• Trucks are the best selling car in America, with over 2.4 million sold in 2018, generating over $100 billion in revenue for Ford, Chevy, and others.
• Tesla is setting itself for a large truck sales opportunity.

It’s pretty clear that in the US, the second largest car market after China, trucks are “flying off the shelves”. The opportunity is clear: there’s a multi-billion pickup truck industry with multiple successful players. Even the #4 player, GMC, brings in over $10 billion in revenue a year from trucks. Tesla’s revenue in 2018 was $21 billion and by introducing a top-selling truck, Tesla is hoping it’s truck segment can generate $20+ billion alone. For comparison, Ford, the best selling truck brand, sold 1 million trucks in 2018, generating $46 billion in revenue.

So now we know Tesla clearly sees a revenue opportunity here. How does the truck fit into it’s product offerings?

Tesla’s current target customer is a middle-to-upper class electric vehicle enthusiast. Most people who buy an electric vehicle are clustered around environmentally conscious coastal states, whereas Ford F-150 buyers are clustered in the center of the US. Tesla is trying to target a totally different segment of customers with the Cybertruck that wouldn’t have bought an electric vehicle.

But the Cybertruck is expensive. Is it really for everyone that wouldn’t have bought the Cybertruck? For comparison, the average selling price of the best-selling Ford F-150 is $46,000. The starting price for the Cybertruck is $40,000.

This leads to Tesla’s product strategy with the higher-end Cybertruck. Tesla wants to first capture the high end buyer in every one of its mobility segments, show how good the cars are despite minor limitations, and move down market towards high volume. Tesla is not concerned about creating an “everybody” car until it captures the high-end customer, who will naturally influence the everyday shopper in the segment.

This is the playbook Tesla used with the Model S and the Model 3. Tesla built the best possible car with the Model S and marketed it towards high end buyers. These shoppers were also much more willing to tradeoff some minor inconveniences that the average shopper might not, such as charging or build defects. The Model S then proceeded to get rave reviews from everyone, including MotorTrend and US News. Customers started lusting after Tesla’s (including me!). That’s when Tesla introduced the Model 3, a lower cost offering targeted towards everyone.

So then why did TSLA stock drop the day after the Cybertruck announced? To be honest, it could be for a different number of reasons but if I were a Tesla investor (I don’t own any TSLA stock as of this writing), I would not be worried. The main concerns are around the looks, which are definitely striking. But I’m not too concerned, especially with the higher-end segment of truck shoppers. They’ll understand the performance the practicality of the Cybertruck, with instant torque, a strong exoskeleton, and standard air suspension. Not only that, to top it off, Tesla says they have over 250,000 Cybertruck pre-orders!

There are still unknowns with full range of options and delivery time, but knowing Tesla, EV capabilities, and a large market, I’m sure Tesla will find some success with the Cybertruck and continue iterating with a different truck for the masses.

I don’t have very many memories of my first few years of my life. All I remember was spending a lot of time with my grandparents. My parents were busy and the cheapest form of daycare was family labor!

Some of my first memories were in Memphis, TN, where my parents lived for a little while after graduate school. I don’t quite remember what they did but I know they worked to spoil me. My parents didn’t make much money but they really understood the value of growing up around positive influences. When I wasn’t being taken care by my grandparents, I was spending my days in Memphis’ top (and expensive) daycares. They decided that instead of spending the hard earned money on themselves, they spent it on me. Can you imagine spend half your salary on a tiny human who can’t even appreciate what you’re doing?

One of my dad’s fondest memories of me as a baby was when I’d run up to restaurants and start saying “餐馆” (restaurant). My dad would laugh and pull me away, having to explain that we couldn’t afford to go out to eat. I don’t think I was fazed at all by this news, as every time I saw a restaurant, you bet I’d be running towards it. It’s amazing that I haven’t spent all my money on restaurants and gotten fat.

It’s pretty clear that I grew up poor but I never really noticed until later in life. What really sticks out to me was how much time we spent as a family together.

My first real memory that I remember was going on a family walk in our neighborhood. I vividly remember a long hedge of bamboo right outside our community. I don’t know if this bamboo was subtle racism, as I lived in a community with other asian families, or if it was just coincidental community decoration. But all my early memories have been anchored to this bamboo hedge and how many times we passed by it on our daily walking routes.

Growing up, I’ve always been an outwardly shy child. But when it came to family, I was outgoing, talkative, and sometimes crazy. One of my favorite memories is when my grandparents were visiting, I decided one day to try out my biting strength. On my grandpa’s butt. I don’t think I bit hard enough to break skin or pants but I did bite hard enough to get a stern yelling at, in Chinese. I have no idea what came of me at that moment but I guess the crazy side of me came out. Thankfully, I haven’t continued this bad behavior of butt biting.

I’m not really sure what to make of this part of my life. For better or for worse, I couldn’t really remember much since I was so young. I don’t remember being poor. I don’t remember all the trouble I got into. I don’t remember being carefree and just playing. It’s almost like I was drunk for 3 years straight and have no recollection of what happened.

All I know is I’m thankful for everything that happened to me during this time period.

Life’s Highs and Luos: First Memories was originally published in A day in the life of Azianmike on Medium, where people are continuing the conversation by highlighting and responding to this story.

While reading Michelle Obama’s book “Becoming”, I became inspired to put my life and my thoughts on paper. I hope to capture my naivety, development, and story for when I’m older to look back on.

