(#22) Apple is a hardware company; Amazon quarterly results explained and the moats in AI are on very short term
Is AI becoming the new McKinsey? Who will be the first company to offer a functionally personal AI copilot?
The most interesting things happen in the AI space. Probably, the next two big things will be the following: (1) Consumer companies giving you an AI chatbot copilot and (2) the emergence of text-to-video generation content.
Onto the update:
Too big to let others innovate?
Apple Services made $20.9B last quarter, which is the equivalent made by Netflix, Mastercard, Spotify, HBO Max & Discovery, and Peleton. At some point, these companies not only will prevent innovation happen but also will enter other markets (e.g. security, retail etc).
Warren Buffet aka the “cash-generating machine”:
Segment margin 11% (-0.3pp Y/Y).
Pilot consolidated (80% controlled).
Stock repurchase $4.4B.
Cash and short-term securities $130.6B.
Apple is a product company
1 /No matter how good are they going to be at selling services, their moat is the products.
2/ So, the ranking looks like this: hardware, software, apps, services, other.
3/ For Google is exactly the opposite.
EVs are having their glory days
91.1% of the registered new cars in Norway in April 2023 are electric. This is crazy, if you take a second to think about it.
I side with Toyota’s CEO who earlier this year said:
“People involved in the auto industry are largely a silent majority. That silent majority is wondering whether EVs are really OK to have as a single option. But they think it’s the trend so they can’t speak out loudly.” CleanTechnica, Toyota
Amazon’s quarter explained:
If you run a large and complex company, watching what others are saying and doing might help you run your business better. From the strategy point of view here are my takes from their investor’s call:
1/ Inflation is making customers do two things: (1) buying cheaper products and (2) refraining from buying at all
2/ Third-party sellers are becoming a larger slice of the pie (59%). Have started creating your marketplace. Maybe you should.
3/ Customer services come ahead of everything, including ahead of cost cuts. From this relationship will come the future profits
4/ Amazon is replacing UPS in some regions. Of course, by building regional and local hubs the cost of transporting products is decreasing
5/ Advertising brought $38bn last year vs $31bn in 2022. Probably is now the largest contributor to the company’s profit
6/ AI and generative LLMs - they are working on it for several years and probably we are going to see something later this year or next year. (ie. CodeWhisperer is one product for developers). LINK
Streaming’s question: All at once or weekly?
“67% of Gen Z adults prefer when the episodes of a TV series are released all at once.” - (Gen Z - also known as the instant gratification generation) LINK
Well, I think this is a bad strategy for the streaming companies. Four weeks after the entire series is released nobody speaks about it. Also, many Gen Zs close their subscription for 6 months per year due to no new and interesting releases.
HBO has a weekly release, which usually spans over 10 weeks. Not sure this strategy is good either.
However, releasing the content twice per year might be an interesting strategy. (hint! Netflix)
EVs are hard to make for traditional auto companies
Me in 2021: the automotive industry is going through a radical transformation. The competitive advantage is moving from complex, proprietary engines to scale, design and distribution. But the value moves to software, which requires a totally new skill set.
Not so many software developers will be willing to work for Dacia or other companies (especially German companies), mainly due to the overall pay & other
The German automakers in 2021: Kein Problem!
WAG group yesterday (5th of May 2023): “Volkswagen CEO Oliver Blume is set to oust the management of the company’s struggling software unit after it caused delays to new model launches”. LINK
Is there a moat even possible in the gen LLM?
The buzz last week was coming from a leaked memo from Google: “We Have No Moat, And Neither Does OpenAI”.
I argued in other posts that the moat in AI is different from company to company:
1/ It is not possible to deploy it on a device (e.g. Apple is best positioned here due to its powerful chips)
2/ You can deploy it to your laptop. LINK
3/ Finally, Meta released ImageBind - an approach to learn a joint embedding across six different modalities - images, text, audio, depth, thermal, and IMU data.
From their paper:
“We show that all combinations of paired data are not necessary to train such a joint embedding, and only image-paired data is sufficient to bind the modalities together. ImageBind can leverage recent large scale vision-language models, and extends their zero-shot capabilities to new modalities just by using their natural pairing with images. It enables novel emergent applications 'out-of-the-box' including cross-modal retrieval, composing modalities with arithmetic, cross-modal detection and generation. The emergent capabilities improve with the strength of the image encoder and we set a new state-of-the-art on emergent zero-shot recognition tasks across modalities, outperforming specialist supervised models. Finally, we show strong few-shot recognition results outperforming prior work, and that ImageBind serves as a new way to evaluate vision models for visual and non-visual tasks.”
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Is AI becoming the new McKinsey?
“Today, we find ourselves in a situation in which technology has become conflated with capitalism, which has, in turn, become conflated with the very notion of progress. If you try to criticize capitalism, you are accused of opposing both technology and progress. But what does progress even mean, if it doesn’t include better lives for people who work?". LINK
ChatGPT (OpenAi) has a product roadmap and they deliver accordingly
This week they dropped their most powerful tool yet: the Code Interpreter.
With this tool, you can create from charts to basic video editing to converting files. Pretty amazing. LINK
Soon to arrive: Generative text-to-video
1/ Text-to-video is the next frontier for generative AI.
2/ Now, we know some possible bad outcomes when creating these videos: bias, misinformation, lack of creativity, privacy, and many others.
3/ What I think we’ll also see is illegal sequels and prequels to famous TV series: from Game of Thrones to Sopranos.
4/ From the copyright point of view, this will be easy to solve…officially; on the black market (ie. torrents) that can be a totally different story.
Wendy goes AI
From the WSJ: “The fast-food chain has customized a language model with terms like ‘JBC’ for junior bacon cheeseburger and ‘biggie bags’ for meal combos”. LINK
Source: A Wendy’s drive-through using natural-language AI at a company-operated location in Columbus, Ohio. PHOTO: WENDY’S
Yuval Noah Harari argues that AI has hacked the operating system of human civilization. I doubt it. LINK
Apple’s market cap is as large as every business in the UK, combined. The USA is producing business and innovation as nobody else.
Chinese banks subsidize businesses that are capital-intensive but have low margins. Somehow, they are considered “safe” to invest in by the banks (given the subsidised they receive and the government and other specific factors)
Debt runs the world
In the US, 45% of millennials now have more credit card debt than savings.
44% of US adults who are aged 43 to 58 have more credit card debt than savings.
No reforms, no good credit score
Fitch Ratings cut France's Rating to AA- from AA without a stable outlook in another blow to politically embattled President Emmanuel Macron. Citing weaker economic growth & higher inflation-indexed expenditure.
This year France expects to show a fiscal deficit of 5% of GDP from 4.7% in 2022.
The largest trading partner of the U.S.A. and has a lot of deficit. LINK
The tech trends reshaping fashion. LINK
Rick Rubin gave Jay-Z the idea of how to open "99 Problems". LINK
This ceiling is entirely flat. Made in 3D by the extraordinary genius of Andrea Pozzo. He created this breathtaking fresco between 1685–1694 in Rome’s Jesuit church of St. Ignazio.
The antidote of life is…love. This a brilliant essay from Maria Popova. LINK
Bears can count, take selfies, use tools, recognize supermodels, and even open car door. LINK
The curious case of the missing Spanish afternoon.
“When I first moved to Spain last summer, I felt strangely disorientated. I could hardly blame culture shock — I’d been visiting the country for years before I moved to Madrid. I speak Spanish. I have Spanish family. But I’d never lived here, and something was out of place. Then a chance comment from a friend crystallised the problem. “The thing is that in Spain you have no word for the afternoon,” she said. And she was right.” LINK
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