so without further ado, here’s the final piece for 2022!

amapiano to the world 🎹

If your social media feeds are anything like mine, you’ve probably been flooded with “Spotify Wrapped” posts over the past week – a genius user-generated marketing campaign, where Spotify users are given an easy-to-share summary of what they’ve been listening to in the past year.

And while I wasn’t surprised to learn that Claude was in the top 0.01% of Drake listeners, or that amapiano star Kabza De Small dominated the South African charts… I was pleasantly surprised to notice a lot more amapiano featuring in my international friends’ Wrapped posts this year. 

It really got me thinking: Is 2022 finally the year that amapiano took off to the rest of the world? 🚀

Amapiano, the basics 🧱

Directly translated to “the pianos”, the South African born amapiano is best known for its iconic log drum sound and its viral dance challenges. But instead of wasting precious word count on breaking down the backstory, I’d recommend diving into the following:

• SHAYA! - A short documentary that does a great job of recognising the roots of amapiano.

• This is Amapiano - A short BBC documentary about the rise of the sound.

• What Business Can Learn from Amapiano - An article I once wrote for a few publications… and upon doing research for this piece, I discovered that DJ Maphorisa himself tweeted it too! 😂

Self-plugs aside, I want to take a slightly different angle this time around: What are some of the factors that have contributed to amapiano’s ability to scale globally?

The secret sauce? 🥫

Not everything is rocket science. Amapiano’s success has been built upon a solid foundation:

• 👍 A good product: Of course, the precursor to being able to scale anything is actually having a good product / service (with clear differentiation) to start with. Amapiano, generally speaking, ticks both boxes - the bar for production quality is high (thanks to a competitive local landscape) and the music definitely has a unique sound. 

• 🥵 Work ethic: The artists themselves have been relentless too. Whether it’s the sheer volume of singles and albums being released (something new basically drops every damn Friday), or the kind of international touring schedules that’d have SARS sniffing around… there’s a clear hunger and desire to push the movement to new heights.

• 📂 Access: And of course, we now have access to platforms like Spotify and Apple Music which make music discovery and consumption so much easier. Let’s give credit where it’s due.

But in my opinion, amapiano’s scalability has been amplified by a few key marketing principles…

1. Build with / for Gen Z 👶

• 📲 Channels and content: Short-form video platforms (TikTok, Instagram Reels and YouTube Shorts) are enabling the active participation of Gen Zs to craft the culture. With over 5.7 billion views on the hashtag #amapiano on TikTok, we’ve seen heaps of viral dance challenges accompany some of the biggest songs (see #UmlandoChallenge with over 320 million views). Naturally, artists have taken notice and have started producing songs with TikTok and dance challenges in mind.

• ✨ Representation: Gen Zs are at the forefront of the movement. Teenagers like Uncle Vinny are leading with the dance moves and dictating what’s cool and what’s not. And in historically male-dominated space, many of the most relevant DJs in the game are women: See Uncle Waffles (who Drake happens to be a big fan of) and DBN Gogo.

2. Create the platform, ride the wave 🌊

• 🚪 Opening doors: Kabza De Small and DJ Maphorisa (arguably the 2x biggest names in the game) have shared their platform and launched the careers of many young artists through features and co-production.

• 🔌 The plugs: Major League DJz (the former hip-hop DJ duo) had one of the smartest pivots during the COVID pandemic. The duo had the vision to take a bet on amapiano, and used their (now popular) YouTube channel to livestream a series of Balcony Mixes, featuring some of South Africa’s biggest amapiano DJs and producers. They’ve since taken Balcony Mixes to a host of different countries and have subsequently become synonymous with amapiano.

3. If you want to go far, go together 🤝

• 🇳🇬 x 🇿🇦: Instead of hogging amapiano for South African artists only, artists like Kabza de Small, DJ Maphorisa and Focalistic have famously collaborated with 🇳🇬 afrobeats global superstars like Wizkid, Burna Boy and Davido - a power move, which has no doubt accelerated amapiano’s global appeal.

Lessons? 🤓

Naturally, from a business perspective, I think there’s a host of transferable lessons to be learnt. If you’re looking to scale a product or service, here’s a few amapiano-inspired thought starters to chew on:

• Am I building for (and with) Gen Zs? Gen Z makes up ⅓ of the world’s population, and 25% of Gen Zs will be in Africa by 2030. The sustainability of your product / service is on the line.

• Who / what are the enabling platforms in my ecosystem? If they don’t exist, how can I become one? The power of the network effect cannot be underestimated.

• How can I strategically collaborate / partner to reach a broader audience? Joining forces can often get you there faster.

What’s clear is that amapiano is bigger than any one individual. It’s a movement, and it’s taking over the globe.

That’s all for this year. See you in 2023. 👋🏽

sash

matt’s in awe of opeai’s new gpt-3 chatbot

sash found fnb’s black friday analysis interesting - despite turbulent times, consumer spend boomed!

can we reinvent sport? ⛳️

A lot continues to happen in this crazy world of ours. The unravelling of Sam Bankman-Fried’s FTX may pose a systemic risk to cryptocurrency, Elizabeth Homes was sentenced to 11 years in prison for her Theranos fraud and Disney bought Bob Iger back in as CEO for another ride (of a lifetime).

In other news, the long-awaited (and much storied) FIFA World Cup kicked off in Qatar this week. Much has been made of the host in the run up, largely characterised by controversy that spans from banned beer sales to human rights violations. But this isn’t the Middle East’s first foray into the world of sports.

Been there, done that… 🤑

The regions increasing engagement with, and investment in, global sport has been a theme over the last few decades:

• Cities in the Arabian Gulf, like Abu Dhabi, Saudi Arabia and Bahrain, have become regular destinations in the Formula 1 Grand Prix circuit.

• Sovereign wealth funds of Middle Eastern nations have acquired and propelled major European football clubs like Manchester City, Paris Saint Germain and, more recently, Newcastle United.

• Even so, you’d be hard pressed to watch a sports fixture without seeing Etihad or Qatar Airways splashed across a kit, pitch-side advertising board or even a stadium’s shell.

And now they’re looking to have their fingers in more proverbial sporting pies.

Enter LIV Golf… ⛳️

Bankrolled by Saudi Arabia’s sovereign wealth fund, Public Investment Fund, LIV Golf has emerged as an unlikely disruptor in the sport. With backing to the tune of $2 billion, the nascent tour has lured a handful of the top players from the PGA Tour and aims to put a spin on the gentleman’s game.

What’s so different? 👐

🗣 Golf, but louder: A greater emphasis is placed on entertainment rather than etiquette, with live music and activities for fans. Fans can interact with players more closely during the round,

🍬 Short and sweet: Shortened to 3 rounds (instead of 4) and kicking off with shotgun start, the total time of the round and the weekend is shorter. LIV Golf is also just a 14 event-long season, as compared to the nearly 50 played in the PGA. By compressing the viewing time, they’re increasing the entertainment density and addressing the concerns of most of golf’s detractors.

🌍 Globetrotting: While there are golf tours across the different continents, the PGA Tour is largely based in the US. LIV Golf plans to host events across the US, Europe, Asia and Australasia in the upcoming year.

👬 Pick a side: Golf has long been a sport of one. Golf fans have an appetite for team formats, best illustrated in the Ryder Cup, and the introduction of franchises may help coax some new fans and drive commercial value.

You can put lipstick on golf… 💄

… but it’s still golf. Of late, a handful of sporting leagues have tried to reinvent themselves, as a means of appealing to a broader audience and keeping their loyalists engaged. Both T20 cricket and Sevens rugby were short-format versions of their forefathers, but LIV Golf hasn’t been met with quite the same enthusiasm.

While the first few events showed promise, events in the middle of their season attracted less than 50% of the viewers that tuned in initially. Even so, LIV’s final-round coverage has repeatedly struggled to reach half that of the PGA Tour’s average. Marred by claims of “sport-washing” and a controversial image, LIV has battled to secure a large pool of advertisers. But most concerning has been their inability to nail down a TV rights deal, which is the lifeblood of most sporting leagues, and is responsible for 41% of the PGA Tours total revenue.

Build it and they will come… 🧱

But to merely pass it off as a short-form version of a niche sport with big paychecks and some loud music is reductive, and glosses over LIV’s unique value proposition: teams (and their role as a driver of asset value).

The introduction of teams to golf may prompt the development of the tribalism that is so potent in the Premier League, NFL and IPL alike. And while the emotional pull of such may draw in viewers, it’s the commercial value that may come to be the lifeblood of the incipient LIV Golf.

📈 Teams are assets: Creating teams creates value beyond the individuals. Imagine the commercial value of a team of Dustin Johnson, and just how much brands would pay to be associated with their team. As an example, each NBA franchise is now worth in excess of $1 billion. 

👕 Merchandising and licensing deals: Teams allow for the sale of merchandise to adoring fans, and the auctioning of rights for licensing deals. This introduces new  revenue streams to the sport.

🎰Fantasy and betting layer: Many betting companies have leveraged team sports to introduced gamified versions of betting through fantasy teams. IPL’s Dream11 is the perfect example. 

A word on disruption…

In a roundabout way, I actually wanted to speak to disruption that occurs in an orthogonal industry, to offer an illustration that falls out of the oft-referenced tech industry. Any progress, be it in [X] or [Y], can be viewed as a marginal improvement or one of more radical gains; in a more binary sense, they can be viewed as sustaining or disruptive innovations.

But is LIV, and other similar efforts, just a sustaining innovation or one that is truly disruptive?

Most new forms or iterations foster improved product performance of incremental nature, continuing on the past product’s performance trajectory. As is with the iPhone, the minor improvements of the camera or introduction of the dynamic island we see in the new model are sustaining innovations along a well-trodden performance trajectory.

Disruptive technologies or innovations bring a very different value proposition to the market, and may even result in worse product performance, at least in the near term. Owing to the inertia of incumbents and nature of the adoption curve, disruptive innovations are also typically embraced by the least profitable customers in the market, but they create a new performance trajectory. And if you’re in search of an example, Netflix’s The Playlist chronicles just how Spotify was a market-creating, disruptive product that targeted the least profitable users, eventually redefining a seemingly untouchable music industry.

