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We have discussed how the recent rally has been driven by technology, but the extent of the S&P 500 now represented by the FAANGM group really is a jarring figure. There is, of course, justification to the rally as there are now even fewer companies that can be consistently relied upon for revenue growth. That said, historically, similar levels of consolidation have not ended well.
A great podcast which goes a few layers deeper in the Blockbuster story than we have ever heard. It is incredible how close Blockbuster came to the right answer on streaming (and avoiding that whole bankruptcy thing). Tough to imagine this happening in the current environment of large tech players buying everything that looks even remotely like competition:
But we can point out that Netflix itself thought it didn’t have a chance of unseating Blockbuster. That’s why Netflix co-founders Reed Hastings and Marc Randolph went to Blockbuster’s headquarters in 2000 and offered to sell their three-year-old company to their rival for $50 million. Blockbuster ended up trying to beat Netflix instead of buying it. And today Netflix is worth about $200 billion.
Ben Evans has updated his classic deck on tech in our current “new normal”. The updates start around slide 25. Lots of fascinating data on the adoption of various technologies and the impact of the pandemic on workers in here.
“There are decades where nothing happens and there are weeks where decades happen” - Lenin
An excellent long form read from The New Yorker on the evolution of the restaurant industry. We are sure most people have heard of the “ghost-kitchen” trend at this point, but the scale of the fledgling industry was surprising to us. This would fall into the same basket as the accelerating technologies mentioned in the previous article:
Like Reef, many of the brands operated by CloudKitchens and the like are “virtual.” The branding and food are real, but the restaurants do not exist elsewhere in the physical world; consumers, presumably, are none the wiser. Uber Eats, which delivers from Reef and CloudKitchens, among others, has facilitated seven thousand virtual restaurants, more than four thousand of which are in North America. Using data from in-app searches, Uber Eats identifies opportunities for certain cuisines in various neighborhoods, then approaches existing brick-and-mortar restaurateurs to pitch them the idea of launching a virtual restaurant.
Some restaurant owners operate ten virtual brands from a single kitchen. In February, when the New York City Council held an oversight hearing on the impact of ghost kitchens on local businesses, Matt Newberg, an entrepreneur and independent journalist, testified that he had visited a CloudKitchens commissary in Los Angeles where twenty-seven kitchens, occupying eleven thousand square feet, operated a hundred and fifteen restaurants on delivery platforms.
Robinhood has taken the behavioral nudge playbook (confetti, push notifications, etc.) of many digital firms and applied them to an industry which has no business engaging in that type of encouragement, investing. This has led to a massive increase in risk taking amongst its users, and in one incredibly unfortunate case, a life lost. People’s hard-earned capital should be managed prudently, not gambled. We hope this is one tech trend that reverses sooner rather than later:
In the first three months of 2020, Robinhood users traded nine times as many shares as E-Trade customers, and 40 times as many shares as Charles Schwab customers, per dollar in the average customer account in the most recent quarter. They also bought and sold 88 times as many risky options contracts as Schwab customers, relative to the average account size, according to the analysis.
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