To begin, we need to start with the people who created me: XiaoZhong Luo and XiaoTao Yao.

My parents first met in the Chinese city of Kun Ming, where they were both studying at the time. Long story short, they fell for each other and got married. I still question why my mom picked my dad. 😜

My dad, XiaoZhong, first immigrated to America to attend graduate school in Memphis. Can you imagine how scary it is to move to America from China? All you have is a piece of paper that says a random American school has accepted you to study biology. You don’t know if your visa will be accepted at the border. You don’t know anyone. You barely speak the language. You pack your whole life into two suitcases. Oh, and you only have $200 in your pocket. Somehow, he found a way to make it work.

A year later came my mom. Right before she immigrated, there were small scale student protests all across China. The Chinese youth refused the communist party’s way of life and wanted change. My mom wanted to be a part of this movement and to go to Beijing to join the cause. At the behest of my grandpa, a humble but straightforward ex-military rule follower, my mom decided to skip out on the protest in fear of losing a chance to travel to America to be with my dad.

This protest in Beijing eventually became known as the “TianAnMen Massacre”.

Eventually my mom made it safely over the Pacific ocean and met up with my dad with $200 in her pocket too. To fully make ends meet during the school year, my parents would spend the summer break away from Memphis and inside the bustling city of New York York, making some extra cash.

With little English skills, my dad managed to find a job as a delivery boy and a department store stocker. My mom worked in a hot, humid laundromat folding clothes. After a hard days work, they’d come back to their small NYC apartment which contained a small bed unable to hold their bodies without a leg or arm spilling over the edge.

While my mom was still in school, I was born. I was born wide eyed and curious with the world. I know it’s hard to believe but I used to be cute too.

My parents vividly remember on my mom’s graduation day, a hot Memphis summer day, me inside the stroller. Being the needy baby that I was, I refused to be anywhere but right next to my mom in her cap and gown. When my mom was called to walk across the stage though, all the focus was on my mom and her accomplishments. Not even a cute Michael could steal the spotlight.

My parents are the greatest thing to ever happen to me. They took a chance to move to a different country to give me and my brother a better life. They left behind friends, family, comfort, racial acceptance, culture, identity, and good food to give me and my brother a better shot at achieving the American dream.

They willingly and knowingly gave up their dreams to raise me in this country. They taught me the value of education. They taught me the value of not just math and science but humanities and communication. They were the ones playing soccer with me in the backyard. They were the ones sitting with me at 9pm, after a day’s work, helping me with my geometry homework. They were the ones taking me on every single vacation to open my eyes to the world.

They have shaped almost every aspect of my life and for that, I can’t begin to talk about me without beginning with them.

Life’s Highs and Luos: Origin Story was originally published in A day in the life of Azianmike on Medium, where people are continuing the conversation by highlighting and responding to this story.

The big question: What is Disney+’s true value to Disney as a company?

The stock market reacted very positively and since April 11th, the stock has rocketed from $116 to $140 as of writing. I would guess a majority of this increase was due to positive sentiment of Disney+, the new streaming service that will be available at $6.99 a month.

I’m personally not as bullish in the short term (1–3 years) but I am very bullish in the long term (3–6 years) and I’ll tell you why.

• I believe Disney+ is underpriced at $6.99 to attract consumers. Disney will raise the price sooner rather than later.
• I don’t believe Disney+ will drive meaningful merchandise and park/resort sales.
• I believe margins from Disney+ price increases will be greater than margins from parks
• I believe Disney+ will scale better than theme parks

Let’s first walk through some math, which are largely based on assumptions.

Let’s assume after 3 years, Disney+ will have 50 million subscribers. Netflix currently has 139 million. Netflix started streaming in 2007, but I’ll give Disney+ an edge since it has a lot of high quality content by default.

Through looking at some rough 2018 attendance numbers, we can estimate about 127.2 million people went to a Disney park in 2018. We know that Disney theme parks have about a 22% profit margin according to Disney’s fiscal report. With that same report, if we take total revenue for 2018 ($20.296 billion) and divide it by 127.2 million people, we get an average spend of about $159.56 per person. I would say my estimate is on the low end so we’ll just bump it up to $200.

Let’s assume that Disney+ converts 10 million (20% of Disney+ subscriber base) into new park goers, with an average annual visit of once per year. This means Disney will get about $2 billion in annual revenue, with about $440 million in profit.

Let’s also assume $6.99 is the break even rate for Disney+. If Disney increases this price to $8.99, it will effectively make $2 per user in profit.

Scenario 1: Let’s assume Disney+ does not lose any customers due to $2 price increase. This means Disney will make an annual profit of $1.2 billion. (50 million users * $2 profit * 12 months).

Scenario 2: Let’s assume Disney+ loses half of its customer base due to price increase. This means Disney will make an annual profit of $600 million. (25 million users * $2 profit * 12 months)

Note: I believe a park conversion rate of 20% is VERY high since most people who subscribe are already familiar with Disney and Disney theme parks. I also believe the 22% park margin rate will increase with more visitors, since the park is the main fixed cost. I also believe that Disney+ will not lose very many customers with a price increase, as evidenced by Netflix price increases.

Now for my opinion.