Time will tell in deciding where exactly LIV Golf falls, but should they be able to dance around the legalese of the PGA and escape the ethical entanglements of their funders, they may just be onto something.

matt

matt found this piece interesting, which looks at an etf that tracks the inverse performance of cathie wood’s ark (and is up 110%)

sash enjoyed listening to lex fridman’s interview with chamath palihapitiya (thanks to an intro from claude)

quantum safety ⚛️

In South Ah’, the words “quantum” and “safety” are not typically used within the same sentence 😅, but as you probably guessed, we’re not referring to that Quantum. Rather, we’re talking about quantum computing and the implications it could have on cryptography and the safety of our communication channels and data.

According to the European Telecommunications Standards Institute (ETSI), “quantum-safe cryptography refers to efforts to identify algorithms that are resistant to attacks by both classical and quantum computers, to keep information assets secure even after a large-scale quantum computer has been built”.

Cryptography, the basics ⛹🏽‍♀️

Cryptography is the practice and study of techniques for secure communication in the presence of adversarial behaviour. When you send a text message or make a purchase online, information such as the content of the message or card details are kept safe in transit via encryption.

Traditionally cryptography refers to a sender (Alice 👩🏾‍⚕️) applying “encryption” to convert legible information (plaintext) into an unintelligible form (cipher-text), and the intended recipient (Bob 👷🏼‍♂️) applying “decryption” to convert the cipher-text back to plaintext.

Any unintended recipient (Eve 🦹🏾‍♀️) cannot decrypt the cipher-text because they do not have the required decryption key.

There are two types of encryption:

• 👬  Symmetric encryption: In this flavour of encryption, one key (a secret key) is used to both encrypt and decrypt data.

• 👨‍👦 Asymmetric encryption: In this case two different, but mathematically related keys are used.

Irrespective of the type, the security of cryptography rests upon “hard” mathematical problems that are practical to solve with the right cryptographic key, but impractical to solve without it given current available computational power.

A hard problem in this context means that it would take a modern (classical) computer millions of years to solve… at which time the information that you are trying to encrypt is likely no longer relevant.

Enter quantum computers 💻

Quantum computing is a largely (for now) theoretical paradigm of computing that uses phenomena in quantum physics to create new ways of computing.

While in classical computing, data is stored as sequences of bits which can each store either a binary 0 or 1, quantum computing makes use of quantum bits (qubits) which have the property that they can be in a superposition of 0 and 1 simultaneously until its state is measured, effectively storing multiple values at once.

While this is all very abstract, the main take home is that this property theoretically gives them a huge speed advantage over classical computers and algorithms for certain problems. This so-called “quantum advantage” means that quantum computers can perform some tasks exponentially faster than classical computers.

The threat of quantum computing on cryptography ☣️

The issue of quantum safety arises because many of the “hard” mathematical problems on which current day cryptography relies are “easy” problems to a theoretical quantum computer.

Where it takes a classical computer millions of years to solve, a quantum computer could solve the problems in a matter of hours or days. Therefore, anyone in possession of a sufficiently powerful quantum computer would effectively be able to decrypt all the current information being transmitted and stored with non  “post-quantum resistant” encryption methods. 😱

What needs to be upgraded? 🏗️

As Andreas Baumhof from Quantum technologies points out, pretty much everything. 😮 In the information age, we use encryption for most everything. 

To list but a few:

• All connections of devices to the internet are facilitated using cryptography via protocols such as HTTPS, OpenVPN = vulnerable. 

• All encrypted data stored in databases = vulnerable.

• All applications that communicate with the cloud via protocols like SSL/TLS that rely on asymmetric cryptography = vulnerable. 

• Cryptocurrencies also rely on cryptography = vulnerable. 

How long do we have? ⏳

In a 2020 report titled: “The Next Tech Revolution: Quantum Computing”, McKinsey highlights that quantum computing is just starting, but predicted that quantum machines will not be able to factor significant prime numbers (in the hundreds of thousands of digits long - like those used in today’s “hard” encryption problems) until the very late 2020s at the earliest.

What is being done? 🩹

Some good news is that standards bodies as well as researchers are working to mitigate the threat.

Since 2015, the US National Institute of Technology (NIST) has been researching new encryption algorithms to replace the current ones that can be broken by quantum computers. In July 2022, they announced the first four quantum-resistant cryptographic algorithms for standardisation.

The NIST hopes to publish the standardisation documents by 2024, but may speed up the process if there are major breakthroughs in quantum computing.

The outlook 🔭

After the release of the new standards, companies within the industry need to be pushed to implement these new post-quantum resistant encryption algorithms. This will likely require huge technical, operational and social work, making for a very open-ended scenario.

• Protocols and companies that are not upgraded to post-quantum resistant algorithms will be vulnerable and we will likely see data theft and leaks from this new attack vector.

• The new algorithms might vary with how performant they are, which could significantly change the user experience of the internet.

Ultimately, the consensus is that quantum computing is going to be a reality. Research and Big Tech investment is ramping up quickly, with IBM, Google, Microsoft and Amazon (to name a few) all having ambitious roadmaps in the space. And while general-purpose quantum computers are not yet a reality, we still have some time to brace ourselves.

claude

if you’re a football fan, sash recommends watching “fifa uncovered” - a new documentary series on netflix

matt was interested to read about amazon’s new telehealth service

on cloud 9 ☁️

You open up your favourite app (yes, we know it’s Tinder 😉), your data is fetched from “the cloud” and your profile loads in about a second. You’re able to swipe left on an almost infinite supply of people who just aren’t quite “good enough for me”. This all works because, “the internet”. I’m sure you’ve asked yourself, “how does the internet actually work?” Better yet, “what is the internet?” 🤔

One big family 👪

The internet is just a bunch of computers that are all connected together. Data travels from computer to computer until it reaches the computer holding the information you requested. For example, Google owns a set of computers in America that run their software. When you Google, “how to impress my crush”, a bunch of data is shuttled across the world to those computers. It goes from your computer to your router (which is a computer), from your router to your internet provider’s (e.g Afrihost) computers and from there, all the way to America. There are underwater cables that connect the world together. That’s how your data travels from South Africa to America. Submarine Cable Map has a graphic showing the world’s fibre cabling -- it’s impressive.

Finally, Google’s computers receive that data, run some algorithms to determine the results and shuttle that data all the way back to your computer.

It’s “in the cloud” 🌩️

You may have heard companies say, “your data is stored in the cloud” or that Netflix “streams movies from the cloud”. For most people (like my mom), that just means the data is in the sky somewhere. As magical as it sounds, the cloud isn’t all that complicated to understand.

First, we need some context. In the ancient times of the world wide web (which is only ~30 years old), if a company wanted to create an internet-based product, they had to buy their own computers and connect them to the internet themselves. Fast forward ~20 odd years and the picture looks very different. Most companies don’t own the computers on which they run their software, they rent them from someone else. We call them “cloud providers”. They buy loads of computers, connect them to the internet and provide ways for companies to run their own software on those computers. That’s all the cloud is: a bunch of computers operated by one company for rental to other companies.

Why is it a big deal? 🤷

Computers that run company software have huge amounts of computing power. Most companies don’t run software that needs to use all that computing power, they can run their software on a portion of it. In tech we say, “it needs a portion of the computer’s resources”. That means we can run many different companies’ software on just one computer. It’s as if we’ve sliced the computer into parts and given each company a portion of the parts.

How much money do companies make renting “slices of computers”? A lot. Remember I said Amazon is a cloud provider? They have a cloud computing unit called Amazon Web Services (AWS). They are the largest cloud provider, owning ~33% of the market. This translates to $63 billion in total revenue and $18.5 billion in profit in 2021. For comparison, Amazon as a whole (including AWS) made ~$25 billion in profit meaning that AWS contributed 74% of their total profit. This is more impressive given that the rest of Amazon made ~$407 billion in revenue (about 6 times the amount AWS generates) yet only contributed 26% to the total profit. If there’s ever been a business that “prints money”, it's cloud computing.

Opening the floodgates 🌊

The true innovation of the cloud is not renting computers, it’s actually the consumption model. For the most part, you’re billed using a “pay as you go” model -- you only pay for the computing resources you use i.e the size of the slice of the computer you use and the duration you use it for. For example, to rent the cheapest “slice of a computer” from AWS costs $0.0042 (R0,072) per hour. If you only use it for 1 day in a month, you pay 0.0042 x 24 hours = ~$0.1 (R1.72) for the month. Ridiculous right? All of a sudden, starting a company that builds internet-based products became much more affordable. You don’t have to buy a couple of high-end computers (we’re talking hundreds of thousands to millions of rands), figure out how to connect them to the internet and maintain and replace them. Instead, you can just rent exactly what you need from a cloud provider and pay only for those resources. You can build a whole company off a few hundred dollars. We’ve opened the floodgates; there’s never been a better time to start a software company.

The future of the cloud 🔮

The cloud is still in its early days. AWS launched only 16 years ago in 2006. There’s still plenty of work to be done in improving the ease of use and functionality of the cloud. There are hundreds of products and platforms all aiming to improve the cloud. While this won’t directly affect us as consumers, it does mean more people will start software companies. Who doesn’t want more versions of Netflix and BeReal? You never know, maybe you’ll start the next Tinder, find love and stop having to swipe right 👩‍❤️‍👨.

senyo

senyo has been reading a book called scarcity, which discusses how humans behave when they have reduced access to resources: time, money, food, etc.

matt loved this pod with roelof botha, a sequoia partner (and south african too) 

sash enjoyed this wsj pod on how crypto giant ftx suddenly imploded

karl enjoyed this bestie episode with the ceo of coinbase, they broke down the current ftx situation

draw a(i)nything 🤖

AI landscape 🗺

We’ve looked at artificial intelligence (AI) through many lenses on UC, from its use in the healthcare space in vol. 4 & 20, to TikTok’s dominant AI algorithms in vol. 43 & 53 - to name a few. The recent unicorn status of Stability AI and Jasper at the seed and series A stage have suggested that the sector is pushing against the grain in the current macroeconomic climate, begging for a deeper look. 

As seen in the State of AI Report 2022, the global economic downturn has affected the startup industry as a whole with an expected 24% decrease in YoY funding. This is seen in the AI space as well, with private AI companies expected to raise 36% less money in 2022 vs last year but still more than in 2020.

As shown above, AI startup funding is expected to hit $71b this year. The space has been growing rapidly -  Sequoia recently broke the landscape down into a few key segments that sparked my interest, primarily:

• 🔠 Text & Code 💻

  • Think AI generated blog posts, product descriptions, thesis papers, excel, and a whole lot more basically all written for (with) you.

