Tourism alone employs 100s of Millions globally, but if you were to include retail which is a certain beneficiary, probably a Billion jobs are at stake. And they are hurting…

India’s international borders have remained closed since March 22, while domestic travel has been limited since March 25 when the country went into a nationwide lockdown. 

[…]

“The sharp drop in the number of tourists and foreign visitors have already impacted millions of jobs in the hospitality and travel industry as many businesses are going through a severe cash crunch,” said Sudeep Kumar Sen, a spokesperson at HR firm TeamLease Services. “More than 50,000 tour operators have shut shop as there is no hope of revival anytime soon.”

Source: Quartz

When you think of large tourism markets, Africa is not the Continent that first comes to mind. But tourism is a massive employer in Africa and the industry has collapsed.

When the Covid-19 pandemic changed the world earlier this year many African countries were quick to react. Borders were closed and protocols from past or existing epidemics (TB, HIV, Ebola) were rolled out. Of the many industries hit by lockdowns, tourism—an industry that indirectly employs 24.6 million people across the continent (6.8% of total employment)—was hit particularly hard.

Source: Quartz

and nobody is being spared

Aside from obviously tourist-dependent businesses such as hotels, a number of retailers are feeling the effects. Among them are high-street fashion chains, luxury boutiques, watch and jewellery shops, and department stores such as France’s Printemps and Selfridges in the UK, says Vinod Paul, Planet’s head of business and market intelligence.

Source: Quartz

Also, there is no end in sight.

Keep Trying

If you keep trying to do something, you will eventually be successful.

Indian businesses were so resilient that a shock and awe demonetisation did not kill them. The introduction of GST was a source of pain for a lot of small businesses that were previously not on the tax regime. Even worse, making businesses operate with improper data. Last year, the government was still claiming that the GDP was growing at 6.7% only to revise it closer to 3% once the pandemic started. COVID did what all of these could not – went for the jugular. 

Hit by a stringent lockdown, 57% of micro-enterprises have zero cash reserves and 65% will have to turn to their personal savings for operational cost, the report further stated. Also, around two-thirds of them have reported a fall in orders, the report said. 

[…]

It’s clear that merely supporting MSMEs through an indirect route like the infusion of credit and equity isn’t enough. The Indian government needs to realise this if it wants to pull small and medium-sized businesses out of a deep and prolonged mess.

Source: Quartz

When the GST bill was signed into law, to push it through, the centre agreed to provide a 14% tax growth year over year for the first 5 years. It must have been a tightrope act already given that the GDP growth was not in line with what was being told. Given the current circumstances, the government is also broke! The centre has been falling behind on compensating the states and now the centre is throwing them under the bus. 

The impact of the virus and lockdown on the economy can be clearly seen in the GST collections, with the first-quarter revenues down 41 per cent over last year, despite signs of an improvement in June, when the lockdown was eased. This has impacted the Centre’s revenues as well as GST transfers to the States, which have fallen below the mandated 14 per cent annual growth rate as promised under the GST law for five years

Source: Business Line

The centre transferred the GST owed in March ’20 to the states in July. The states are already 4 months behind and are struggling to make payrolls. The attorney general has opined that there is no obligation under the law. The states have been asked to try and borrow from the markets.

Twitter 

I had argued a couple of weeks ago that no company should have the power to start a world war. Twitter does. 

Trump spews all kinds of nonsense on all platforms but it is from twitter that it is reported. Turns out that the hack that was run on twitter was the handiwork of teenagers who registered the Bitcoin wallet to their own name! This was not sophisticated sovereign hackers.

A 17-year-old, Graham Ivan Clark, was charged separately with 30 felonies in Hillsborough County, Florida, including 17 counts of communications fraud. Together, the criminal complaints filed in the cases offer a detailed portrait of the day everything went haywire—and how poorly the alleged attackers covered their tracks. All three are currently in custody.

Source: Wired

Guess what might have been possible if it was the Russians or the Chinese who were running the hack. Or perhaps a White Supremacist? Oh! 

On that note

Duke’s account “has been permanently suspended for Twitter Rules on hateful conduct,” a Twitter spokesperson said in a statement. Twitter’s policy, revised in March, prohibits posts that promote violence or threats of violence against people based on their religion, race or ethnic origin.

Source: CNET

Also, when the advertisers had started withdrawing ads from Facebook, Mark Zuckerberg had scoffed. Many outlets had reported that those brand spent only $10 Million a month. I had argued that 8 brands spending 10 Million a month would mean a Billion dollar hole in the topline.

Facebook and Twitter on Wednesday took extraordinary action against President Trump for spreading coronavirus misinformation after his official and campaign accounts broke their rules, respectively.

