Sunday Snapshots (19th January, 2020)
Pressfield's advice, AI and Inequality, Shopify's capital moves, gifting books, and decaying memories
Hey everyone,
Greetings from Evanston!
It’s been a brutally cold week here and I’m sure the worse is yet to come. But sandwiched between the dark and frigid days are occasional sunny and cold days – my favorite weather. For these days, I am grateful.
Before we get into the newsletter, I want to give you an update on two things:
I’m writing a book named Lessons from LBJ about the principles that Lyndon Johnson used to go from being born to one of the poorest families in the country to the President of the United States. It’s an exploration of the laws of power through the lens of organizations, networks, and people. Check out the website and sign up there to receive monthly updates and a free PDF of a draft in July. If you did this last week and didn’t get a confirmation email, please do it again since the link was broken.
Sunday Snapshots just passed 250 subscribers! Thanks for giving me your most precious resources – time and attention. We’re just getting started.
On to this week’s issue. In it, I want to tell you about:
Nobody Wants to Read Your Sh*t by Steven Pressfield
Artificial Intelligence and Inequality
How Shopify is financing the rebels
A great product for book lovers
How 1917 was made to look like one continuous shot
And more!
Book of the week
I asked a mentor of mine what to read before I start writing Lessons from LBJ and he suggested Nobody Wants to Read Your Sh*t by Steven Pressfield. The basis thesis of the book is simple:
Sometimes young writers acquire the idea from their years in school that the world is waiting to read what they’ve written. They get this idea because their teachers had to read their essays or term papers or dissertations. In the real world, no one is waiting to read what you’ve written. Sight unseen, they hate what you’ve written. Why? Because they might have to actually read it. Nobody wants to read anything.
That’s a sobering thought but it pushes me to be better in not just my writing, but in all my interactions. When someone spends any amount of time with you, they are giving away their only non-renewable resource. It is not just a courtesy, but our duty to everyone that we interact with to be respectful, kind, and generous.
How do you do that when it comes to writing? Pressfield has a step-by-step guide:
1) Streamline your message. Focus it and pare it down to its simplest, clearest, easiest-to-understand form.
2) Make its expression fun. Or sexy or interesting or scary or informative. Make it so compelling that a person would have to be crazy NOT to read it.
3) Apply that to all forms of writing or art or commerce.
He also lays out a blueprint for how to best approach creative work. They should be seen as:
Problems seeking solutions. This is a very powerful way of thinking about the creative process. Implicit in this point of view is the idea that the answer already exists within the question, that the solution is embedded within the problem. If your job is to find that solution, the first step is to define the problem.
The last thing that stuck out to me was how great work often seems to us like it’s a product of spontaneous genius. That’s certainly not the case. It is highly choreographed. Pressfield describes the moment he first realized this as:
I was tremendously disappointed and, at the same time, I felt terribly foolish. How could I not have known this? Of course there’s a script. Of course it’s all planned out in great detail. Nothing is spontaneous. Everything is the product of deliberate conception, deliberate thought. Steve, you’re an idiot to have this surprise you. That was a big lesson and one that applied down the line in every other creative field. Art is artifice.
I am a strong believer that you need to read the right book at the right time to get the most out of it. I definitely read this book at the right time.
Long read of the week
Artificial Intelligence and Inequality [My annotated version]
There’s a lot of buzz around how AI will affect labor and inequality. Michael Webb at Stanford University developed a mapping between job postings and patents to figure out the exposure of various occupations to robots and AI.
His key findings:
Robots and AI are different: While robots affect the lowest wage-earners, AI affects the 90th percentile of wage earners. This means that jobs like paralegals and diagnostician will be replaced, but lawyers and doctors won’t be. This is because more of the functions of paralegals and diagnostics is around pattern-matching which can easily be replicated with the help of machine learning algorithm.
Experience in a pattern-matching sense has less value: Since much of the economic value that is created by high-paid professionals comes from their ability to draw from years of experience which essentially maps to better pattern-recognition, these jobs have more downside exposure to disruption by AI.
Soft skills are the most valuable: Ultimately, the interpersonal interactions and relationship building are the key skills that will probably be immune to automation for a very long time.
While I would take this findings with a grain of salt (the author makes a series of assumptions), I do this that they are directionally correct. McKinsey’s MGI posted a similar report a while back that is less technical and worth checking out.
Business move of the week
Shopify Capital lends a hand to small businesses with starter loans
Note: This was originally posted on my blog as Shopify: Financing the rebels.
At a time when people are concerned about Amazon’s growing dominance, Shopify is positioning itself as the anti-Amazon. In what might be one of the best one-line descriptions of a company, Shopify CEO Tobi Lutke said :
Amazon is trying to build an empire. And Shopify is trying to arm the rebels.
And while arming the rebels with an easy to set-up shop and providing payments infrastructure is important, many small companies fail because of lack of capital.