I believe Disney+ is not actually an “ecosystem” play of driving consumers into parks and getting users to buy merchandise as some analysts and articles would have you believe. I strongly believe it’s a content distribution play. I don’t think Disney wants to indirectly make money off of Disney+ by funneling users into parks, I think Disney wants to directly make money off of Disney+ by taking profits.

I firmly believe $6.99 will be an “introductory” price to undercut competitor streaming services and Disney is almost guaranteed to raise their monthly price.

Let’s face it: Disney theme parks are for wealthy people. It costs a lot of money to buy a ticket, food, and accommodations when you visit a Disney park. The problem with wealthy people is there aren’t a lot of them. So to effectively grow, you need to make money off of the average Joe and parks aren’t the right answer.

Disney’s original answer to this was cable networks and movies but with the rise of differentiated content distribution, specifically streaming, Disney’s main source of revenue from the average person was declining. Less people are cable subscribers and movie goers everyday and are opting for products like Sling TV and Netflix.

Disney needed an answer for making money off of content distribution and Disney+ is that answer.

I also believe people who find the most value from Disney+ are probably already Disney theme park goers, which makes a 20% Disney+ to theme park conversion rate very high. Most of the announced content are for the fans who like to dive into universes, such as the Marvel spin-off series’ and Star Wars Mandalorian series. This leads me to believe that Disney+ will attract majority users who already go to Disney theme parks often.

With that being said, do I believe Disney+ will keep users in the Disney ecosystem? Hell ya. Do I think it will attract some new Disney theme park visitors? Hell ya. Do I think it will be successful? Hell ya.

— — — — — — — — — — — — — — — — — — — —

Some sources:

Average spend per person: $159.56

2018~ish attendance numbers 127.202 https://www.themeparkinsider.com/flume/201805/6107/

2018 revenue numbers: https://www.thewaltdisneycompany.com/the-walt-disney-company-reports-fourth-quarter-and-full-year-earnings-for-fiscal-2018/

22% profit margin on parks according to https://www.thewaltdisneycompany.com/the-walt-disney-company-reports-fourth-quarter-and-full-year-earnings-for-fiscal-2018/

Disney+: What’s it really worth? was originally published in Thought For Tech on Medium, where people are continuing the conversation by highlighting and responding to this story.

• I don’t believe Lyft will have the best self driving
• I don’t believe Lyft be able to sustain growth by 2021/2022 to fully realize self driving cars as part of its platform (at the earliest)
• I believe long term (20+ years), building self driving technology will be a commodity similar to how building an app is today.

As we all know, Lyft recently IPO’d and the stock is doing not so well. But why? And how can Lyft get its stock price back on track?

We must first understand the Silicon Valley mantra, “Growth at all costs”. Hidden behind this quote are many different meanings of the end result of growth. If you’re an early stage company, growth can equate to product market fit. If you’re a mid-stage company, growth can equate to grabbing market share from incumbents or realizing a path to $1 billion. Here’s where it gets interesting: if you’re a late stage company, growth can equate to a monopoly. As a monopoly, this is where you truly extract value from your consumers and generate massive profits.

At the end of the day, every company wants to be a natural monopoly. You get most of the market share, you have less competition, and you get to make mistakes without many consequences. Google is a great example of this, absolutely dominating search queries. Note that because Google’s Search is so good and they’ve been growing so fast, I would consider them a natural monopoly. No one has a better search than Google.

This is where Lyft, as a mid-stage company quickly transitioning to a late stage company, is really shining: growth. Lyft had over 100% growth in revenue from 2017 to 2018. But the key problem lies in future profit potential: most of their growth is fueled by venture capital money. Lyft lost $911 million in 2018 even though they made $2.2 billion in revenue. To put it plainly, Lyft spent over $3 billion in 2018 alone paying employees, marketing, and subsidizing rides (plus many, many other costs). This means that for every $1 Lyft earns in revenue, they spend about $1.50. Another key thing to note here is that revenue does not account for the full cost of the ride, but a percentage of the total fare paid to Lyft. The rest of the fare is paid to the driver. Lyft’s revenue does not include fares paid to drivers.

The key question becomes can Lyft ever make a profit? And self driving cars just might be the answer to that.

It’s become pretty apparent that Lyft is battling with Uber for market share and growth. Whoever stops subsidizing rides first will see their growth plummet and future earnings potential with it. (Question we won’t answer today: how much “growth” is there left overall?) The first company to focus on profits instead of growth may see a bump in earnings in the short term, but long term all the passengers will migrate to the cheaper platform and thus a natural monopoly will have formed.

This is where self driving cars come in. At current ride sharing prices, a majority of the fare goes towards the driver. However, if the driver is a robot and doesn’t take a fare, then 100% of the fare can go towards Lyft, which is essentially what it’s riding on 😉. It’s hoping to keep fare prices the same but capture a larger part of the fare, which will help it grow revenue and get to profitability.

However, this is where I believe self driving cars will not save Lyft. Currently, developing self driving car technology is not easy. It takes a lot of time and resources to develop this tech. I don’t think self driving tech will be as good as a human driver nor regulated within 3 years. Most car companies believe some form of self driving will be on the road by 2021 but that’s at the earliest. I personally believe most “basic” highway self driving will be finished and regulated by 2021 at the earliest but not urban driving. And urban driving is where I’d argue Lyft / Uber make most of their money. I only have anecdotal data but most rides I’ve seen are short, urban rides, getting from one place to another when users don’t have cars. And owning a car doesn’t make sense in the city.