Facebook removed from Trump’s official account the post of a video clip from a Fox News interview in which he said children are “almost immune” from Covid-19. Twitter required his Team Trump campaign account to delete a tweet with the same video, blocking it from tweeting in the interim.

Source: Washington Post

Facebook is, after all, a company and capable of growing a conscience when kicked where it hurts.

Cross-Industry

Do you know a position that almost every company has?

Think.

Accountant.

There may be a lot of fancy names that they are called, but the position exists in every company. It looks like AI is something that almost all companies will end up having. I do not suppose this should come as a great deal of surprise. 

If AI had to have a tagline, it should be – Use this to reduce your salary bill. And what kind of capitalist would say – “Nah! I don’t want to do that.”

The list also includes 11 graduates who went to brick-and mortar-retailers Walmart and Target, nine who went to defense contractors Lockheed Martin, Northrop Grumman and Raytheon, and five who went to office supplier 3M, a conglomerate perhaps best known for making Post-it notes (and, more visibly during the pandemic, masks and respirators).

Source: Quartz

The Elephant turns into an Ant

A couple of weeks ago I had written about the Arm IPO that Softbank wants closed. Also, how the US government has been handing Billions to TSMC to get them to move their fabrication to the US and reduce the dependence on China. Exploiting Arm and TSMC has enabled Apple to leapfrog the industry and delivery products that its competitors can’t keep up with. Intel, on the other hand, has been struggling to ramp up newer processes. This has further moved Apple towards adopting Arm architecture for their laptops and computers as well. Given this, Intel’s announcement does not augur well for the company.

“The company’s 7nm-based CPU product timing is shifting approximately six months relative to prior expectations. The primary driver is the yield of Intel’s 7nm process, which based on recent data, is now trending approximately twelve months behind the company’s internal target.”

Source: Tom’s Hardware

Intel can’t afford this.

New Oil Order

In the 1970s there was the Oil Crisis. The Saudi’s refused to supply oil to the US and petrol pumps ran dry in the US. Henry Kissinger went to the Kingdom with an offer to put an air force base in exchange for energy security. America brought the only thing Americans continue to make in America – Weapons – to the middle east and the place has never been peaceful thereafter. They helped flame the Shia Vs Sunni fight and half a century later the region still burns.

Lately, Americans have sought to take energy security into their own hands and pushed shale oil extraction. This has resulted in the USA becoming a major oil producer and a thorn in the sides of Saudi Arabia and Russia. COVID was sort of a godsend. Oil prices crashed. Shale extraction requires prices to be north of USD 60 per barrel for it to be profitable.

The major oil producers have been tactfully adjusting supply to keep prices in a narrow range around USD 40 per barrel locking out American oil companies. This is causing much soul-searching.

One of the world’s largest oil companies just announced it would cut 40% of its oil production. During an investor presentation on Aug. 4, BP announced it would roll out the dramatic cuts over the next decade, while limiting future exploration for new sources of petroleum.

[…]

BP says it will invest as much as $5 billion annually in low-carbon technologies by 2030, a ten-fold increase over current levels. If implemented, the cuts put BP on track to bring oil production down to zero by 2043, according to energy engineering researcher Arvind Ravikumar of Harrisburg University of Science and Technology, well before the mid-century target established by the Paris climate accords. 

Source: Quartz

Exploring new lands

When explorers used to land on new land, they would set off with their machete to learn more about the land and find its riches. Would it not have been easier if they had choppers and could fly over the terrain and determine what was of interest and what was not? 

Our exploration of other planets has been akin to the former. We have sent rovers to the Moon and Mars. These can cover a limited surface area and are slow-moving. Would it not be easier to fly over the land and see it. We have done that through satellites traditionally. While satellites cover massive ground, they are not close enough and can only be so detailed. But what if we could fly a chopper and determine what was of interest? NASA is sending an experimental chopper to Mars!

Perseverance will boot up a mission to collect samples of Martian dirt that might have traces of ancient life so that they can be returned to Earth by another mission later this decade. It will also carry a payload, unlike anything that’s ever been boosted into space: a small autonomous helicopter called Ingenuity. Sometime next spring, probably in April, Ingenuity will spin up its rotor blades and become the first spacecraft to go airborne on Mars.

Source: WIRED

Also Read

Meat consumption in America has gone down for the first time in perhaps forever.

A misunderstanding between two brothers during the World War II bombing raid resulted in the Dassler Brothers Shoe Factory turning into two competing brands – Adidas and Puma. A thread.

Signing off…

Categories
General Thinking

The Disruption of Travel

Travel is one of those industries that will change forever never to return to anything like what it used to be. 