  • These are created off the back of large language models like OpenAI’s GPT-3, a 175 billion-parameter model that can generate text and even code given a short prompt containing instructions.

  • E.g., Copy.ai helps with any kind of writing, so does Jasper - the Series A unicorn that just raised $125m, and Debuild helps you build your website with little to no code. 

• 📸 Image & Video 📽

  • Think text-to-image or video, with AI generating images that match your description, editing images by changing the style or adding elements (be it a new car or girlfriend) to the image all with a text prompt. 

  • Let’s take it further, think about asking the AI to ‘complete’ a partial image based on what its database of over 650 million images would consider the best match, as Trevor Noah did with the CTO of Open AI a fortnight ago. 

  • E.g., Meta’s Make-A-Scene of both image and video content, OpenAI’s DALL-E 2 elaborated on below, Midjourney, and Google’s Imagen, among many others. 

Text-to-image… but how? 🤔

Accepting that we’ll likely get lost in the weeds, this video breaks DALLE-2’s operating system down pretty well. Essentially: text input, AI works, amazing image (or video) is outputted. Job done. 

Diving deeper, there are a few factors at play here:

• Contrastive Language Image Pre-training - Clip ♲

  • A neural network that efficiently learns visual concepts from natural language supervision by doing two things simultaneously:

    • 1️⃣ Training a natural language model - looks at text descriptions and associates this with an image.

    • 2️⃣ Training an image classification model - looks at an image and describes it in a way humans can understand.

• Diffusion 📺

  • Diffusion models train by adding noise (think static noise on a tv) to images until the image is unrecognisable. From there the model works backward to remove the noise and regenerate a similar and realistic image. By doing this, the models learn how to construct images.

  • Glide: an additional diffusion model that adds a text prompt to the above diffusion process bolstering the accuracy of results.

• Aesthetic quality evaluations 😍

  • Basically mimicking human preferences. Another place where biases come into the model. The model is trained to predict human aesthetic judgement based on different artistic datasets.

All these factors work together to produce the most relevant match to your text input. Let’s pretend to understand it. 🤷🏽‍♂️

Progress 📈

The two rows of images below were processed based on the exact same text input a year apart, one on DALL-E (from early 2021) and the other on DALL-E 2 / unCLIP (from mid 2022). The difference in detail is mind-blowing. It depicts the impact of CLIP and the diffusion model in the bottom row. For consistent updates in the space see bleedingedge.ai.

Implications 🚩

Imagine talking to someone who learned the wrong word for something and never had anyone correct them. This is how existing biases are built into these models and reinforced. For that to change, datasets need to become more inclusive. Issues are often seen with gender and race-biassed professional representations as mentioned in vol. 4 where I looked at how AI has tackled the HealthTech space. 

Beyond this, additional guardrails have been put in place to avoid certain outcomes, attempting to prevent disinformation and the spread of harmful content with ethical ramifications. Furthermore, copyright liabilities and usage rights concerns have been a huge topic with artists feeling their jobs and art forms are in jeopardy. Claude discussed this in vol. 52.

The future 🔮

We’ve been here before, people criticised T-Pain when he popularised auto-tune, claiming it was the end of music as we knew it. It wasn’t. Rather, a new era with new musicians arising and empowered by this new technology. AI is largely the same. With a much larger impact and a few more billions behind in support.

With the rapid pace of growth, and far and wide-reaching impact, the onus is on us as a society in how we shape and use AI. One thing is for certain though, it’s here to stay.

karl

karl thinks this video is a good primer for today’s piece

matt just finished reading a classic - the ride of a lifetime by bob iger

sash was surprised to learn that twitter is hiring - yes, you read that correctly

the padel boom 🏓

Damn. A lot has happened in the past week. Elon Musk finally bought Twitter; Big Tech (led by META) sent shockwaves through the global economy after releasing underwhelming Q3 earnings updates; Rishi Sunak relieved the lettuce of duty and became the new British Prime Minister; and heck, even Sandton was on edge about a potential terror attack. 

Inhale… exhale. 🥵

And in an even bigger update, thanks to a severe case of FOMO, I finally caved and tried the one thing people just can’t stop talking about… padel. 

So what’s this padel thing? 🤔

If you’ve driven through Joburg or Cape Town in the past few months, you’ve probably noticed a bunch of these tennis-meets-squash-kinda-looking courts popping up all over the place. Well no, it’s neither of the two – it’s padel.

• 🇲🇽 A Mexican businessman, Enrique Corcuera, founded the sport in 1969. The story goes that he didn’t have enough space to build a full-size tennis court at his holiday home… and the rest is history.

• 🎾 With elements of tennis, squash and badminton, it’s (dare I say) quite an easy game to learn how to play. Here’s a quick breakdown of the rules.

• 👯‍♂️ It’s almost always played in doubles, creating a really fun and social experience.

• 🏓 While the courts are 25% smaller than tennis courts, the racket and balls are also completely unique to the sport.

But despite being over 50 years old, padel has experienced a sharp rise to prominence in the last few years…

The boom 🚀

In the midst of the COVID pandemic, the Italian government identified padel as one of the safest sporting activities for its people to play. What soon ensued, like in other European countries, was a period of rapid growth.

A few stats to chew on:

• 📈 Over 25 million people play padel in over 90 countries around the world.

• 🇪🇸 There are over 6 million active padel players in Spain and more than 20,000 padel courts, making it the second most popular sport in Spain behind football.

• 📺 The 2021 World Padel Tour’s official YouTube channel recorded an average of 2.3 million live viewers per tournament (up 43% from 2020).

• 💰 The padel equipment market is forecasted to reach ~$337 million by 2028, with a CAGR of 8.1% (2022-2028).

The entry into (South) Africa 🌍

South Africa appears to be the first place on the continent where padel is establishing itself before expanding further north. Consumer demand is noticeably increasing, and new facilities are being opened at a rapid rate.

There are currently a handful of significant players in the 🇿🇦 market:

• 🏆 Primary player: Africa Padel - a South African-Swedish business consortium, aggressively investing in courts across the country. 

• 🌱 Smaller player(s): Epic Padel; Padel Tennis; Action Padel (to name a few).

• 🆕 Newcomers: Virgin Active (the dark horse) - the famous chain of health and fitness centres recently announced its plans to open its own padel clubs around the country.

But what about the 💰? 

• 💵 Upfront capital investment: 

  • 🧱 Assuming you already own land, I’ve heard via the grapevine that 1x turf court can cost in the range of R800,000 - R1 million to build.

• 🤑 Revenue streams:

  • 🎟 Booking fees: Depending on the location, a 1 hour game will currently set you back anything between R300-R600.

  • 🛍 Retail: Most of the facilities rent and sell the necessary equipment.

  • 🍻 The entertainment experience: The facilities are (naturally) also becoming spectator hotspots and the preferred setting for post-game food and drinks.

But irrespective of where you choose to play, there’s one thing that’s constant across them all…

The booking app 📲

With around 1 million monthly active users, Playtomic (in my opinion) is the real winner in the padel boom. In its own words: 

“Playtomic is the largest and fastest-growing community of racket sport players in the world.”

Some of its features:

• 🎮 Gamification: The app automatically builds you a player profile and ranks you based on your results.

• 🤩 Social: The app allows you to find players (with a similar ranking) to play against / with.

• 🎟 Centralised booking: You can book across most facilities, and filter for what’s closest or what’s available. Naturally, you’re charged a % fee per booking, and you can also choose to upgrade to a premium plan.

For example, the only way to book at Africa Padel is through the Playtomic app. You’re effectively locked in… but from a user POV, it just makes sense.

Future looking 🔮

Here’s 2x of my hot takes:

• 1️⃣ Scale: With incumbents actively building more courts across the country, it’s only a matter of time before we see the same across the rest of the continent. And with the likes of Virgin Active entering the space, the barriers to entry (initial capital costs and individual booking prices) should also decrease with time.

• 2️⃣ Franchises: We’ve seen the recent Major League Pickleball boom, and the likes of LeBron James and Tom Brady investing in teams. I wouldn’t be surprised if padel follows a similar route, and grows in popularity as a spectator sport.

What’s clear is that padel is on the rise. The question is: who’s going to benefit from the boom?

I’ll be watching closely. 🍿

sash

sash enjoyed listening to the wsj’s pod about the rise of pickleball in usa

if you’re looking for a book recommendation, matt can’t stop talking about the innovator’s dilemma

karl is looking forward to the november conference season on the african tech space, here's a breakdown on all the events

who ordered the azul? 🌵

It feels as if the only real constant in this “new normal” is chaos, and it seems there is no clear off-ramp in sight. Fed rate hikes have caused mayhem in financial markets, as the world battles to keep a top on the previously transient, and now runaway, inflation. After almost pushing the bond market over the edge, and then reneging on her tax-cut plan, UK Prime Minister Liz Truss resigned just 45 days after taking office. Anticipatory belt-tightening has seen hiring freezes and job cuts across a once-immune Big Tech, with Google, Meta and Microsoft all affected. Hell, even Netflix finally introduced their lower-priced, ad-supported tier. It’s no wonder Bloomberg is projecting a 100% chance of a recession in the next twelve months (and this manages to gloss over the ever-present threat of nuclear war).

I need a drink 🥵

Vices are often perceived as crisis-proof, and alcohol is no different. As is often remarked: when the times are good, people drink and when the times are bad, they drink more. But the more interesting subplot in this, at least to me, is the rise of tequila (and the new faces that have come to cash-in on its growing popularity).

Humble beginnings 🇲🇽

Named after the small Mexican town from which it was born, tequila is a distilled liquor that is produced from cooking and then fermenting a cactus-like perennial succulent called agave. Deemed sacred by the Aztecs, its cultural significance is rooted in its use for everything from food and shelter, to clothing and religious ceremonies. Agave-based distillates, which include both tequila and mezcal, soon found an export market in the form of the United States, and from there it has trickled its way into bar menus and onto drinks trolleys across the globe.

Nowadays… 👀

…the cultural importance of tequila may have been diluted by the more prominent part it plays in fuelling the uncouth behaviour of spring breakers, but its economic significance is hard to ignore. Today, the tequila industry is worth $10 billion, a number which is projected to double in the next 10 years. A large proportion of their CAGR is derived from tequila managing to grab market share from other spirits like whiskey and vodka; by next year, estimates suggest that tequila will surpass vodka as the most consumed spirit in the US.

