Wiser! #84: Elon has got himself into a right old mess, entirely of his own making. The question: how does he get out of it. Plus, Amazon make a big move into Healthcare. And it's BigTech's BigNumbers season.
w/Issue #84 - 29th July 2022
Welcome, to the 13,771 smart people making sense of what's happening in today's tech economy.
You'll remember I just took 3 weeks out to go visit family and friends in the UK.
I did that...then got covid on the way back to Spain. 🤢 Which is why you didn't get a newsletter last week.
It's been my first bout of the dreaded lurgy and I don't like it. It wiped me out completely and I'm only just up on my feet. I'll return to full writing and researching on Monday and, all being well, a return to normal service next week.
Back to Wiser!
In this issue: I'm talking Elon (again), how he's lost against Twitter, and why he's going to be talking the stock up to minimise his loss. Bottom line: Elon's screwed!
Plus: Amazon makes a big move in US Healthcare.
- Me: "Hey Alexa, I feel sick, what should I do?"
- Alexa: "Hang on Prime member, let me put you straight through to our Amazon doctor."
And: it's quarterly earnings time for BigTech. 🤦
Finally: I learnt that 84% of the world's population is younger than me. Ouch!
Elon Has Lost Battle Over Twitter. Now It's Damage Limitation.
So, the big question is: what's it going to cost the world's so-called wealthiest man and the most prolific tech innovator of our generation?
Round 1 to Twitter
To Bot or Not To Bot? Musk’s claim is that Twitter wont give him the information he needs to answer the "bot question". Elon is claiming there are more bots and spam accounts than Twitter say are on the platform.
Which is odd because Twitter don't say how many bots and spam accounts are on the network. They just don't.
In other words, the "bot question" is complete BS from Elon.
But that's not the point.
Caveat Emptor: The point is that Elon should have thought about this BEFORE signing the unconditional binding offer to buy Twitter at $54.20 in cash. Now he’s claiming that he needs more time and data to do due diligence.
He's not going to get it after a judge in the Delaware Court of Chancery ordered a 5 day hearing for October.
"The claim that he (Musk) needs complex discovery is an invented issue." Twitter’s response to Musk in court.
Elon's real end-game is, of course, unknown. But right now, Twitter is not worth the $44 billion Elon's offered to buy it for. (Remember, he already owns 9%.) It's a bum deal however you look at it.
Over-exposed: IMHO, he wants out because he'd be over-exposed, and it could even be the undoing of Elon's empire.
According to SEC filings, Elon has raised around $13 billion in debt financing at a time of rising interest rates (i.e., the debt is more expensive now than it was 3 months ago when he raised it!).
Elon will raise the other $30 billion or so himself. Even for the world's so-called wealthiest man, this amount of cash isn't hidden under the mattress. Which means leveraging Tesla stock (which is already hugely over-inflated against the fundamentals of the car company).
So, The Big Question Is: What's it going to cost Elon to get out of this mess?
Short Answer: Most likely, whatever the difference is between $54.20 and the Twitter share price when he makes a get-out offer to the Twitter board. If you see Elon talking up Twitter, then this is his game plan.
And yes, if he pulls it off, it will be seen as market manipulation by the SEC. A road we've been down before with Elon. This is not his first rodeo, remember!
For a Longer Answer, Read This: I didn't have room in this newsletter for the long answer, so I wrote it here as a separate post on the website. 👇
Meanwhile, here's what Elon thought about all this in his Twitter playground....
How big IS the spambot and fake account problem on Twitter?
To find out: I ran a "fake account" audit on SparkToro for Elon's Twitter handle.
Reading the Signals: SparkToro looks at 25 different factors to determine a fake account score. It's a best guess based on a sample of 2,000. It's not a definitive count of the fake followers.
But it is hugely entertaining!
It's also different of counting to the way that Twitter do it. I explain how they do it in the long form article here.