For most people when they think travel, they think of taking a vacation at a beach or mountain destination. A large portion of travel is a result of business travel. It is another thing that this does not contribute a great deal to the turnover or the bottom line of companies since businesses find a way to negotiate cheaper rates. The global travel and tourism industry is estimated at USD 9.25 Trillion according to Statista. There are several components of this massive industry that employs 100s of Millions of people.

I foresee a drastic decline in business travel once COVID ends. With the increasing use of video calls and work from home norms, the need to meet in person will reduce significantly. This will also be seen as a source of cost savings by many companies. This will, in turn, hurt certain components of this well-oiled machine in a big way.

Business Travel

Once people have been used to making calls and getting work done from home would they see a point in travelling? Most business travellers end up with red-eye flights and punishing travel schedules. Not to mention time away from home and family. I have undertaken full days trips often to get a couple of meeting done. The rest of the time spent was often spent commuting within the city. If there is a possibility to get on a video call and finish it, why should I waste 20 hours?

A decline in business travel will affect airlines as well as city hotels which are great beneficiaries of this kind of travel. 

At the same time, a lot of business travel is also undertaken to attend meetings, conferences and exhibitions. I do not know how much of this will get back to normal levels after this pandemic passes. 

Is there a possibility to create a digital experience which could reach even more people and help exhibitors find more audience? Can the Car-Expo be done online? Saves a lot of logistical costs and the companies might be able to provide a better understanding of its capabilities from their factory. 

Is there another way to replicate the experience of a conference – virtually? Would it be possible to enable better engagement between people with a lot of contextual information about a person made available rather than just running into a stranger and discovering them? Would we lose the serendipity or can we enable it online?

The JW Marriott in Banglore has already started food delivery because traffic is unlikely to return in the short term. But their requirements are quite stringiest with a high bill value and 6-hour advance order. 

Personal Travel

Though in the short term this would be reduced to quite an extent, I expect personal travel and vacations to come back up. In fact, in a work from home reality, might it be possible for your spend a week at a resort and still put in the 8 hours that you need to?

Countries like Thailand and Indonesia are already pitching themselves as safe destinations with low CoronaVirus cases and also cheap destinations where westerners can come live and work from. All you need is good internet access. This would be in continuation with the disruption of real estate, where alternate forms of real estate stand to gain.

The upshot of more work from home would be much-reduced traffic on the roads and lower commute times. This will perhaps increase the car ownership considering most of those who gave up cars did not want to drive for 2 hours at a stretch.  

Ride-hailing services have already started raising their prices to be more profitable rather than be seeking new customers. These services will find it hard to get back to similar levels that they were at pre-COVID. The exodus of drivers who had come from other cities to make a living would leave the driver pool much smaller. A greater number of people working from home implies lower demand. Also, the increase in price would result in fewer people using the services. By extension, all of the bike-sharing businesses will also have it tough going forward. 

Would airport retail be as valuable if not as many people are flying? Would the business model and income potential of airports themselves need revision?

Every piece of this economic puzzle will struggle to rise back up. Perhaps a new model will emerge changing

Categories
Entrepreneurship General Thinking

Travel Business – will it ever be the same again?

I have always enjoyed travel and have visited quite a few nations and cities in my life. Not only that, but I have also myself been involved in the travel business and so it is close to my heart. 

A vast majority of my travels have been for work and this is possibly reflective of most travel undertaken. A vacation is taken once or twice a year at most. 

Thousands of flights are taken every day just to conduct meetings that last a few hours. With the restriction that is now being placed upon people, there is a need to avoid this travel and undertake the meeting over phone call / Online / Telepresence etc. This has meant that those who were probably, not incapable, but apprehensive of conducting meetings online are now being forced to do the same. I think a whole host of people are going to discover the comfort of online calls as well as economic gains of doing the same. It avoids the time and cost of the commute. It also ensures that you can optimise the way your time is utilised. Where you would have had one really important meeting in a day for which you travelled all the way to another city, you could instead have several.

Travel Industry need to ponder

How many people would get back to the old ways once things get normalised? Would business travel come back to the same level? What would this mean for the travel business?

I feel that for better or for worse, travel business would need to re-align itself to this new normal. It is good for the environment as well if people travel a lot less. It puts a lesser strain on the resources needed as well. But can it have other effects as well?

  • How many planes would get sold in the next 5 years?
  • What effect will this have on car sales in the coming years?
  • What does it mean for services like Uber which transport people from place to place?

These are some of the thoughts that come to mind when I think about the pain the travel industry is undergoing right now. What is it going to mean for the long term?