Amazon's Huge Win From Going Into Physical Stores

(I don't know if this needs saying, but the following post has absolutely no information contained therein that I learned while working at Amazon. Also, I have a position in and am long on AMZN).

You know what sucks? Margins in retail. 

With margins of 2-8%, you're working with basically no leeway for any failures, and pricing pressure is extreme. Yet, Amazon wants to expand even more deeply into the market with things like a credit card reader and an in-store POS. ( Why would you do that? Three reasons come to mind:
  1. Amazon makes the vast majority of its goods selling online today. But, 85-90% of total purchases occur in the physical world. Amazon wants a piece of that.
  2. Amazon is all about selection. They're "Earth's Biggest Selection". Can't have selection without every single product in the world - online and off.
  3. Most importantly, Amazon has the opportunity to close the loop - to keep money flowing through its system, and never let it out. 

The third point would be absolutely transformative. Think about it this way - today, I go to Target and buy some sheets. Target goes and buys some floor cleaner. The floor cleaner company pays their employees. The employee goes and buys a Nintendo DS at Best Buy. 

Everyone of those transactions require a percent off the top for credit card, debit and ACH fees (on average about 2%, similar to low end retail margins). 

Now imagine that Amazon is the player at each step - they sell the sheets, floor cleaner, gift cards (or creates a "store your money with Amazon"-style bank), and Nintendo DS. Without doing a single thing they don't do already today, Amazon has participated in 4 transactions with zero processing fees. Instantly they've doubled their margin.

Amazon could drop their prices and demolish retail, or keep their prices the same and vastly improve their cash flow. Regardless of their choice, it's such a huge strategic win, I'm not sure why everyone is focused on all the other points. Keep the money and you win by default.

What I Would Do To Improve Soccer

There's a spirited discussion over on the excellent Wait But Why on Why Americans Don't Love Soccer.

I think the majority of the items are spot on correct - they're some really basic items that just seem like no-brainers. They would not affect the flow of the game at all, and improve the fairness (reducing things like incentives for flopping and fake injuries). However, they missed a big one that I think would be even better - more refs.

If you look at the other major sports - Football, Basketball, Hockey and Baseball - they all have much higher square-footage to ref ratio. For example:

  • Football:  110m x 48.7m = 5,363 m² / 7 refs = 766 m² / ref
  • Basketball: 28.65m x 15.24m = 436.6 m² / 3 refs = 145.5 m² / ref
  • Hockey: 61m x 30.5m = 1,860.5 m² / 4 refs = 465 m² / ref
  • Baseball: Varies, but around 100k ft² = 9,290.3 m² / 4 umps = 2,322 m² / ump
  • Soccer: 105m x 68m = 7,140 m² / 3 refs = 2,380 m² / ref

Soccer has the MOST square footage necessary to cover for each ref. And, if you change baseball to just looking at the infield (where most of the action requiring umpire evaluation happens anyway), soccer has a practically 4x greater difference than the nearest other sport. Yet fouls in soccer are just as serious (or worse) than other sports. 

More refs would massively improve the game - diving would be less likely and more bad behavior would be caught and punished. I love the idea of changing the rules (particularly the two tier penalty in the box to prevent cheap dives to get penalties), but let's start with just more accurate calling of the game.

Amazing Video on Alternative Medicine (and Why Global Warming Denial is a Religion)

Just fantastic.

Apart from being written entirely in prose, which I have a weakness for, the core of this video is exactly what frustrates me most about politics and positions today. That core is summarized as follows: 
If you have a position, back it by data. If you get new data that contradicts your existing position, either fix your data or change your position.
Somehow, we've gotten into this mindset that changing positions is wrong, or that it's our job to dismiss data so that we can remain true to our original belief. If the data is valid, why can't you change your position? To paraphrase the video:
If you can prove I'm wrong, I will change my mind. I’ll spin on a fucking dime.
It is this particular point that makes me so frustrated with the current global warming debate. Especially with the discussion of the melting of the West Antarctic Glacier, it is more than a little terrifying the world we are leaving for the next generation.  Yet people still deny the science. To go back to the video:
Science adjusts it's beliefs based on what's observed
Faith is the denial of observation so that Belief can be preserved.
Time and again when I get into a discussion of any kind with those who do not believe the climate science, they cannot say a) what the motivation would be behind a near universal conspiracy of climate scientists (grant money?) or b) what data they WOULD accept that would cause them to change their opinion. This blows my mind. 

Religion, on the other hand (and which, by and large, I have no objection to) is faith-based. It requires a structure, and then faith in that structure, to the exclusion of all data. There is nothing wrong with this, as long as it's self-regarding only. The problem is when it starts to affect other people, which denial of global warming CERTAINLY does.