Why the thirst for tequila? 🧐

A few tailwinds:

🌍 Shifting consumer demand: The pandemic held consumers captive in their living rooms, which underpinned a shift towards mixing their own cocktails and sipping premium liquors. Aided by an e-commerce boom, global sales of tequila (and vodka and liqueurs) have outperformed the broader alcohol market since the pandemic.

🍏 Heed to health: Although none would be better than some, 100% agave tequila is gluten free, low in calories and has fewer fermentation products (leading to improved hangovers)

👐 A broader market appeal: Data suggests that tequila consumptions spans age, gender, culture and occasion, providing a larger market when compared to most spirits.

And then there’s the celebrity angle… 😎

While it’s difficult to know whether they would be the chicken or the egg in this instance, they are most definitely in the pen. The brand power of celebrities has long been used by the alcohol industry, but it's evident that the stars have realised they can bypass any intermediaries by creating their own brands, and then using their untapped distribution channels for gaining market share. 

For tequila, Kendall Jenner serves as the poster girl for celebrity-owned brands, with 818 emerging as the best-selling new tequila of 2021 and a handful of awards to match. Others like The Rock, George Clooney and LeBron James have seized the opportunity to monetise their brand value in the tequila trade. 

Yet tequila is but an example of the rise of celebrity entrepreneurship we’ve witnessed unfold over the last decade. As opposed to merely endorsing products, household names have spun out their own brands, using their capital and selling power, to start successful ventures. Kim K’s Skims and Kylie’s eponymous cosmetic brands are both valued over $1 billion, Tom Brady followed in MJ’s steps and launched his own apparel brand, and Ryan Reynolds and Drake push their own liquor brands. From a consumer goods perspective, we could probably explain the utility of star power in three points:

• ⬇️ Lower customer acquisition cost: Having already amassed followings, and developed trust, the marketing costs are exponentially lower than most.   

• 📈 Increased retention: A sense of aligned beliefs and an adoration for the star, customer retention remains higher when compared to ordinary brands, and in doing so, increased lifetime value of the customer. 

• 🚀 Network flywheel: Passionate members of the community drive engagement and support customer growth.

In saying all this, a new type of celebrity is emerging: the influencer. And the case study of influencers-cum-entreprenuers offers a fascinating take on the value of creating distribution channels, and then offering products. Stay tuned for a deeper dive into that.

matt

karl binged the makings of the swedish giant, spotify, on netflix’s new show: playlist

sash is keeping an eye on gas - the app taking american high schools by storm

on newsletters 💌

$17.9 billion. That’s how much the email marketing industry is predicted to be worth by 2027. Top newsletters like Morningbrew, The Hustle, and The Marginalian reach millions of people each week, delivering news and content about business, lifestyle, culture, productivity, and literature.

These newsletters monetise by selling you access to private content, memberships, event passes, merchandise, and more. The better known newsletters like Stratechery (tech), The Ken (Indian startups, tech, and health), and the Everything Newsletter (productivity, strategy, business, and culture) monetise directly through subscriptions.

People want to start (and read) newsletters, and software companies have rushed in to serve that demand. Platforms like Substack, Ghost, and Beehiiv have sprung up over the past few years, each offering a different value prop for those wishing to launch their own publications.

Substack allows you to write for free and takes a cut of any subscriptions you charge. Ghost and Beehiiv charge you a flat monthly fee and let you keep all your subscription revenue. Revue is free and tied to your Twitter account, making it easy to grow a newsletter readership in sync with your social media following.

But what does all this mean within the South African context — especially for students, creators, and young professionals?

Why you should write a newsletter: 3 key benefits ✍🏽

We’ve all heard stories of people rising to 20k followers on Twitter or Instagram and getting suspended. This might even be your story.

Social media platforms can suspend you at any time, but you’ll always own your email list. A newsletter is ideal for anyone who wants to build an engaged, long-term relationship with their audience that can’t be taken away on a whim.

Your newsletters don’t need to be long, either. You can share short daily notes, weekly updates, or monthly roundups. Publishing a regular newsletter unlocks three key benefits:

1. Advance your career

2. Grow your business

3. Increase your luck

#1 Advance your career 💼

With unemployment in SA projected at 33.8% in 2023, jobs are notoriously scarce. A newsletter can advance your professional career faster than your peers.

For example, when a mid-career engineer launches a product and packaging newsletter, she attracts the attention of recruiters in her space. Her writing helps her stand out in a sea of sameness and prove to hiring managers she knows her stuff.

Being able to write your way into a new job is especially helpful to university graduates who may not have much experience.

A newsletter shows hiring managers you’ve built up useful, transferable skills at school: research, writing, editing, publishing, and marketing.

#2 Grow your business 💰

A newsletter isn’t just a vanity project — it can help you launch and grow a profitable business. 

Retailers make money sending you shopping deals and Black Friday promotions via email. (Here’s a detailed look at just how much effort big brands put into email marketing.) 64% of small businesses currently use email marketing to reach customers, and over half (57%) of them plan to increase their investment in email marketing.

If you’re running your own startup or freelance practice, a newsletter is an excellent way to attract clients and boost your bottom line. This strategy works especially well for B2B businesses. By writing a newsletter around the main problem your business solves (e.g., corporate accounting, product management, or DevOps), you build credibility around your brand and offerings — and make people more likely to buy from you.

Sometimes the newsletter is the business — just ask Ben Thompson of Stratechery who banks north of $3 million a year from his subscription-based tech newsletter. And there are many other such ways to monetise your newsletter.

#3 Increase your luck ✨

No one is ‘self-made’ — we all caught a lucky break from the right person(s) at the right time and place.

Luck is defined as ‘a force that causes things, especially good things, to happen to you by chance and not as a result of your own efforts or abilities.’

The key words in bold imply that other people are responsible for bringing good things into your life. It follows, then, that to attract more luck into your life, you must increase the number of people who know you.

A newsletter helps immensely with that.

Such luck can translate to landing a new event co-host, a podcast or talk show guest, or a business partner for your next project.

How to start a newsletter in 5️⃣ easy steps

Launching a newsletter is deeply rewarding. Here’s how you can do that in 5 steps:

1. Pick a theme: Determine what you’re going to write about. Keep it narrow enough to be helpful, but broad enough to generate new content. For example, writing about cameras would be too broad, but writing about street photography in Johannesburg is a lot more helpful.

2. Nail your audience: The tighter you target your audience, the faster you’ll grow. Your content must be tied to solving their problems, too, else they’ll tune out your monologues.

3. Map out your first few issues: Think like Netflix — plan a series. If you enjoy football, write your first newsletter about your favourite teams, then another next week on your top 5 favourite stadiums, etc.

4. Write and publish your first issue: Writing is the easy part — you’ll actually spend more time on research. However, don’t overthink your first piece — it’s merely meant to awaken your editorial muscles. After editing your draft, pick a platform (like Substack) to set up and publish your first newsletter issue.

5. Promote your newsletter on social media: A great way to drive newsletter growth is through social media. A platform like Revue makes it easy to achieve this, as you can spotlight your newsletter directly on your profile. Grab snippets from each piece and post them to your feed, linking back to your newsletter.

Write your first issue today 🙌🏽

If you love writing, have weakly held strong opinions, and enjoy engaging online, writing a newsletter will come easily to you. Get started today.

mo

mo thinks you should check out shortform, a collection of epic book summaries for avid readers

after writing about it in vol. 38, sash was interested to read that only 9% of android users are using the app daily

matt’s still following developments in crispr gene-editing, a topic he covered way back in vol. 21

i’ll never let go, jack? 👀

If you’re a little older (😮) you may remember that the iPhone used to come packaged together with a set of wired headphones (EarPods). This was always a hassle-free-extra until Apple sparked some controversy by not including a headphone jack on the iPhone 7 (introduced in late 2016).

Of course, this wasn’t an uncalculated shot in the dark. In the same breath, Apple announced the release of the first generation AirPods, doubling down with two bold moves in one. The initial reaction? Memes and ridicule. 😂

I remember being at university and seeing the odd early adopter talking to themselves with AirPods in… looking strange. Over a year after their release, people still wrote articles on “how to wear AirPods and not look like an idiot”. 

The current sentiment? 👀

Fast forward to today, AirPods are a game-changer.

• 🚶‍♂️ I can walk into the next room without having to first find my phone.

• 🫢 No more accidentally yanking my phone off the table by mistake.

• 🏋️‍♀️ It’s a lot more pleasant running or going to the gym without running the cable through the inside of your shirt.

Since their initial release, Apple has released several successors in the form of the AirPods 2, AirPods Pro, AirPods 3 and most recently the AirPods Pro - to which they’ve added exciting new features such as active noise cancellation and transparency mode.

This sentiment about utility seems to be shared by more than just me because..

The numbers don’t lie 📈

Apple is estimated to have made a revenue of $12.1 billion off of AirPods alone in 2021!

And while it is not fair to draw a comparison to companies in different segments, it is illustrative to grasp the scale of these numbers when viewed in the context of other tech companies’ revenues.

Apple’s estimated revenue from AirPods alone has grown from a respectable $1.76 billion to a mind-blowing $12.1 billion over the last 5 years. This places AirPods above the annual revenue of notable companies such as Snapchat, Shopify, Twitter and  Spotify 🤯.

Smash hit… why? 🤔

• 💰 Investment in technology: Before the AirPods, wireless technology was not yet at a point where an equivalent product of that size was feasible. Apple developed custom H1 hardware chips for the AirPods, and this paired with the Apple iOS, enabled them to provide a low-latency, wireless and high-quality listening experience, all packaged into a device that was not much larger than the initial wired EarPods.

• 🍏 Ecosystem: AirPods is not just a standalone product. The product integrates seamlessly into the existing Apple ecosystem. You can speak to Siri through your AirPods, and it can seamlessly connect between your other Apple devices.

• 🤝 Convenience: Not having cables attached to your headset is undeniably an amazing experience. That, coupled with the fact that they fit into a small case that also charges them, makes it easy to take them anywhere.

• 🤔 Lack of alternatives: I mention this last because it definitely was a factor in the velocity of adoption. Coupling the launch of the AirPods with the removal of the headphone jack on the iPhone model was a bold move.

Takeaways 🍔

I think the Amazon mantra of “innovating on behalf of your customers” fits nicely into the narrative of the AirPods product.

When you compare the initial reaction to the removal of the headphone jack and the launch of AirPods to the current success and mass adoption… it supports the idea that your customers don’t necessarily know what they want.