So that means Lyft has to survive AND grow by 2021 at the earliest if it wants to take advantage of self driving tech. As far as I can tell, Lyft raised about $2.3 billion in its IPO. Without knowing exactly how much cash in the bank it has, Lyft will probably barely squeeze into 2021 if it manages to keep its yearly losses steady at $900 million. Best case scenario, Lyft survives until 2021/2022 and quickly implements urban self driving tech.

But just as all technology grows and becomes easier to implement, so will self driving technology. What happens in 10–20 years when it’s just as easy to build/buy a self driving car as it is to build an app today? Won’t Uber and other future competitors, with their own self driving tech, be able to compete against Lyft? Won’t it again, be about growth and offering the cheapest prices to attract consumers? Will Lyft be able to build the best self driving technology and offer a superior product, similar to Google Search?

In my personal opinion, I don’t think Lyft will have the best self driving (my early prediction is Waymo) nor do I believe Lyft be able to sustain growth by 2021/2022 to fully realize self driving cars as part of its platform. I also believe long term (20+ years), building self driving technology will be a commodity similar to how building an app is today. I also believe there will be “off the shelf” self driving technology you can buy, similar to software you can buy today.

Remember, when you are investing in Lyft, you’re investing in future earnings potential (since they have no profit today) through reducing costs and massively increasing revenue, which is probably through self driving cars. So at the end of the day, be sure to thank your driver and some venture capitalists as they’re currently subsidizing your rides.

Lyft: Self Driving Cars Won’t Save It was originally published in Thought For Tech on Medium, where people are continuing the conversation by highlighting and responding to this story.

On March 25, the Apple Card was announced. If it wasn’t obvious before, Apple is getting deeper and deeper into the services business due to slowing hardware sales. With most credit card companies making money through fees (rather than interest), it’s a great vertical with relatively low churn for Apple to break into.

But who exactly is this card aimed for?

My first guess are millennials. The titanium physical card is a delightful touch and as we’ve seen from the trend of metal cards, a titanium card will definitely be a selling point for some people as a status symbol. But will it be enough to achieve critical mass for Apple?

The big miss that I think will deter a lot of users is a lack of sign-up bonus and good cash back. 1% on all purchases, 2% on purchases with Apple Pay, 3% on any Apple store purchase. If Apple Pay was accepted in more places, this would be a much better cashback structure. But there’s barely any places that accept Apple Pay, the ones that stand out are Safeway and Starbucks. This will detract a lot credit card nerds, including me. But I’d argue this group of people is relatively small.

So who do I think this card is really for? The average person who probably doesn’t understand or distrusts credit cards. There are plenty of people who avoid credit cards because they don’t understand complicated interest and payment schedules. With the branding of Apple and simplicity at the forefront, users may be more trusting.

The real killer feature: being able to easily apply for the Apple Card right on your iPhone. Apple has about 1 Billion active iPhones. That’s a lot to of people to target with notifications and marketing material to seamlessly apply for a credit card. All you need to enter is your social security number! The barrier to entry will be as minimal as possible and if I had to guess, Apple will make the sign-up experience seem less daunting, like you’re just registering for any other app / service.

But what about after the sign-up experience? Doesn’t consistent usage matter too?

Apple’s marketing material promotes “spending management” features, such as spending tracking and charge location tracking. To be totally fair, the spending tracking feature actually looks like a good feature and I wish was something offered on all credit cards(note: there are already services like Mint that offer this). One thing to remember is if you’re a user of Apple Card and you’re bad at managing your spending, you’re incentivized to put all your purchases on the Apple Card to truly understand your spending habits. If you split costs across multiple cards, Apple Card will only paint a partial picture of your habits. I imagine this will be a big feature for users who want to rein in their spending and will see the Apple Card as a tracker for “everyday spending”.

One very telling piece of marketing is their focus on fees (or lack thereof) and security. Apple is boasting they have no “fees” (interest for partial monthly payments is not considered a fee) and to be fair, they have great visuals to help you understand interest. If I was a new user, this emphasis on visuals rather than cold, hard numbers would not only attract trust but usability in the Apple Card. No need for calculations, just look at the colors!

The focus on security is also a great feature but for most current credit card users, it’s a rare occurrence. A delightful security is feature is a dynamic CVV number that’s generated right on your iPhone. Obviously much harder to steal your card number now (impossible?) but adds slight friction in your online buying habits now when you have to pull out your phone to get a new CVV number.

Overall, the Apple Card is an interesting divergence from the high end credit cards with high annual fees and lofty cash backs. It’s a simple card that I think will be a great “beginner” card for those without credit cards or deep knowledge. It will be interesting to see how big banks respond to this card (if at all). I predict we’ll see more lower end cards that eschew advertising cash back for simplicity and strong customer-centric ideals.

Who is the Apple Card for? was originally published in Thought For Tech on Medium, where people are continuing the conversation by highlighting and responding to this story.

First off, what is Google Stadia?

It’s a game-streaming platform that doesn’t require anything special besides a good internet connection. In practical terms, the average consumer won’t need to buy a PC/Xbox/Playstation to play the latest and greatest games. All these games (and consoles) will live somewhere in the “cloud” and just like how video gets streamed to your browser via Netflix, your video games will get streamed to your screen via Stadia. You now don’t need to buy special hardware and you can play wherever you are, whether that’s in your living room or at the airport.