This is why I consider climate change deniers to be a religion - they form an opinion, and, no matter what facts are presented, they cling to their faith. So, like all religions, I believe they should be contained within purely self-regarding behavior only, and restricted from doing anything that impinges on the freedoms of the populous as a whole.

The hilarity of the situation is that they claim the exact reverse, that climate science is a religion. So, I'll ask this now, if your position of global warming denial is based in fact, what are the facts that would change your mind? Please base your question in some form of scientific structure, that takes into account the natural variability of the Earth and geologic time scales we're talking about here. Tell me, and we'll find them. Not that I have any hope of changing your mind.

Why We're Really Unhappy

This is just a fantastic article about why Gen Y is unhappy (despite the not-obviously-great title): Why Generation Y Yuppies Are Unhappy

The TL;DR is just that we (I think it's we, I might be on the border between X and Y), for our entire lives, have set our expectations high and, by definition, not everyone can be exceptional. Or, basically, this awesome equation:

The only bad part about the article is that there's effectively no way to break the cycle without a) a massive depression of expectations (in this generation or the next) or b) millions of people working to hard to be happy with what they've got. I don't see either happening any time soon.

The Atlantic & Tyler Cowen on Why Jobs Go Unfilled (and Why It May Not Be The Worst Thing)

I heard a great piece by the always excellent Tyler Cowen on the radio today. One quote of particular interest:

"Imagine a very large bohemian class of the sort that say, lives in parts of Brooklyn," Cowen explains. "... It will be culturally upper or upper-middle class, but there will be the income of lower-middle class. They may have lives that are quite happy and rewarding, but they may not have a lot of savings. There will be a certain fragility to this existence." (Tired Of Inequality? One Economist Says It'll Only Get Worse)

It overlapped with a piece I've been meaning to blog about for a while "Why Jobs Go Unfilled Even in Times of High Unemployment".

Of all the near term future views, this feels the most correct. But it's not (necessarily) a bad thing!

Let's go back 100 years, and compare the same lower middle class existence. You worked in a factory 50 hours a week, lived in a hovel, had a million kids  and died before you turned 50.

What will the same lower middle class people have today? Earn $40k/year, save nothing, have a car, iPhone, clean water and plenty of food, commute about 45 minutes each way to work and probably live to 70. And that's all before the robots!

This does remove a ton of choice - it's not like they can choose to travel the world after they retire, or even retire - and, to use Mr. Cowen's excellent choice of words, "a fragile existence", but it's also not backbreaking labor. If the wealthy chip in an even stronger social safety net, these people may even go out and take some risks - we'll see if that ever comes to pass. I have long thought that the wealthy have a huge benefit to (partially) funding the non-wealthy's leisure; I would argue that giving them money to spend encourages them to spend the money on the things the wealthy's firms produce - win-win!

As an aside, the skill thing feels a little bit off - or at least it feels like a rural only thing. In many cities, there are actually many jobs that can be filled by even people of modest skills. The other day I spoke with a Postmates delivery kid - he said he worked 30 hours that month, and earned $1800. CRAZY.

EDIT: Someone pointed out the very interesting review of The Lights in the Tunnel which also covers this very thing. It's going to be a race - utopia provided by automation vs. the jobs that automation kills.

An Unparalleled Level of Growth You (Likely) Will Never See Again

In 2001, the fastest computer in the world (ASCI White) clocked in at an astounding 7.6 TFlops/sec and cost $110M.  This is versus the fastest main stream computer processors which was around 10 GFlops or 1000x slower.

In 2012, the fastest computer in the world (Titan) clocked in at a mind bogglingly fast 17 PetaFlops/sec and cost $97M. This is versus the fastest main stream computer processors which was 177 GFlops or ~96,000x slower.

(I am well aware I'm comparing a single processor vs. a multiprocessor machine, but that's the best I can do)

Roughly, this is 2315x growth in efficiency/power in 10 years FOR LESS COST.

That is absurd growth for an industry that is already 50 years old (just for fun, to build a 17 Petaflop computer in 1961, would have cost roughly $141 Quintillion (or $141,000,000 Trillion). This means if you allocated 100% of US GDP to the paying this off, would take about 9.4M years).

To compare another highly specialized industry - this would be equivalent to a 2001 F1 Racer which topped out at around 250 mph now traveling at 578,750 mph and costing less. 

I cannot think of another industry where more will be available for less over time.

Our Hidden Fingerprint (and Why the NSA STILL Doesn't Need To Read Your Email)

There was a wonderful analysis of How Robert Galbraith was found to be JK Rowling the other day, and, basically, beyond the anonymous tip, it was the fact that a textual analysis of her work matched her OTHER known work more closely than any other author. This is exactly what I'm talking about when I say the NSA does not need to read your email - we're all leaving EXTREMELY DETAILED digital finger prints ALL THE TIME that identify us, locate us - basically reveal anything that anyone would need to know.