“If I had asked people what they wanted, they would have said faster horses.”

- Henry Ford

It is the job of a company to become intimately familiar with their customers and their problems via empirical, observational, anecdotal methods or even intuition so that they may think of ways to solve the problems/ inconveniences that they themselves might not be aware of.

“People don't want to buy a quarter-inch drill, they want a quarter-inch hole.”

– Theodore Levitt

claude

leading on from “innovating on behalf of your customers”, claude was reminded about this interview where jeff bezos describes why amazon doesn’t focus on competitors

matt has been trawling through pg’s archives, and enjoyed this piece on how to write usefully

sash was excited to learn that google is launching its first cloud region in africa

imagine a healthy, happy africa 🌍

At 2.7%, Africa is the continent with the lowest insurance penetration rate - a long way away from the global average of ~7.2%. And as you can imagine, health insurance only makes up a fraction of the pie. But why’s it so low? 🤔Although hard to pin-point, here are some of the factors that could be contributing to this:

• 💰 Low average disposable income.

• 📚 A lack of trust and poor financial literacy.

• 🧱A lack of infrastructure and poor distribution channels.

• 👎 Last, but not least, insurance models that are not quite fit for market.

The opportunity: Africa’s mobile future ☀️

The 2019 study titled The Mobile Economy Sub-Saharan Africa (SSA) shed some light on this…

• 🤑 In 2019, the mobile economy generated 9% of GDP in the region, and supported more than 3.8 million jobs. 

• 📱 By 2025, SSA will have over 1 billion mobile connections, of which 65% will be smartphones.

• 💸 Mobile money has taken off in SSA as the main form of digital payment and financial channel. This significant penetration has spurred new business models layered on top of mobile-money.

• 🏦 In 2019, ~14 million insurance policies were sold through mobile money in Africa with the top 3 product offerings comprising of life/funeral insurance (32%), accident/disability insurance (19%), and health insurance (12%).

The smartphone penetration does not only enable digital payments but also enables the development of a digital healthcare ecosystem. And the implementation of healthcare insurance products such as telehealth.

What is it about telehealth? 💭

It seems like UC 🦄 has a thing for this topic, as Potter from vol. 34 spoke to this too. Telehealth is essentially the delivery and facilitation of health-related services via telecommunications and digital communication technologies. It has the ability to address all of the aforementioned problems, especially those related to underserved markets.

What needs to be taken into consideration? 🤔

The beauty with telehealth is that when operated correctly, everyone will receive the same care. Keeping this in mind, underserved markets must be a focal point when building the offering. A few factors cater to this:

• ⚡️ Broadband connectivity: Telehealth providers should mitigate barriers to internet access by partnering with cellular networks or building text messaging services.

• 📱 Devices accessibility: Telehealth solutions should cater for both smartphone and feature phone devices.

• 🏥 Availability and affordability of health services: Telehealth solutions should seek to create broader access to health services at a fraction of a price. 

• 💿 Data health system interoperability: Integrating various health data streams helps to improve patient care and speed up the development of new treatments. However, integrating with various Electronic Health Records (EHR) systems is complex yet essential to creating a sophisticated and intuitive telehealth product.

The problem? A data draught 🌵

Globally, data and analytics have been interlaced in every sector of the economy and have become core to operations and strategies for most businesses. Mastering this emerging space is key to companies establishing a competitive moat and outperforming their competitors. 

The lack of capital, infrastructure, talent, and awareness amongst healthcare professionals has limited the adoption of basic data tools by African healthcare organisations. Up-to-date data on healthcare metrics, outside of the Global Burden of Disease, is few and far between. This has made healthcare in the continent a black box.  

Is data the recipe? 👨🏾‍🍳

• 💡 Players that use data to create a forensic understanding of their patient pool and transform that into timely, tailored, preventative health interventions will gain a sustainable competitive advantage. 

• 🛠 Big data allows for an ever-narrower segmentation of customers and, therefore, much more precise tailored products and services.

• 🏷 Better pricing of products and quality care for the African context will be enabled by healthcare data lakes. The absence of this data has resulted in insurance companies pricing their products “blindly” and sadly further overlooking the majority of our population. 

The long game ♕ 

Discovery did it first and they did it right. Your health is connected to everything, embedding wellness into healthcare products ensures the sustainability and affordability of private healthcare, while enabling patients to make healthy choices to drive healthy lifestyles.

Integrating health records to better build and price healthcare products, underpinned by emerging and robust technologies that enable the consumption of digital healthcare solutions, will be central to Africa’s digital health transformation.

In my eyes, it’s clear. A happy and healthy Africa lies on the bed of innovation in healthcare.

blessed

karl enjoyed this tweet by luke mostert on the power law of vc, what makes a company vc backable?

sash thinks you should register for google for africa (happening tomorrow)

only just meeting the “twenty-something” description of uc, jonty is a second-year medical student whose interests have spilled over into the world of start-ups and tech. in between medical school lectures, he’s managed to gain experience working with medical ventures coming out of the delta, and recently started a position with one of bcg’s new start-ups. his piece has come off another one of his passion projects, an npo that aims to raise awareness about posthumous organ donation.

can virality save lives? 🫀

Way back in the archive, Matt looked at the role of emerging biotech as a means of addressing the organ donor shortfall. And while the technology may eventually leapfrog current methods, it seems the scalable deployment of pig-to-human kidney transplants and 3D printed hearts is a little way off. But do not despair; there may be a simpler stopgap as we wait for the tech world to catch-up.

The problem 🤕

The global organ donor shortfall and the factors that have contributed to the current state of affairs, have been well-documented. To bring it closer to home, here’s what we’re dealing with:

• 5,000 South Africans are currently waiting for a life-saving organ transplant. 

• 400 potentially life-saving organs are buried each week. 

Where are you going with this? 👀

Well, as the saying goes, there are many ways to skin a cat. The slam-dunk here would be to follow in the footsteps of Austria, Belgium and Denmark, whereby citizens are born organ donors in what has come to be known as an “opt-out” model (versus South Africa’s “opt-in” model). Spain, who arguably have one of the most successful organ donation programs in history, couples the “opt-out” model with in-hospital counsellors to provide information at the coalface, arming families of potential donors with more context and insight into the process (and converting them in the process). But public policy is hard, and it seems our government has more pressing issues to attend to (see Eskom, for one).

A brief digression… 🤓

Borrowing from disparate industries is a much-storied occurrence in the start-up and corporate world alike, and healthcare is no stranger either. Checklists, a cornerstone of aviation safety, have become commonplace in surgical theatres around the world. Real-time data analysis, which comes to shape race strategy and decision making in Formula 1, has been applied in clinical settings to provide predictive insights for wards of children following cardiac surgery. And while these are both cool and compelling examples, there may be another industry that can help healthcare.

And it’s probably not what you'd think.

So here’s the pitch… 💥

And here’s where applying another industry’s framework may be of use. In essence, solving for the organ donation supply problem looks a lot like a user acquisition funnel (remember Marketing 101?). Awareness, that progresses to consideration and intent, before ultimately resulting in action. Well, that’s the hope at least. 

So, my ideal solution would be: a system that educates and motivates people to have this conversation with their next of kin, and incentivises them to continue this cycle by sharing it with their friends. 

Enter the world of marketing. Here’s 3x ways we could achieve scale:

• Virality 👥: Organically reach as many people as possible with educational content.

• Gamification 🎮: Track individual / collective influence to drive behaviour.

• Incentives 🤑: Reward people who successfully share / influence.

The 3x elements mentioned above are tried and tested across industries. So, why not transplant this system from the marketing world into the healthcare world? 

Here, we need to discuss the concept of “virality” and how it is usually achieved. Virality is a term used to describe the exponential spreading of an entity (be that information, a cat video or ds-RNA) where each user generates more users. Primal organisms achieve this by hijacking host cells to create new copies of themselves, TikTok users achieve this by generating content that makes you want to share it with your friends, and marketers create frameworks that incentivise you to flood your network with information in order to get some sort of reward. 

Why virality? 💭

When diving deeper into attitudes surrounding organ donation, it seems that a great deal of the hesitancy stems from a lack of information. 

• A handful of studies speak to the idea of mistrust in the medical system. Anecdotal evidence suggests some believe when treating a registered donor, doctors won’t do everything they can to save their life.

• The largest source of doubt is rooted in medical misunderstanding, primarily when faced with the idea of brain death (where their organs are viable but they will never regain consciousness or be able to breathe without support). Studies reveal that most wouldn’t donate their loved one’s organs if their heart was still beating, despite being brain dead. 

• Death is scary, and so the taboo surrounding it precludes most from broaching the subject. Studies from both the US and UK speak to predominating fear around addressing death. It’s also evidenced in the fact that only 25% of Americans have advance directives.

• The impact of religion and culture permeates views on organ donation too. According to some research, Catholics are less inclined to donate organs when compared to other religious groups. In South Africa, cultural opposition to organ donation has been well-chronicled. 

In teasing apart the root of the hesitancy, it becomes evident that dissemination of information is necessary to move the needle. And the best way to deliver information at scale may be through, well, virality.

But, virality can only bring a horse to water… 😕

Information campaigns form part and parcel of most, if not all, public health policy and aim to drive health behaviour. Unknowingly, we’ve all participated in what will likely become one of the largest scale public health information campaigns in our lifetime (if not ever); that which sought to drive vaccination rates against COVID. It proved that using health information to prompt change remains a challenge, and also served as a reminder that virality drives both information and misinformation. Making the horse drink, or converting that awareness and intent into action, is the real skill. 

Here is, perhaps, where the marketing analogy comes up short. In healthcare, there is far more nuance to every decision that is made, and the consequences thereof are far more weighty than signing up for a 2U course or adding those Gazelles to your cart. 

The takeaway 🍔

… is more of an “eat-in”, in that I’m seeking answers more than providing them. So, in stewing this over, how would you, as a student, marketer, engineer, accountant or entrepreneur (to name a few) help me tackle this problem?

jonty

matt found this thread on private equity firms pretty useful

been working on your pitch deck? karl learnt from docsend that vcs are spending less than 3 minutes per deck and that the “why are you doing this” is rising to the ‘most important’ slide

sash wasn’t surprised to learn that tiktok has followed instagram in creating its own bereal clone

the airport business 🛩

The prophetic mantra, ‘catch flights not feelings’, seems to have held true in the post-COVID world of aviation. The global industry totalled revenues of $180.9 billion in 2021, up 5% from 2019. That equates to 2.3 billion travelling passengers throughout the year. If we work that backwards, that's 115,000 flights daily and ± 360,000 people up in the air at any given time! 