What does this mean for the average gamer?

You can now pay a monthly fee (price not yet disclosed as of writing) for to play video games without having to buy a console. Cool. But what about paying for games? I think this will be the most interesting aspect, the details of which have not been announced. In my opinion, there are two ways this could play out:

1. You have to pay the normal, one time full price for games you want to play
2. Your monthly fee will include a library of games

I’m really hoping for option 2 and the monthly fee is in the range of $10–15, which is an insane bargain if the game library is good.

One thing I’m most excited for is being able to play your games anywhere and on any device. You can now move seamlessly from your living room TV to your bedroom TV to even your iPhone while traveling (just need to make sure your Wi-Fi is good)!

For the average user, this solves buying and upgrading hardware, hardware failures, and physical location of hardware. Depending on the execution and price point (less than $15 a month), this could mean the end of hardware.

Google’s tech breakthrough

OnLive was one of the first companies to try video game streaming, realizing that one of the biggest pain points was buying your own hardware, and keeping it up to date, to play games. It also was a plus that using OnLive meant you didn’t have to install the game or updates, meaning you could jump right into the action.

Where OnLive failed was the latency issue. Back in the mid 2000’s, the internet infrastructure just wasn’t there yet. This means that for every controller movement, there was a noticeable lag since you didn’t have a console in your living room to do graphics rendering. It was all being done in “the cloud”. Now however, we’re getting into the era of fiber connections for everyone and soon the era of 5G (low latency) will be upon us.

This is where Google Stadia’s timing is perfect.

The tech of Google Stadia is more real estate location than anything. Generally, the closer you are to a data center, the lower your latency is. Think of it like a mail carrier. The closer your destination is to you, the faster it gets there, regardless of package size. With Google’s abundance of data centers, they probably have one super close to you in the USA.

One other interesting breakthrough they’ve made on the tech side is the custom machines they built to run your games. I’m curious if they will be able to run multiple game instances on each machine. It’s probably not hard to run 10 different instances of Minecraft for 10 different users, which would allow 10 people to play on one machine. This would be amazing from an efficiency standpoint.

Google’s business breakthrough

Google knew that they were late to the cloud services game after being beat up by AWS and Microsoft Azure. However, it seems like they are predicting the same cloud model can be followed with gaming to potentially even more devastating effect.

I think where Google Stadia will really shine is the recurring revenue model. An Xbox One X costs about $400, which if Google Stadia costs $15 a month, that would be about 26 months of Google Stadia before buying an Xbox makes sense. Google is banking that you are going to be sticking with them for a very long time and never need to buy a console or a PC (for games) ever again, which would be amazing from a business perspective. They could also make it very hard or impossible to transfer your games and progress, effectively locking you into their platform.

What I think Google will struggle with is accommodating users during peak times. Most people probably get off work around 5pm and play in the evening. How many machines do you need for these users? What about the idle machines during the rest of the day? You can easily shut them off but you still need to recuperate the hardware costs.

Will it work?

Will Google Stadia work? I’m not really sure, especially without having tried out the service itself. Lag and latency could literally make or break this service. For a lot of shooting games where precision and speed is key, any additional latency would probably be a no-go. However, I think for most other types of games, such as sports and action/adventure games, an extra bit of latency won’t hit.

If the price is $15 or under, the games are cheap and plentiful (or even included in the subscription), and the service really provides a convenience value without a huge cost in latency, I could see myself and many other users paying for Stadia consistently.

Google Stadia: The Netflix of games? was originally published in Thought For Tech on Medium, where people are continuing the conversation by highlighting and responding to this story.

We all love (and hate) Uber for what their product currently is: a (relatively) cheap and convenient way to get from point A to point B. I remember my first experience using Uber, which stemmed from my hatred of calling a taxi cab company to go out to the bars. Usually, I’d have to call a random cab company I found online, request a cab at a street corner that I’d have to describe, and then ride in a dinky cab with out any knowledge of pricing. Then, along came Uber. At the time, Uber wasn’t really trying to reinvent the taxi cab system: just take a user from point A to point B. But all the pain points of requesting at a certain location, taking the most efficient route, and best of all, a well kept and modern car they hit right on the money. I (and the rest of the consumers) never looked back.

So now it’s interesting to take a look at where Uber is now. I would argue that Uber has grown and expanded the personal transport market. Where I once maybe took 5 to 10 cab rides a year (mainly for bars or the airport), I now take easily that many Ubers in a month, from seeing friends to going out to eat to grocery shopping. It’s pretty clear that Uber is not only trying to takeover the taxi industry but also transportation as a whole, by catering to everyone.

I’m writing this from my perspective in America, as that’s where I’ve had the most interactions with personal transit and public transit. In most American cities except for maybe New York City, we have pretty horrendous public transit. It’s just a given that America was built on cars. Everything was about owning a Ford or a GM car, from the status symbol to the convenience to the family road trips. So instead of like European cities, our public transit money went into building road infrastructure and subsidizing gasoline. We were investing in our future of personal, convenient transport.

Fast forward 50 years and we are increasingly becoming more urbanized with a smaller reliance on long car rides and a bigger emphasis on quick trips. Uber covered the personal trip part with UberX and UberBlack but what about the average consumer who just wants to get from point A to point B and is willing to sacrifice convenience for a much lower cost? There’s where UberPool and all the offshoot products come from (and unrelated products, such as the Uber credit card or the Jump bike acquisition).