Apparently the Completely Disfunctional Cable Market Works In Our Favor

The Atlantic covered the true costs of unbundling ESPN (or projected, since no one would actually do it), and I'm shocked it's so high. Well, not really shocked, just confirming what seems like a shocking number.

Apparently, the cost of unbundling these things (all sports, so anyone not interested in sports, please look away) would be far larger than keeping them in your current (horrible) package. This is not a surprise as the above numbers, if anything are an UNDERESTIMATE!

Currently, the Cable Networks Group (read as "ESPN and some other various nothings") makes up 36% of Disney Revenue, and 62% of operating income. 62%!  (10Q Filing) No wonder they are so hesitant to do anything to screw that up.

The fact is that only a model that mimics that profitability will encourage those content providers to unbundle - and that will require enormous subscription fees. The very fact that there are #x Million people, who looked away above because they don't watch sports but are still being charged, is why the entire system works.

Race and Intelligence: Where Are All the African Nobel Prize Winners?

There was an incredibly fascinating interview on Fresh Air with the author of The Sports Gene (off to my Kindle it goes). A particularly interesting highlight:

"Most of our ancestry as humans has occurred in Africa, so people have been in Africa for far longer than they've been outside of Africa. So genes for hundreds of thousands of years were evolving, changing inside of Africa, and then just a tiny group of people — maybe no more than 150 people, or a small group — left East Africa en route to populating the rest of the world. At each stop, their genes changed to accommodate their environments and sometimes just by random chance. ... But what this means is that most of the genetic differences that have been built up in our history are all still in Africa. All of us outside of Africa are just tiny subsets of a tiny subset that left Africa. So if you got rid of everyone in the world outside of Africa you would lose a little, but you would preserve most of the genetic variation for all of humanity.

"... [For] a particular trait, you might find the most diversity within an African population, as opposed to comparing someone in an African population and someone in a European population. So you might find the fastest 10 runners and the slowest 10 runners. But nobody is looking for the slowest 10 runners."

This makes COMPLETE sense to me. Of course where you have the most genetic diversity will you get the highest opportunity for extreme of the human population on both ends of the spectrum, both the fastest and the slowest.

But the conversation should not stop there, shouldn't we see genetic variability in all areas? Curliest hair? Straightest? Bluest eyes? Lightest blue? And so on.

Even further, when you get into more significant traits, we should see these in extremes as well. Specifically, I'm thinking of intelligence. If we believe there is some genetic component to intelligence (which it appears there are), then just as we would expect to see the fastest and slowest runners in Africa due to the genetic diversity, we should expect to see people at the extremes on the predisposition to intelligence in Africa.

However, according to this (, there have been only 5 Nobel prize winners from Africa in anything other than Literature or Peace. I'm sure much of the reason is that there are not as many facilities for African research and science, but this seems like it needs to be addressed immediately.

To be clear, this book and research indicates there should be RIGHT NOW a set of folks in Africa that are as genetically predisposed to intelligence as anyone who has ever lived. One could argue it is humanity's responsibility to find these folks. IMMEDIATELY.

Dangerous Waters: The Only Article You Need to Read on Abortion

Jonathan Chait had a really measured piece on an incredibly sensitive subject the other day - Abortion. Let me stand out of the way for most of it:

There's no real resolution to this dispute. Nobody even makes much of an effort to resolve it. Both sides advance arguments that only make sense if you already accept their premise about what a human life is. That's what Perry's doing here. He's saying we should force women to give birth even when they don't want to, because babies born in bad circumstances can be happy anyway. That isn't an acceptable burden to place on women, in my opinion, but it surely is if you think abortion is murder.

Likewise, liberals often call conservatives hypocritical for wanting to shrink government while expanding government's power to ban abortion. Except, if you think abortion is murder, then banning abortion is the sort of thing government ought to be able to do, even if it does very little overall. "Stopping murder" is one function of government that even Grover Norquist would endorse. Anti-abortion conservatives aren't hypocritical, they're (from the pro-choice standpoint) wrong about what a murder is.

The fact is that this is not a resolvable debate - stop attempting to convince the other side. If you believe that life begins at conception, then everything after that is murder. If you believe that life begins at viability, then everything before that is a non-moral choice.

There is NO middle ground. 

The best suggestion I've ever heard was from a professor I had in college for the Philosophy of Medicine. Rather than even arguing about this, we should be aggressively trying to move the age of viability (or the ability to freeze zygotes) as close to zero days as possible. If, for example, you had the ability to extract a zygote (and freeze it for future implantation) that was a mere 1 day since fertilization as easily and safely as you could perform an abortion, then everyone on both sides would agree that would be the correct path.

All energy directed towards anything else ultimately will not swing anyone one way or the other.