Sunday Snapshots (2nd August, 2020)
Sunday Snapshots (2nd August, 2020)
Moving, Podcasts, Kochland Pt. 2, Predicting Truck Accidents, Apple and pandemic profits, Personal utility poles, London hockey, and USPS Media Mail
Hey everyone,
Greetings from Washington, D.C.!
It’s been a long week of packing and unpacking, of throwing stuff away and buying new things, and of goodbyes and hellos. Thanks to everyone who reached out to meet and introduce me to this new city – I’m extremely grateful for your generosity.
But rest assured that no matter where I am in the world, Snapshots will be delivered to your inbox every Sunday afternoon with a curated analysis of the best books, academic papers, business news, and other online goodies.
In other news, I was a guest on a couple of podcasts this week that you might like to check out:
I had a fascinating discussion with Gonz, Packy McCormick, and Brett Bivens about some fantasy M&A picks on the Seedtable Podcast. Should Apple buy Peloton? Should Amazon acquire Doctolib? And most importantly, will the French government let that happen? Should we get Brian Chesky on the phone and push him to merge with Zillow? How dumb would Uber have to be to acquire Lilium?
Nate Elliott interviewed me on the Vortux podcast about my journey as a newsletter writer. I talk about growing up in India and the Philippines, my time at Northwestern, and what I’ve learned from David Perell.
With all that out of the way, let’s get into this issue of Snapshots in which I want to explore:
The political machinery of the Koch brothers
(Not) Predicting trucking accidents and the limitations of machine learning
Apple gets greedy with pandemic profits
Personal utility poles, Photo essays, and USPS Media Mail
Book of the week
We are exploring Christopher Leonard’s Kochland in two parts. Last week, we talked about how Koch Industries was set up. This week, we’ll discuss how they apply the Koch Industries strategy to political lobbying.
What I wrote last week about treating lobbying as trading still stands:
If you’re a commodities trader, you don’t want to make a large one-directional bet on the price of a single commodity. In this case, you have to be right 100% of the time to make money. What you want to do is to make a series of small bets across different commodities and be right six out of ten times. Here, you only have to be right 60% of the time. It’s simple diversification of risk.
Charles Koch brings this approach to political lobbying. Most people think that the Koch brothers decide who gets to be President. That is naive. Charles would never make a one-directional bet with such a large effect. Instead, the Koch lobbying machine looks at where laws get created and where public opinions is shaped. This include committees, sub-committees, lower judiciary benches, town halls, etc. This decentralized network makes Koch Industries resistant to the failure of any single node and allows it to continue doing business as usual.
What gets added to the mix is a grounds up effort to infiltrate every level of our institutions with the libertarian philosophy of Charles Koch. Enter The Cato Institute. Enter The Mercatus Center. Enter The Bill of Rights Institute. Enter The Quincy Institute for Responsible Statecraft. Like his book, these are instruments and structures to scale up his thinking. Propelled by a network of big ideas and bigger checks, the Koch brothers have created a fine-tuned political machine that would make a Swiss watchmaker proud.
And with what looks to be a fairly low-drama succession story, their legacy might be intact for a while.
Kochland is a fascinating book and Christopher Leonard has done an exceptional job weaving a narrative full of detail about a company that is notoriously secretive. Grab a copy.
Long read of the week
🚚 Predicting Truck Accidents using Machine Learning by Antoine Hébert, Ian Marineau, Gilles Gervais, Tristan Glatard, and Brigitte Jaumard
Week after week, I feature papers in this section which show the advances in machine learning. This week, I feature a paper that shows how difficult problems in this space actually are.
Predicting truck accidents would lead to lower equipment turnover and costs. It could also save lives. This study involved looking at almost 1200 drivers for 18 months.
Despite throwing the kitchen sink of machine learning tools at it, the researchers were not able to predict upcoming accidents. They outline a variety of reasons why – unpredictability of the driver’s physical state after a night of bad sleep, the inability to incorporate the driver’s environment into the algorithm, or just the relatively short length of the study.
But at the end of the day, it’s a reminder that this stuff remains very hard to crack.
Business move of the week
💰 Taking a cut of pandemic profits
As the COVID-19 pandemic has forced businesses to move online, many have created unique experiences through their apps. For example, Airbnb has created digital experiences that allows creators to sell “classes” via Zoom. This is designed to sustain Airbnb and creators alike while the pandemic blows over.
Amidst all the controversy about its App Store policies, Apple comes in and asks for a 30% cut of this new revenue source. Oops!
Let’s look past the extremely bad look of profiting from the pandemic. More fundamentally, there’s a distinction to be made between the two types of revenue:
Revenue from in-app purchases like collectibles or subscriptions have zero marginal cost for the developer. Any cut of this revenue can be considered “free” money for both the developer and Apple.
Revenue from non-zero marginal cost experiences like an online class with a live component or a personal training session with a coach cannot be scaled up in the same way. There is a time component to this revenue that has to factored in.
Collecting 30% of the first category seems less insidious than the latter. What’s concerning is that Apple (and its fans) seems attached to both its righteousness and its outdated policies.
It is true that the App Store has enabled thousands of developers to receive millions of consumers. The internet was a dangerous place before the current App Store regime and the curation that Apple provides is a key component of the easy and safety with which we download apps.
But the centralization remains troubling. I talked about this a few weeks ago:
Apple is increasingly a part of how we pay and how we look at our health. It's also a gatekeeper for how we log in to other services. While this centralization does offer a more unified and seamless experience, this perspective can switch on a dime.
Consider this: Would you be okay with giving Facebook this level of power over your pockets, your health, and other parts of your life? I'm guessing not. Well, then you shouldn't be comfortable giving any company this level of power. Most worrying is that Apple and its users are completely convinced of its righteousness. They may even be correct in their thinking – today. Expansion of authority and centralization sounds nice when its in the right hands. Tim Cook might be the best and most considerate CEO ever, but what happens when the baton gets passed on the next generation of maybe-not-so-great leaders? You don’t need to think too hard for parallels.
Take the centralization and the fact that this is the world’s largest company by market cap, and they start to sound a bit petty.
Odds and ends of the week
⚡️ Personal utility poles for superior music: Anyone who engages with Japanese craftsmanship is amazed at the care and precision that artisans in the country apply to the creation of their craft. But turns out that the care and precision extends to the consumption side of the equation as well. This story in the WSJ covers how music aficionados in Japan are installing their own electricity poles to get higher quality input into their hundred thousand dollar setups. Unbelievable.
🏒 Photo Essay on London Hockey: I loved this photo essay on Ice Hockey in London. The photo essay is a fascinating medium to explore and something I’m not very familiar with. Send me your favorite ones by replying to this email.
📦 USPS Media Mail: This last share comes from some tactical acquired knowledge from my recent move. If you have physical books, you need to use USPS Media Mail to ship them. Founded in 1938 and restricted to certain items, Media Mail was designed to be used by businesses to send educational materials but it can also be used by individuals. It saved me a lot of money this week. If you are moving soon, definitely check it out.
That wraps up this week’s newsletter. You can check out the previous issues here.
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