First, let’s look at UberPool. It gets you from point A to point B but we’re now going to take slight detours to pick up and drop off passengers going in the same direction as you. So as a passenger, you won’t get to picked up or dropped off as quickly but you’ll be sure to get wherever you need to go within a reasonable time. The user pain point of the original UberX product was, unfortunately, it was just too expensive. So how can Uber bring down the average price it charges per consumer AND make more money per ride? By using smart routing algorithms to place consumers in the same car going in the same general direction! This allows each user to pay a small discount but since there are now more users per ride, the total amount Uber (and the driver) makes goes up. The only bad part is since Uber shows upfront pricing (more on this later), if only one user requests an UberPool, then Uber (but not the driver) will lose since they charged the user a discounted ride and only had one total customer. This is where the next couple of products come into play to help solve Uber’s pricing pain point: to help Uber optimize their upfront pricing.

At this point, Uber knows the major pain point that consumers have is the price point. Ride sharing is currently a commodity; there’s really nothing differentiating Uber or Lyft or Grab or Didi or any other rideshare company besides pricing. All are safe, reliable and easy to track via smartphone. So how does Uber calculate and infer the best upfront price to show to account for potential for only rider? Data. And lots of it. Because at the end of the day, the upfront pricing is a probability game. If Uber knows there is a low chance that there will be a second rider on a given route, they will show a high upfront pricing. On the flip side, if Uber knows there is a high chance that there will be a second rider on a route, they could show a low upfront pricing to attract users. There are millions of more potential scenarios and with more data, Uber can calculate the best pricing to show.

The first version of UberPool was step one, to validate the idea of consumers embracing carpooling for the allure of a cheaper price. Consumers loved it.

The next step was to collect data. Introduce: The Uber Credit Card. Now you’re asking, why would a rideshare company care about people’s spending habits? Because using people’s spending habits, Uber can infer where and when, Uber can best predict where people are requesting Uber’s from and to. Maybe even close to real time. Uber sees a bunch of people are using their credit card at a specific bar? That probably means at closing time, there will be people heading home and hopefully, in the same direction home.

The next step is to have users wait longer after requesting a ride to increase the chances of a second user going in the same direction. If I had to guess, there aren’t very many people requesting UberPool rides at the same time. But given enough time, the chances go up dramatically. So now Uber is having users wait up to 2 minutes before dispatching a driver to pick up a user. I think this is currently in an early testing period to validate if users are even willing to wait. But if I had to guess, I think the average user is willing to wait for a very reduced price.

The end goal, unrelated to collecting data, for getting pricing down is either self driving cars or getting users to do drive themselves. What do I mean by this? Look at the Jump bike acquisition. There’s a new form of short distance mobility emerging and instead of paying someone to drive you 3 miles, you just hop on a scooter or a bike and ride yourself for those 3 miles for pennies on the dollar.

What’s the next step for Uber? I’m not sure but what I guess is Uber ultimately wants to try to guess where from, where to, and when users want a ride before the user even requests it. This gives them ultimate leverage around upfront pricing and how to dynamically change it based on certain user behaviors and routes. This can also help them estimate supply based on demand. The ultimate goal for Uber is how can they leverage technology to optimize pricing for both the consumer, driver, and Uber’s bank account.

Does the future of transportation look increasingly less about transportation technology and more about data and optimizing routes and pricing?

Uber Pool: The Future of Transportation? was originally published in Thought For Tech on Medium, where people are continuing the conversation by highlighting and responding to this story.

It’s pretty old news now that Microsoft has acquired GitHub for $7.5 billion. But I think it’s interesting to take a look at the direction that Microsoft wants to move towards with this acquisition, specifically looking at the product that GitHub provides Microsoft’s ecosystem.

Let’s take a look at what products GitHub offers. For the sake of time, I’m not going to rehash the many articles explain what GitHub does. First and foremost, their core product is a managed store of code, “repositories”. The interesting thing is, GitHub is built on top of the Git version control system, which is completely free and open too. The beauty of Git is it’s distributed, meaning there’s every developer has a full copy of the Git project they work on. That then means there is very little friction for a developer to move their code from GitHub to some other place (like BitBucket or GitLab).

Now we’ve determined that the core feature, storing developers’ code, is nothing unique and that alone provides a pretty small competitive moat. So what’s the big deal with GitHub? How does GitHub attract new users and retain them? By hyper focussing their vertical features and products on top of Git towards the open source community.

First, let’s talk a little about the economics of open source. Yes, open source is literally giving away your code (there are different types of open source licenses which I won’t get into here). But there is still lots of money to be indirectly from open source software. Following the freemium model, if I open source an amazing database, I drive demand via the free version. Then, I place plenty of power user, convenience, and managing features behind a paid wall. With this specific database, I now have a user locked into the ecosystem (it’s pretty high friction to migrate large amounts of production data off a database) and the longer a user uses my software, the more likely they will want advanced features to solve their long term problems. This then results in paying customers.

That’s how releasing free, open source software can generate money for a developer, but how does GitHub make money off of that? Interesting question. GitHub doesn’t really. Their money making machine is selling control over code repositories, such as making code private or being able to manage an enterprise amount of software through permissions. The interesting thing is their focus of all the free features (more on those in a bit) to get more users to create open source projects and increase collaboration is the antithesis to who would actually use GitHub’s paid product. I think it’s pretty clear Microsoft isn’t buying GitHub for their executive level management or for the “money printing machine” GitHub is (hint: it probably doesn’t make a lot in profit off of just paid users). To understand why Microsoft is acquiring GitHub, I think we need to dive a little deeper into the free product features.