- SparkToro put Musk's account at 70% fake (out of 100 million followers).
For comparison, an audit on my own Twitter account values the fake followers at 13%. (Out of c7,600 followers).
- Twitter posts $270 million quarterly loss. This is despite a 16% rise in monthly active users (or are they?).
- Twitter data breach exposes contact details for 5.4M accounts; on sale for $30k
- Tesla have sold 75% of its Bitcoin holdings for $938 million. It wasn't long ago that Elon Musk tweeted "Tesla will not be selling any Bitcoin" having spent $1.5 billion on the crypto early in 2021.
- Twitter has mounted its first legal challenge to the Indian government over official orders to take down content. At the request of the Modi government, Twitter (and Facebook) had previously been remove posts critical of the government's response to Covid.
Amazon Pushes Further Into US Healthcare
This week, Amazon announced the $3.9 billion purchase of One Medical, a subscription healthcare service with 3/4 million members and a network of walk-in clinics.
Is this the beginning of Amazon's National Health Service (free for Prime customers)?
Strategic: This is the first move in Healthcare by the new CEO, Andrew Jassy since taking over from Jeff Bezos a year ago. Amazon's Healthcare strategy started when they bought online pharmacy, PillPack in 2018. Amazon then went onto build Amazon Care to provide healthcare to its own staff and partner organisations.
Amazon's plans to buy One Medical for $3.9 billion takes the strategy one step further. One Medical are highly regarded chain of walk-in health clinics in the USA. They have around 750,000 members and went public in 2020.
What they have in service, quality and capability, they lack in scale. Which is where Amazon comes in; with 153 million Amazon Prime accounts in the US.
Amazon National Health Service: IMHO, expect to see Amazon create its own health service and roll it into Prime. It sounds crazy, but no more crazy than rolling in free, next day delivery did in 2005 when everyone was paying for a crap 5 day service! (Remember what it was like to order online before Amazon?)
- Big Tech Little Tech podcast discusses Amazon, Andy Jassy and Prime Day.
- Amazon to increase Prime Membership Fee by up to 43% in Europe
- Google does an Amazon, will let cops access Smart Home Video without a warrant
- Amazon generated more ad revenue in 2021 than the entire newspaper industry did globally.
Tech Stocks: Earnings and Performance
📈 Alphabet posted quarterly numbers largely as expected this week. Second quarter revenue was just short of $70 billion (up 13% YoY), with 81% coming from Google's ad business. So what? Well, last week's disappointing numbers from Snap and Twitter signalled the decline in the advertising business model. Maybe for everyone else, but seemingly not so for Alphabet.
📉 Meta reported its first ever YoY revenue decline due to slowing advertising spend. The world's largest social media network is in trouble and the forecast is to get worse, not better. As the Zuck attempts to turn the Facebook tanker into the Metaverse, the latest results show the virtual reality division lost $2.8 billion last quarter! Meanwhile, Facebook is copying TikTok even more and Mark Zuckerberg (and Sheryl Sandberg) will have to give a 6 hour deposition in a class-action lawsuit over Cambridge Analytic. Facebook's day of reckoning is coming!
📈 Microsoft missed its earnings expectations as it cited the growing strength in the US Dollar as a major reason. Revenue for the quarter was just below $52 billion, of which half is outside the USA, hence the negative currency impact.
Shares of Coinbase closed down more than 21% on SEC investigation. More trouble for the publicly listed US crypto exchange as it faces an SEC probe into whether the platform is offering unregistered securities. Problem is that the crypto is being tested against rules and definitions written before crypto was around. It's a time consuming and costly technical debate with no easy answer. Bad news for Coinbase!
- Google's plans to make Augmented Reality language translation a reality. Imagine this: putting on your Joe 90 Google Glasses and being able to speak castellano when in Madrid (I wish). If yes, then Google's latest project might be what we've been waiting for. Google plans to test its augmented reality glasses on Joe Public starting next month.