So now, Shopify is financing the rebels as well.
This week, they announced that they will be launching “starter loans” of as low as $200 for new users of the platform.
What they hope to achieve with this move?
Shopify’s business model means that they are going to have wins (businesses on the platform that become successful) and losses (ones that doesn’t end up surviving). They don’t need to care about any specific business, they just need to win in aggregate.
If you take a quick look at Shopify’s financials, this becomes more clear. They have two sources of revenue – subscription solutions and payment processing. Although payments account for a higher percentage of revenue, they also cost more. In fact, they are so costly that subscriptions actually make up a much larger percent of profits than payments.
So, it makes financial sense for Shopify to encourage many people to join and pay the subscription fee even if the payments part doesn’t work out completely. Again, the goal is to win in aggregate.
An easy way to do this is by having more “at bats.” In Shopify’s case, this means making it easier to start a business so that more people can join the platform.
These starter loans are a way of encouraging that.
The best case scenario is that some of these businesses become a big player and the $200 investment ends up being paid back through sales. Shopify would also make money from the subscription packages it offers to host on its platform and the cut it takes from payments processed on its platform from these new businesses. Presumably, these would be marginal in nature and would not have happened if not for the $200 loan.
On the flip side, the worst case scenario is that Shopify loses the $200 if the new business never makes any sales.
There are certain positives and negatives I see to this move.
On one hand, $200 might not be a lot of money in developed countries (I wonder how much inventory of even a simple product you could potentially buy with that), but it’s a large amount in developing countries which is where most of Shopify’s growth is fueled from. Presumably, this rate of international expansion will only increase in the future. There has also been some contention around how paying back the loan from sales means for an effective interest rate. However, I’d argue that the alternatives (credit cards, personal loans, etc.) will probably have much worse interest rates and will also come with increased friction.
My big concern here is that of adverse selection. While I understand that initial capital can be a barrier, $200 will not buy you any significant inventory or advertising space. Therefore, I’m concerned that this will lead to people who are “just playing around” with an idea to take the $200 and never really realize their business. I read Randy Pausch’s The Last Lecture in high school and one of the lessons that Pausch mentioned stuck with me:
The brick walls are there for a reason. The brick walls are not there to keep us out; the brick walls are there to give us a chance to show how badly we want something. The brick walls are there to stop the people who don’t want it badly enough. They are there to stop the other people!
The $200 is a brick wall. If you want to start a new business and really believe in it, you’ll figure out a way to get past that wall.
I’m also concerned about how to measure the impact of this move. It’s very difficult to measure differences in successful new users across different time periods. But there will always be a counter-factual – would that new user have been successful anyways? I’m sure Shopify’s data team will find creative ways to answer these questions but I’m afraid they’ll always be riddled with assumptions and uncertainty.
Finally, the skeptic in me wonders if this is just a gateway drug to Shopify Capital, the part of the platform that provides loans for larger amounts. These loans are certainly much more profitable. Credit is a drug you don’t want to get dependent on as a small business.
Overall, I do think that it’s a pro-user move and definitely something that gives the rebels more of a chance against the empire.
Don’t be alarmed if the empire strikes back though. Amazon is a master of commoditizing itself so I wouldn’t be surprised if they launched a platform to onboard brands with the lure of smaller margins on payments and access to their superior fulfillment network.
It might take a while for the e-commerce universe to be balanced.
Product of the week
read.gift is neat little project by 16-year-old Samarth Jajoo that caught my eye this week. It’s a public profile of the books that you want to read. Through the service, others can gift those books to you. I played around with it and created my own profile with some of the books that I’ve been thinking about reading soon. Check it out here.
Quote of the week
Memories sharpen the past; it is reality that decays.
This quote comes from Dr. Siddhartha Mukherjee’s The Gene. In the medical field, there is a notion of a “triple-threat.” A triple-threat is someone who does research, teaches students, and treats patients. Mukherjee is a league of his own – he’s a “quadruple-threat” because in addition to all of the above, he’s also a Pulitzer Prize-winning author.
In addition to the fact that Siddhartha is certainly not making it easier for his namesakes to impress their parents, the quote reminded me of the fragility of human memory and particularly about how we frame events in the perspective that is most convenient or comfortable for us. It’s easy to look back at a series of events and create a narrative thread around them because we don’t remember the details or the exact circumstances. This reinforces false narratives and can get us into trouble. Constantly asking ourselves to what extent are the narratives true is the only way to guard ourselves against this.
Meal of the week
This week, I went to Momotaro. It’s a great Japanese restaurant in West Loop, Chicago. Definitely worth a visit if you’re in town!
That wraps up this week’s Sunday Snapshots. If you want to discuss any of the ideas mentioned above or have any books/papers/links you think would be interesting to share on a future edition of Sunday Snapshots, please reach out to me by replying to this email or sending me a direct message on Twitter at @sidharthajha.
Until next Sunday,
Sid