So why the relevance? 🤔

Prior to the pandemic, around 4.5 billion passengers flew annually on 42 million flights - that’s a whole lot of people passing through different airports. If you think about the concept of an airport, it’s brilliant from a business perspective. Meta, with its 2.9 billion MAUs, has been obsessed with increasing their users’ screen time, celebrating the advent of continuous scroll. Airports, on the other hand, have a business model that has its users enclosed and attentive for 2-3 hours (assuming no delays) and surrounded by different places for them to spend money and see exactly what advertisers want them to see.

The Blueprint  🗺

When looking at airports, we can break their revenue streams into two primary drivers: Aeronautical and non-aeronautical revenue. Unsurprisingly, the latter has been growing consistently over the past decade.

• Aeronautical Revenue🛩

  • In 2021 this made up 55% of the aforementioned $180 billion of global aviation revenue.

  • Aeronautical revenue per passenger stood at $9.99.

  • This comprises revenues that airports receive from airlines paying terminal parking rentals, airline’s landing and usage fees and most significantly passenger service charges - which are added indirectly to the price of your ticket and generally comprise ±65% of the aeronautical revenue earned by airports.

• Non-aeronautical Revenue 🛍

  • In 2021 this sat at 40% of the global aviation revenue.

  • Per passenger non-aeronautical revenue stood at $7.44.

  • This comprises revenues from retail concessions, car parking, property and real estate, car rentals and advertising.

The latter intrigues me the most. Just as your local PnP or Woolies have designed their stores and strategically placed their products to attract greater foot traffic… so have airports. Firstly, airports need to get you checked-in as quickly as possible. From your rushed airport drop-off, to the check-in with dogs snooping around your luggage, and of course, the intrusive airport security forcing you to remove items of clothing only to still pat you down… all adds to the stress build up. 🚨

But following that comes relaxation, the start of holiday mode, the dopamine loading phase or as it’s known in the industry; ‘dwelling time’. The 60 minutes from your check-in to your boarding time where all of the airport admin is done and you’re immediately thrown into the ‘Duty Free’ paradise. Just as the architects designed it, you walk through endless sales and shops. You’re unable to ignore adverts because your attention is peaked, you’re looking at signs to guide you to your gate or update you on the status of your flight. In this state, the colourful adverts catch your attention a lot easier than in the ‘normal’ world. Signs reminding you that your gate is only a ‘5 minute walk away’ encourage you to keep shopping.

A Nielsen study showed that frequent flyers are highly responsive to airport advertising, with 80% noticing the media and 42% taking action. Now imagine what more with looming technological advancements! Adverts in virtual reality and shopping experiences supported by augmented reality. All of this alongside the detailed customer analyses and foot traffic heat maps, courtesy of the data given up when signing into the airport wifi. 🤯

Different strokes 🏊🏽‍♀️

Not all airports have the same mandate. Some are privately owned, with a mandate to be as revenue generative and profitable as possible. Others are government owned and are expected to increase the economic inflows into the country as well as its public stature as a whole.

• Private 🔐

  • As an example, London’s Heathrow airport. Their focus is on larger aircrafts, typically international long-haul flights carrying more and generally wealthier passengers, bringing in higher aeronautical revenue.

  • This focus is also showcased in the fact that the airport only has 8 connecting flights to airports within the UK because they bring in so much less revenue than that of their long-haul counterparts.

• Government owned 🏛

  • The purpose of the airport is to centralise the destination. To attract people to the country, build their tourism and support their economy.

  • As an example, Dubai’s state owned airport and Emirates airline. It popularised the Hub and Spoke model and Ethiopian airlines has done the same in Africa.

  • The strategy is actually quite simple: an airline chooses its main “hub” city, and then runs all flights to or from that city, like spokes on a bicycle wheel. 

What next? 🔮

Time will tell, but as technology becomes more efficient, the need for the archaic check-ins and security start to diminish. Without those and with an increased focus on passenger experience, the journey to your travelling destination will become even more of an experience - funded by the money making machines we call airports. 

karl

“airports need to get you checked-in as quickly as possible” - karl learnt that schipol’s 🇳🇱 ceo felt the pressures of failing to do just that and resigned

remember photoshop? sash was shook by the news that adobe acquired figma for a cool $20 billion

peri-peri, please? 🐓

When it comes to African brand success stories, it doesn’t get much more iconic than Nando’s - a once small-town chicken shop from Joburg, now a global brand, changing the world… one quarter chicken (mild, with extra sauce and spicy wedges 🤤) at a time.

I had the pleasure of interning at their IMEA (India, Middle East and Africa) HQ during my undergrad, and while I couldn’t get over the fact that their cafeteria is genuinely a Nando’s restaurant… It didn't take me long to realise that behind the global brand, its delicious chicken and hilarious ad campaigns, lies one of the greatest lessons in localisation strategy and execution.

A brief history 🤓

The legend goes that on a fine afternoon in 1987, two friends, Robbie Brozin (🇿🇦) and Fernando Duarte (🇵🇹), had lunch at a small Portuguese eatery called “Chickenland” in Rosettenville, Joburg. Brozin was so impressed by the flame-grilled peri-peri chicken that he proposed that the pair buy the restaurant… and Nando’s (named after Fernando’s first born son, Nando) was born.

Global expansion 🚀

Fast-forward ~35 years, and Nando’s is now a global brand, with 1200+ stores in 20+ countries. Notably, over 450 of these are in the UK and Ireland (their biggest market) alone 🤯.

How’d they manage to achieve this scale? This could easily be an MBA thesis topic, but I’d like to hone in on one standout element in particular: localisation.

In true customer-centric form, Brozin (who long served in the position of group CEO) was hell-bent on nailing the landing in each and every market, always ensuring local context and nuance was taken into consideration, while staying true to the brand’s core values.

Some cool examples to chew on:

• Product 🌶 : Nando’s tweaks its spice levels and flavours according to the market’s general pallet, and in some instances, adds new items to their menus.

  • I learnt that in Abu Dhabi, one of the best selling items is its espetada (presented on a big hanging skewer). It’s understood that some locals order more to their tables than they actually need… as a flex! 😂

• Pricing and positioning 💵: Nando’s is arguably positioned in SA as a (kinda pricey) fast-food chain, but is categorised more as “casual dining” in markets like the UK.

  • A half chicken (on its own) in 🇿🇦 is ~$5.10 / ~R88.00

  • In 🇬🇧 the same will set you back ~$9.60 / ~R166.00

• Place 🧱: There’s also varying levels of emphasis on the in-dining experience in different markets.

  • 🇬🇧: Nando’s restaurants are more geared towards a (fancier) sit-down experience - the type of place you could impress someone with on a date 😉.

  • 🇿🇦: Nando’s has even experimented with smaller physical stores (with less seating capacity) to optimise towards delivery as its main channel.

And while the product and experience is tailored to fit the needs of the local market, one can’t ignore the real Nando’s superpower…

The brand 🥰

Since inception, the Nando’s brand has been associated with being warm, quirky, culturally relevant, and a voice of the people… across all of the markets it operates in. 

• Advertising 📺: Through its (award-winning) ad campaigns, Nando’s has been known to push the boundaries, create a stir, and make effective use of satire. The (often controversial) ads tend to go viral, irrespective of whether media channels decide to pull them or not. 😂

  • 🇿🇦 Satire: See “Wing Wing” campaign.

  • 🇺🇸 Cultural relevance: See “All-Inclusive” campaign.

  • 🇬🇧 Use of local celebrities: See Nike x Nando’s x Jadon Sancho campaign.

• Art collection 🎨: In each of the 1200+ stores across the globe, Nando’s displays original South African pieces from artists that have come through one of their development programmes, ensuring the in-store experience is always tied to its 🇿🇦 roots.

Future looking 🔮

With great scale, comes great responsibility.

In the markets where Nando’s is well established, it’ll have to make sure that it's evolving to remain relevant…

• Stiff competition 👀: Chicken is the most consumed meat in South Africa, and accounts for close to 50% of all fast-food sales. Naturally, there are multiple (local and international) brands gunning for their share of the pie. And while the Nando’s strategy would definitely not be to open a branch on every corner, I suspect that it would be considering how to defend its market share.

• Is the future delivery? 🛵: Uber Eats and Mr D aside, Nando’s has its own delivery app too. With strong growth forecasted in both platform-to-consumer and restaurant-to-consumer segments, it will be interesting to see how big of a role it’ll play going forward.

• Product diversification 🛒 : The strong brand has enabled Nando’s to branch out into other revenue streams too, and you can now find their bottled PERi-PERi sauces at major retailers in key markets. Is there room for further retail product development? 🤔

Takeaways 🍗

Nando’s has come a long way from its humble Rosettenville beginnings to become the global powerhouse that it is today. Through clever localisation of both product and experience, and through maintaining a relatable brand, they’ve been able to effectively scale abroad and resonate with customers from far and wide.

But like most good businesses, Nando’s biggest challenge will be ensuring that it is constantly evolving to remain relevant in the future. 🔮

Maybe one day I’ll tell you the story about the time I had lunch with Robbie Brozin. 😉

sash

speaking of chicken, sash thinks that kfc’s latest ad campaign is genius

matt enjoyed this piece on preserving optionality

tiktok to the tik-top ⬆️

In a bittersweet moment, millions watched on as Serena Williams graced the tennis court for the last time, after bowing out of the US Open in the third round. She will leave an indelible mark on the game, having won 23 Grand Slams, spending 319 weeks as the best female player in the world and retiring as the highest paid female athlete of all time (~$435m combined on- and off-court earnings). A lesser documented part of her life’s success is that in which she has reinvented herself as a venture capitalist, raising a ~$111m fund that has invested primarily in female founders and founders of colour. Her golden touch obviously extends to VC, because she’s backed 16 unicorns already.

Where are you going with the analogy? 🤔

I’ll be honest, it’s a little bit of a streeeetch🤸‍♂️, but bear with me for a second. The short-form video app, whose success is already well-documented in our archives 🦄, has been subject to a meteoric rise. The proverbial new kid on the block reached one billion users faster than all of its predecessors and now boasts over one billion daily active users (DAU), sitting above its peers as the most downloaded application since its introduction.