- Facebook's growth woes in India: too much nudity, not enough women. Basically, Indian women shun Facebook because it's seen to be too male dominated. These are the findings of a MetaFacebook internal study into why the social network is doing so poorly in India.
- Dubai’s new metaverse strategy aims to add $4bn to economy and create more than 40,000 jobs. Beyond the clickbait of the headline, the Dubai investment strategy also means embracing the new digital world of Web3.
- Reddit is launching an NFT avatar marketplace...alongside all other social networks and community platforms. I don't know how many times I have to keep saying this...NFTs are here to stay. Ignore the naysayers.
- How an NFT trader lost $150k trying to troll Twitter bots. Not a significant story in itself, but it serves to provide an "easy" to understand example of how these things work. Worth a read.
- The Senate voted to advance a $280B package of subsidies and research funding to boost US competitiveness in semiconductors and advanced technology. In other words, reduce the dependance on China for semi-conductors.
- Cryptocurrency and NFTs are a new kind of property, according to a consultation paper by the Law Commission of England and Wales. “Changing personal property law to cover crypto and NFTs could protect investors against losses through hacks and system failures”, the commission says.
- Three individuals were charged last week in the DOJ’s first-ever cryptocurrency insider trading tipping scheme case.
- US Senators are pushing a bill that would make cryptocurrency transactions of $50 tax-free. The bill would let people “use cryptocurrencies more easily as an everyday method of payment… like buying a cup of coffee,” said Senator Pat Toomey.
43,000: Deaths from vehicle crashes hit a 16 year high in the USA in 2021. According to the LA Times, almost 43,000 people died in a car crash last year. The blame? An increase in in-car distractions from apps via connected phones.
1,000: Shopify has laid off 1,000 staff. That's 10% of its global workforce. The reason? CEO Tobi Lütke says they made the "wrong bet" on a pandemic-fuelled growth in e-commerce.
w/Tips & Tricks
Some Interesting Stuff To Help You Out
🧮 Mostly Metrics
I read a lot of newsletters. When I say "read", I mean "skim".
But one of my always-reads, and I mean "read", is Mostly Metrics. I flipping love the way that CJ makes sense of numbers. (CJ, by the way, has agreed to be my new friend. I'm super happy with that and hope to post a discussion with him when I'm back up and running 100%.)
Mostly Metrics is a free weekly newsletter about financial metrics and business models. CJ talks to top VCs, tech operators, and financial analysts in their quest to discover what makes startups tick. I love it and think you will too.
🤖 Use AI Writing Tools To Do The Heavy Lifting
Do you ever need to summarise an interesting, long-form article without going through the effort of doing it yourself? Like, when your boss can't be arsed to read it themselves and they dump it on you to do it for them. Well, here's a hack you'll find useful (and one that I use myself).
Check out Quillbot's Summariser Tool. There's a free and a paid version and you have options to adjust how you want the summary presented for you.
📖 My Book Of The Week: Power Play
I've just started reading the story of Tesla in this best seller from Tim Higgins. To find out more, I've put together a short page with an affiliate* link to Amazon here.
📚 Read Refind. Get smarter every day.
Here's one for the super busy Wiser! reader, i.e., all of you.
Check out Refind. Every day Refind will pick 7 links from around the web specifically for you. And then email them to you in a short, easy to read (skim) format.
The more you use Refind, the more it will tailor the content to your interests. It must be good because it is read by over 50k curious minds.
⏱ How long will I live?
Ever pondered that question. Or, what's my place in the world population? Well, now you can find out with this website from World Data Lab. But be careful... you can't unlearn what you just learnt. I'm still coming to terms with the idea that 86% of the world's population is younger than me!
👐 Disclaimer: In this section you'll find various items that contain affiliate links. This means that I receive a small credit or commission at no extra costs to you if you go on to buy them. These commissions go towards the running costs of Wiser! #WinWinAllRound
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