To reiterate, as a whole, GitHub has a lot of interesting free features that any user can use but I think the biggest ones that I want to look at are related to collaboration. Specifically, I believe the ability to submit pull requests, the ability to quickly and easily fork code repos, and having integrated issue trackers are the biggest features that acquire new users and retain existing ones. Note that all those features aren’t new or groundbreaking ideas. But GitHub was the first to offer unlimited public code repos for free and the first to add all those features for free, which allowed them to gain a big network affect as the place to go to find new open source projects and to contribute/collaborate with others on existing open source projects. GitHub realized at the time that open source projects were a big opportunity but no one was servicing community based code collaboration but instead focussing on the “immediate money” of enterprise code collaboration, where the target market is clear and all the customers pay. The main pain point GitHub realized was there wasn’t even a platform or a toolset for open source contributors! What I think GitHub ultimately got wrong was their pricing strategy (and target market; GitHub’s main financial growth is from GitHub enterprise) but that is where I believe Microsoft can leverage GitHub.

First and foremost, Microsoft is making a big push in not just empowering creators in general but also empowering software developers. The Steve Balmer mantra of “developers, developers, developers” is still not lost to this day but I think there’s two key strategies Microsoft is taking here — a (deeper) focus on enterprise developer tools and a way to leverage the large open source developer community.

Looking at the developer tools, it’s pretty clear Microsoft wants to hit it hard to compete against the big names, such as Atlassian. As said before, GitHub’s fastest growing product in terms of paying users is GitHub enterprise, which is interesting because it’s not their apparent target market. But the numbers don’t lie and plenty of businesses need on-premise, managed code hosting solutions. Microsoft already has big deals and contracts with many businesses and just like they do with Microsoft Teams to undercut Slack and Microsoft Azure to undercut AWS, they can offer GitHub enterprise at a free or reduced rate to incentivize companies to be “locked in” to the Microsoft ecosystem. Looking at the competitors, there is Atlassian Bitbucket and GitLab, the two biggest competitors. If I had to guess, Microsoft wants to steal market share from Atlassian and GitLab and fast.

What Microsoft (probably) realizes is that GitHub has many open source projects that people love to fork (create a copy) but people need easy ways to deploy that code. This is where I believe Microsoft can leverage the existing open source communities to push Microsoft Azure with easy and simple GitHub integration (especially with Docker Containers. Microsoft Azure is pretty behind AWS right now and one big way to catch up is to reduce the friction between code in GitHub and code running in Azure. I think Azure could take a page out of the freemium/open source model and allow users to not only fork public repos, but also easily spin up an Azure cloud server with that code. It would reduce developer friction, boost Azure in the race to catch up to AWS, and increase the friction for developers to move off Azure.

All in all, it’s hard to say in the immediate term what Microsoft’s plan is with GitHub and just how worth the $7.5 billion GitHub really is. It’s pretty clear that Microsoft is buying GitHub more for the audience than for the product direction if anything. Do I think Microsoft stands to break into the enterprise developer toolset that Atlassian has a firm grip on? Definitely, especially if it can leverage it’s existing contracts. Do I think Microsoft stands to use GitHub as a way to leverage Azure numbers? Maybe, I think this is a little harder and even if it does succeed, it will be a relatively small increase for Azure compared to AWS. I definitely think Microsoft bought GitHub to leverage all their users and open source projects, the better question is just how. The real question is if GitHub is worth $7.5 billion.

Disclaimer: I own some Microsoft stock

GitHub acquisition: An analysis of Microsoft’s direction through product was originally published in Thought For Tech on Medium, where people are continuing the conversation by highlighting and responding to this story.

Let’s first start with what this publication is and is not. I’m starting this publication as a way to put my analysis and opinions in a structured format for everyone to view. What good are thoughts if they can not be properly communicated to others? All opinions (unless otherwise cited and stated) are my own. I encourage readers to refute and contradict my opinions and analysis, as it helps me learn and grow too.

I do not intend for this publication to be used for investing purposes. There are too many factors into what goes into a “good” investment and a “bad” investment, from management to financials to strategy. I specifically want to focus on a narrow aspect of business and product strategy with respect to technology companies. What constitutes a technology company? Good question. Which leads me to my first ever analysis: Tesla.

Tesla. Electric Cars. Powerwall. Solar panels. Which one doesn’t belong? On one side, you can say none of them belong. On the other, you could argue that all of them belong. Tesla has a surprising number of products and for the purposes of this piece, I’d like to focus on the electric cars it produces. Why? Because these are the most interesting to me and I believe holds the most immediate realized potential for Tesla (Powerwall and battery tech I think is just not there yet and the Solar City acquisition didn’t bring much besides an interesting financing model for industry standard solar panels).

Before we begin to analyze the actual product, design, and strategy of the Tesla cars (Model S, Model X, Model 3), we need to first look at consumer desires, the history of the electric car, and how Tesla is iterating on the current electric car to achieve consumer goals.