The secret sauce? 🥫

…well, the algorithm of course. Without going into granular detail, TikTok’s proprietary algorithm was the first that was informed by user attention, rather than explicit interest shown by one’s social circle. It’s best described visually:

The algorithm is so valued, that when Trump ordered the sale of the TikTok’s American operations, ByteDance refused to include it in the deal. In vol. 43 🦄, I looked at a few of the reasons the algorithm is so addictive. But we diverge…

If you can’t beat ‘em, join ‘em… 😏

As your mom used to quip when your cousin arrived in the same t-shirt as you, imitation is the ultimate form of flattery. And boy, have platforms been doing their level-best to offer something remotely similar to TikTok’s addictive short-form video content.

Social networks are no strangers to copying their classmates’ homework:

• Vine pioneered short-form video with 6-second clips, but has since been leapfrogged by the competitors that followed (see: copied).

• Instagram was, by no means, the first photo-sharing platform. But rudimentary filters, coupled with product velocity, have seen it cement itself amongst the giants.

• Snap developed “Stories”, which saw Instagram, Facebook, Twitter, and even LinkedIn, follow suit.

• Twitter spun off Spaces as a response to the short-lived Clubhouse (remember them?).

Funnily enough, chief-copycat Zuck’s TurnItIn report has been flagged again, with Instagram recently introducing “Dual”. In what seems to be the most flagrant act of plagiarism for a long while, Instagram has copied BeReal on the back of its success (which Sash predicted in vol. 38 🦄).

And on the back of TikTok’s success, many have looked to the product to improve their own. Google has played with the idea of offering short-form video in search results and even Amazon is testing a TikTok-like feature to show shoppers products in video format. In reality, very few ideas are truly novel, and the value is in execution rather than ideation. And it seems that TikTok may soon be gatecrashing some incumbents’ parties.

In fact… 👀

…it looks like they're going to start eating other companies’ lunches. And here’s where my analogy comes full circle:

Both Serena and TikTok sit atop their respective perches, as number one in their fields (at least for now). And just like Serena, it seems TikTok may be reinventing themselves (on more than one front too).

Those who trawl through patent applications took note of TikTok’s recent filing that would allow users to “purchase, play, share, download music, songs, albums, lyrics” as well as “live stream audio and video”. Already, close to 75% of TikTok users in the United States use the platform to discover new artists, and 67% said they were more likely to seek out a song on a streaming platform if they heard it on the app. In closing the loop, they could allow for creation, discovery, propagation and collation of music, and have a slice of the music streaming pie.

But there may be a bigger story to this… 😳

When you're looking for an answer, where's the first place you go to? Google, right? Well, Gen-Z's don't quite feel the same way. More than 40% of Gen Z’s prefer the visually-rich form of TikTok or Instagram in seeking information, be it a recipe or a cool new restaurant. What may seem like an innocent quirk amongst the youth could seriously come to harm Google’s main products: Search and Discovery. And with ~81% of Alphabet’s entire revenue generated from Ads, this cultural shift may serve as the canary in the coal mine.

In the future… 🔮

Our kids may well laugh at the fact that we used Google Maps to find restaurants near us, just as we laugh at how our parents whipped out physical maps on a road trip. For now, at least, TikTok is more of a headache for Google, rather than an existential threat. 

But one thing is for sure: the TikTok story continues.

matt

karl was intrigued to hear that a popular chinese gaming company appointed an ai robot as ceo of their 3000+ employee company

sash was shocked to see footage of the (climate change-induced) floods in pakistan

revolutions, robots and replacement 🤖

The notion of automation and machines replacing humans has made headlines for many years now. But with the advent of robots that operate autonomously, is this sentiment still just alarmist hype?

By definition, automation describes a set of technologies that reduce human intervention in processes. The goal of automation is achieving increased output, speed and efficiency of production. 

It’s also NB to note that the state of automation has seen several periods of booms throughout human history...

A timeline of industrial automation 💭

1️⃣ First industrial revolution: This came about by the use of steam power and the mechanisation of production. In 1783, Oliver Evans developed the first automatic flour mill using a series of bucket elevators to move grain from one process to the next within the mill.

Notable advances: development of the steam engine, steam ships, steam-powered locomotives.

2️⃣ Second industrial Revolution: Practical application of automation was enabled and accelerated by the proliferation of electrical power which enabled mass production on assembly lines. Henry Ford took inspiration from slaughter houses where pigs hung from conveyor belts and butchers performed only part of the butchering task and applied the same principles to automobile production.

Notable advances: lightbulb, internal combustion engine, automobile, aeroplane, telephone.

3️⃣ Third Industrial Revolution: Also dubbed the digital revolution, is characterised by the move from analogue to the digital. The introduction of memory-programmable controls and computers allowed us to fully automate an entire production process without human assistance.

Notable advances: personal computers, the internet

4️⃣ Fourth Industrial Revolution: We are currently in this phase. It is conceptualised as the application of information and communication technologies to industry. Production systems are brought online with network connections. Some advancements this is expected to bring about are

• Machines which can predict failures and trigger maintenance processes autonomously.

• Auto organised logistics which react to unexpected changes in production.

Throughout the various revolutions, it is clear that the trend is always towards increased levels of automation. The thought on many people’s minds is whether there will be anything left for us humans to do.

Many view the current era of automation led by artificial intelligence and industrial robots as the precursor of mass unemployment. It’s also argued that, like the revolutions before, the outcome will be a renewed increase in demand for labour. So which is it?

A framework for understanding the effects automation 🤔

MIT professor Daron Acemoglu and Boston University professor Pascual Restrepo, present a task-based framework for reasoning about the implications of technological advances on productivity and the demand for labour. The premise is:

• Production requires tasks that are allocated to capital or labour.

• While new technologies increase the productivity of capital and labour at tasks that they currently perform, they also impact the allocation of tasks to the factors of production (capital and labour) - they call this the task content of production.

The claim is that shifts in the task content of production can have major effects on labour demand as well as implications for productivity.

To illustrate this, take the example of a hypothetical small coffee producer:

• They purchase unprocessed coffee.

• They have roasting machines with which they turn unprocessed green coffee into aromatic brown beans (like the ones we purchase at the store).

• Being a small producer, the roasting machines are not fed by a continuous process, but rather they employ staff to operate the machines as well as to manually package the roasted coffee beans.

The roasting machines (capital) are responsible for roasting and the staff (labour) operate the machinery and perform the packaging. This allocation of tasks forms the task content of production for the coffee maker.

The effect of automation 🚜

Building on our example above, if the coffee maker were to upgrade and purchase machinery that could handle packaging, the task content of production of the coffee maker would change due to the increased automation, some of the staff responsible for packaging might have to be applied to new tasks or become redundant. This is also known as the displacement effect.

Automation and displacement 🛫

• In the late 1700s, workers reaping the fields were displaced by mechanised horse-powered reapers.

• In the 19th century, assembly line workers were displaced by fully automated end-to-end production processes.

• Today, a lot of white collar jobs are seeing some of the tasks they performed replaced by specialised software as well as artificial intelligence.

Acemoglu highlights that the impact of automation is not solely the displacement of existing labour. By leading to an increase in productivity - the productivity effect - it contributes to increased demand for labour for tasks that cannot be automated.

Furthermore, the displacement effect is counterbalanced by new technologies that create new tasks in which labour is effective. These tasks generate a reinstatement effect — they reinstate labour into a broader range of tasks.

Automation and reinstatement 🛬

These examples are chosen to mirror some of previous examples of displacement:

• Workers could retrain to manufacture, maintain or operate the machinery used to reap.

• While assembly line workers were made obsolete, new occupations opened up in the form of mechanical engineers for the machinery, control engineers for the processes, etc.

• Although software has made some white collar tasks redundant, they have created more in the form of programming and maintenance of software.

What potentially makes the current industrial revolution different? 💭

The current era of automation is seeing the mass adoption of fully autonomous industrial robots that are reprogrammable, multipurpose machines capable of performing a variety of tasks.

In a recently published paper, “Robots and Jobs: Evidence from U.S. Labour Markets,” (also by Acemoglu and Restrepo) highlighted several concerning trends:

• Every robot added per 1,000 workers in the U.S led to a decline in wages of 0.42% and a decrease in the employment-to-population ratio by 0.2%.

• Robots affect workers across all education levels negatively, but it is the workers lacking college degrees that bear the biggest downside.

• When jobs at a certain level of complexity disappear, those workers take jobs away from lower skilled workers.

Automation technologies always create both displacement and productivity effects. However the above trends imply that robots create a stronger displacement effect, therefore having a net negative impact on labour.

Where to from here? 🔭

Finding ways to counter the negative effects of automation is an active field of research. Researchers are investigating the feasibility of programs such as “Universal basic income” and “Robot taxes” as policies to be implemented in order to mitigate the effects of automation on employees whose skills are made redundant. Time will tell.

claude

claude found it interesting that netflix is exploring introducing a cheaper ad based tier

today’s piece reminded sash of his (mind-blowing) tour of the tesla factory a few years ago

russia’s invasion of ukraine 🇺🇦

Last week in vol. 50, Sash touched on some factors that are contributing to the global rise in inflation. After reading the piece, some of you may have asked: “What exactly is happening in Ukraine, or is it in Russia, or is it both?” Don’t fret, today we’re going to dive a bit deeper into the Russian invasion of Ukraine 🚨. 

So Russia’s invasion of Ukraine? 🤔

The history of Eastern Europe is complicated, nuanced and very long. In the interest of being impartial and keeping to the point on this latest invasion, let’s look at some of the key moments and when they happened.  

How we got here... 🚶

What are (some of) the implications you should be aware of? 💭

• Firstly 🥇, it affects the lives of millions of civilians who have had to flee their homes to get away from the destruction that ensued. Any life in danger, no matter where, is a matter for concern. It also impacts the lives of the people in the country they are fleeing to (many sought safety in Poland) 🇵🇱. 

• Secondly 🥈, Russia is one of the biggest exporters of gas to Europe. After the invasion, many European countries imposed sanctions on Russia. Now to counter this, Russia has strangled its supply of gas to these countries, which is very concerning because those supplies are needed, in large part, for heating in winter which is only a couple of months away in Europe 🧊. 

• Thirdly 🥉, Russia also happens to be a major exporter of oil. The invasion has led to an increase in oil costs and a subsequent increase in inflation across the world. 