First looking at a car in general, what does a consumer want? Well, first and foremost, transportation. A reliable way to get from point A to point B without breaking down. Next is speed. How fast you get somewhere if you’re in a rush is crucial. But also for non-utilitarian purposes, such as racing. But there’s a difference between a theoretical speed limit and legal speed limit, which is interesting to note (that’s a conversation for another day). Then you start to get into amenities, such as storage space, entertainment system, seat material, remote unlock, etc. One interesting thing to note is I never mentioned fuel source. At the end of the day, unless you are an environmentalist, who cares if you are burning gas or consuming electricity or something in between. As long as it’s relatively cheap and is convenient to get, why would a consumer really care?

So then that comes into the history of the electric car. Electric and hybrid cars have historically been marketed as a way to “save the planet” while saving money. Are you really saving the money (or the planet)? There are environmental risks to not recycling batteries properly. And, depending on your driving habits, you’re saving on average a few hundred dollars after paying a relatively large upfront cost. I believe there are cost savings long term with a hybrid but it’s not as much as people would expect. Which then leads me to Tesla’s products: it was never about the fuel economy or cost savings but about a great product.

Historically, Tesla started off with the Roadster. You might not remember this car but it was Tesla’s first production car that was more sports car than anything. It had cool, convertible stylings. It wasn’t subdued or practical like a Toyota Prius Hybrid. The Roadster was a marketing stunt for sure. But it was not a marketing stunt for an electric powered car. It was a marketing stunt for a sports car that happened to be powered by an electric motor and battery.

Next was the Model S and Model X. These were the classy, practical sisters to the Roadster. These were designed to compete with high end BMWs and Mercedes. They hit all the checkpoints of a fast and comfortable ride with extra amenities focussing on the experience, such as semi-autonomous driving (more on this “feature” later). Again, note how they focused on the customer experience. Going back to my previous point: who cares that this car could be powered for 200 miles by electricity? What people actually cared about was 0 to 60 time. People cared about the storage space (a regular trunk AND a frunk!). People cared about the infotainment system and how GOOD it actually was. People cared about the amazing safety features. It was genuinely a great car, regardless of the battery or not. People saw past the “boring and slow” stereotype of electric cars and saw this high end, elegant, and functional car.

Now, what’s the one caveat that I mentioned earlier about fuel sources? Cheap and convenient. Electricity in general has gasoline beat in price, that’s pretty clear to see. But convenience? That’s where I think Tesla is sorely lacking. They have a Supercharger network but it‘s not built out (yet). (Interestingly enough, there are no super chargers within 10 miles of me in Seattle) Which means charging is actually inconvenient because you can really only charge at home reliably. Or you must plan your roadtrip around Superchargers. I think this is where Tesla’s strategy (or lack thereof) is pretty abysmal. Long roadtrips? You probably need a second car.

See, Tesla’s strategy was never to sell a regular car with a battery in it. That would lead to the same product as a regular car but with a different fuel source. Tesla knew no one wanted to spend a lot of money upfront to save pennies on the dollar with electricity all while being inconvenienced. They knew they had to redesign a car from the ground up that was desirable, that people would suffer through all the inconveniences of the electric car for what they saw as an amazing machine.

This then leads me to Tesla’s strategy: the long con. They aren’t looking to build a Toyota Camry without a gas tank. The only thing they are truly taking inspiration from is the shape. Everything else under the hood, from the motor to the technology to the driving experience to the manufacturing is all changing. Have you ever noticed that they don’t release “years” anymore? You don’t hear about the 2016 Tesla Model S with features X, Y, Z. No, as soon as they complete a feature, they add it onto every new Tesla being produced. No need to wait a year cycle to get the newest car.

The Model 3 then becomes an interesting dynamic. On one hand, the starting price is $35,000, still out of reach for most average Americans. At that price point, it’s competing with the BMW 3 Series or the Mercedes C class. But is it really? On the surface, the base Model 3 is pretty barebones. But there are so many packages, like the enhanced autopilot. The Model 3 isn’t made to look like luxury. Which, when you think about it, doesn’t really make sense at the price point or for the inconveniences. Tesla also doesn’t market the heck out of low maintenance costs or fuel savings. So what’s the reason for the high price? (Pricing in general is all speculative and very hard to deconstruct but reveals a lot about strategy when you compare to competitor pricing)

I believe two. One is how unprofitable Tesla currently is. The initial estimates were break even cost of each Model 3 was about $40,000. I bet the break even cost is currently less due to economies of scale and the north star metric of 5000 units produced per week. But I think the price point is still at an “early adopter” price point. Both the car and battery manufacturing techniques are still very much under development and an integral part of Tesla’s competitive moat. It’s not easy to produce batteries let alone a well made car with batteries. Either way, there’s a bigger reason for a high price.

The car owning experience.

Just like Apple, the sum of the parts don’t really tell the whole story. It’s about the seamless experience, from the buying at the retail store to the software and hardware development to updates and maintenance. Tesla is taking a page out of Apple’s book and doesn’t prioritize marketing of the pure technical specs (although it does for cars like the Roadster or the performance package). Tesla markets the brand. Tesla markets the seamless experience. Tesla markets the whole package, from the lifestyle to the panoramic sunroofs to the advanced technology. Tesla markets the simplicity of everything working for the Model 3.

Do I think the strategy is working? We’ll just have to wait and see.

Tesla: Analysis of the company through the product was originally published in Thought For Tech on Medium, where people are continuing the conversation by highlighting and responding to this story.