• And finally 🏁, Ukraine is a massive exporter of wheat. Its main port, Odessa, (where it ships majority of its wheat from) has been blocked since the invasion began. The biggest recipients of Ukrainian wheat? 🌾 The Middle East and Africa - this means countries who already have food supply shortages will potentially have a food shortage crisis to add to their troubles. Farmers in Ukraine are also worried as to what their yields (how much they can harvest at the end of the growing season) will be like in the future with war ongoing in their country. 

It’s not all doom and gloom.. 🤔

🧑‍🌾 Within the last few weeks there was a deal signed to allow for the port in Odessa to be operational again - granted there was some trouble shortly after this deal was signed but hopefully it remains in place going forward 

🇺🇦 Within Ukraine, there have been harrowing stories of a nation pulling together and standing for what they believe in. On top of this, they are winning back some territory that has been Russian occupied until now. 

🌍 Environmentally, European governments have acknowledged their overdependence on Russian fossil fuels and are speeding up their investments into Green Energy.

Looking forward, what can we expect? 🔮

As much as this conflict is contributing to the rising cost of living, it is not the sole reason for high inflation (as highlighted in vol. 50). We can probably expect inflation to peak mid-to-late this year and start subsiding during 2023. The question is, will a prolonged war extend the natural recovery of the economy, even if everything else settles? 📉

Inflation aside, another thing to look out for is whether NATO will show resolve and continue to support Ukraine, especially through the coming winter ❄️. Russia is increasing the pressure on Europe, having just announced that it’ll halt supply of gas to Europe for a couple days at the end of August. 

These next few months will set the precedent of how to deal with aggressive neighbours for many years to come. 🍿

dan

dan gets most of his world news from the economist’s podcast or the bbc’s world business report

sash was introduced to this interesting three-part podcast series - the guardian’s exposé into the inner workings of uber

lipstick, champagne and underwear 📉

This past weekend in a nutshell: The Springboks took an L and my beloved football team went down 4-0 to Brentford. I’m down bad 🤕. But hey, so is the global economy.

If you haven’t heard already, it’s been well covered that the world is on the “edge of a global recession”. Karl did a great job of breaking down what this might mean for venture capital funding in vol. 42, but I thought I’d look at things from a slightly different angle: consumer behaviour.

First, a quick recap ⏮

• Definition 📖: As per Investopedia, a global recession can be defined as an extended period of economic decline around the world.

• Implications 👀: The drop in gross domestic product (GDP) generally coincides with a weakening of other macroeconomic indicators, such as trade, capital flows, and employment.

How’d we get here again? 🤔

The International Monetary Fund (IMF) recently released a report where it predicted significant slowdowns in the three biggest economies in the world: USA, China and Europe. 

Some of the (simplified) underlying reasons include:

• 🇺🇸 Diminishing consumer spending power in the USA.

• 🇪🇺 The impact of the Russia and Ukraine war on European economies.

• 🇨🇳 The property crisis and the ongoing effects of COVID-19 lockdowns in China.

And while the IMF uses several criteria to officially identify a global recession, there are some pretty bizarre indicators of economic downturns that have supposedly stood the test of time too…

Unconventional indicators 🤯

Here are a few (consumer-driven) recession indicators to chew on:

• The lipstick effect ⬆️💄: This is the notion that in an economic downturn, consumers treat themselves to help them forget about their financial problems. But instead of dropping 💰 on big luxury items, cash-strapped consumers spend money on smaller indulgences… like lipstick. 

• Champagne index ⬇️🍾: While generally associated with times of celebration, history tells us that champagne sales spike during times of economic boom. Similarly, sales slump during times of economic gloom.

• Men’s underwear index ⬇️🩲: This recession indicator is based on the observation that undies tend to be the last item of clothing that men replace. And when money is tight, men defer buying new ones for even longer. Basically, when men’s underwear sales go down, the economy is soon to follow.

It’s still a bit early to find the data across many of the unconventional indicators, but we do know that lipstick sales have been climbing - Forbes reports that Q1’22 sales were 48% higher than the same time last year*, and grew more than twice as fast as other products in the beauty category. 👀

*The drop in global mask mandates likely had a role to play in this growth too.

So what does this all mean? 🤔

Don’t worry, I’m not judging you for wearing the same pair of undies since 2018, nor am I here to make recession predictions. But what’s more interesting is that, through historical economic downturns, these unconventional indicators have highlighted a few key consumer insights:

• Consumers do not have the same levels of spending power. 

• Consumer sentiment is bleak.

• There’s a consumer shift towards practical buying.

Implications and considerations 🤓

In the midst of a looming economic downturn, the way that products and services are perceived by consumers will play a big role in whether demand is (positively or negatively) impacted. I think all business-to-consumer (B2C) firms should be preemptively asking themselves questions such as:

• Are my goods / services priced appropriately? 🏷

• How do my goods / services make consumers feel? 🥰

• Are my goods / services perceived as a nice-to-have or as a necessity? 🛍

According to the IMF, it looks like we could be in for a tough few months. Don’t be surprised if you find yourself stocking up on your Kylie Cosmetics, or holding off on that bottle of Moët and waiting a little longer before buying that new pair of Calvin Kleins. 😉

sash

sash enjoyed this article about android’s beef with apple over green text messages

for a longer read, matt enjoyed this overview of the telehealth space

sticking to telehealth, karl enjoyed scott galloway’s take on amazon’s one medical acquisition

water into wine 🍷

As for miracles in this world, turning water into wine is pretty high up there. In religious folklore, Jesus managed it at a wedding in Cana in 1563. For mere mortals, producing wine (or any beverage for that matter) involves a great deal more effort, waste and expertise (see the ~$1,5 trillion global beverage industry). But science can be almost logic-defying at times, and we may soon all be able to turn water into wine. Well, with the help of a little machine that is.

What makes up a beverage? 🍹

As far-fetched as it may seem, the majority of beverages we consume, from orange juice to an espresso martini, are actually made up of more than 90% water. The colour, taste and texture of any beverage are usually produced by compounds that only make up 3-4% of the total composition. So wine is basically water already…

What’s your point? 👉

Well, there may be a great irony in the fact that we use hundreds of litres of water to produce a few hundred millilitres of wine that is predominantly water in any case. In short, the beverage industry uses a mind-blowingly large volume of water in the production of its products. To help put it into context:

• It takes 600 litres of water to make 1 bottle of wine.🍷

• It takes 200 litres of water to make 1 glass of orange juice. 🍊

And if you weren’t already aware, water is in short supply. Alarmingly, the waste isn’t limited to the 400 trillion litres of water used to grow and process ingredients in the beverage industry. Over 1 trillion bottles and cans are used for packaging, and while 20% are recycled, the difference ends up in landfills. More worryingly, the beverage industry as a whole contributes to almost ~2% of global CO2 emissions, which comprises production, storage and transport.

The solution… 🕶

…is quite simple really. Molecular beverage company Cana (ring a bell?) have managed to identify and isolate the molecules that give rise to the tastes, aromas and textures of our favourite drinks. A sleek, compact, almost Apple-like body encases water (no duh), a carbonating cylinder, and a cartridge system containing universal ingredients with a nifty-screen that helps you make an infinite variety of chilled and carbonated beverages in under 30 seconds. So, instead of moving tons of water around, it’s easier to just ship the ~3% (the flavours) and add them to the water that’s already in your taps. A beverage printer if you like…

The commercial opportunity 🤑

Now the brilliance of molecular beverages isn’t limited to tree-hugging environmentalists. In fact, the development of such a technology allows producers to access the long-tail of consumers. You see, our supermarket shelves don’t have enough space to cater for everyone’s niche desires and that’s why you’ll never find a strawberry-flavoured, turmeric-infused, cold-brewed Indonesian coffee. Why? Well for one that’s weird. And two, it’s unlikely that’d be a fast mover. Historically (and at present), beverage companies have been participants in lowest common denominators. The advent of molecular beverage creation gives everyone and anyone access to a customer along the entire Gaussian curve.

Priced at $799, there are low barriers to entry for any player who wants to enter the beverage industry. Thereafter, the startup will collect a monthly fee ($49) and plans to charge the user per drink, but at 25-30% of the retail price. It may also play into the growing creator economy and rise of influencers and microbrands. Cana has spoken of partnering with creators and recommenders, who’ll concoct their own bespoke mixes and offer them to those on the platform in what looks almost indistinguishable from Netflix’s user interface. I can think of a few who would line up to try Kim K’s refreshing, low-calorie summer seltzer. Similarly, bringing creators onboard, think Mr Beast and Khaby, would drive adoption and growth, playing on the already strong community ties they bring.

The downstream effects… 🦦

…are many, and would impact almost every point along the industry’s supply chain; from production and packaging, to logistics and even the little bar in your neighbourhood.

🌾 Half of the world’s habitable land is already used for agriculture, and only 33% of that is used for crops that are consumed by humans (and not livestock). Beverage crops, those that provide a potable beverage other than water, include sorghum, maize, sugarcane, corn, coffee, tea, and agave, to name a few. Being able to molecularly imitate their tastes and textures bypasses the need for their farming. While it most certainly will place pressure on those producing solely for beverage ingredients, it may free arable land to farm crops that’ll contribute to our global calorie pool (and mitigate food shortage concerns, highlighted by the recent Russia-Ukraine conflict)

🧃 The beverage packaging industry, with a global market size last valued at around ~$123 billion, would be left reeling with increased uptake of molecular beverage innovations. While the marketing value of an eye-catching can is often foregrounded, environmental enlightenment has seen regulatory pressure already shift packaging trends. Factories will have to pivot and redirect their efforts, or face ruin. Cana, and others that may follow suit, could usher in the end of an era.

🚚 But, perhaps most glaringly, is the likely redundancy of the majority of the supply chain of the beverage industry. Gone will be the need for fleets of trucks, storage facilities and distribution players that have made themselves at home in an intricate supply chain. While there’ll likely be economic and social dislocation, it’ll remove inefficiencies and make a noticeable dent in reducing the beverage industry’s global carbon footprint.

Hot-take 🔥

Should Cana be able to do everything it says it can (and not follow in the footsteps of Elizabeth Holmes’ Theranos), I battle to come up with a storyline in which it doesn’t completely leapfrog the beverage industry and its current incumbents. And if this works, maybe we’ll be printing McDonald's chicken nuggets in a decade or two.

matt

matt found this article interesting, which looks at how tiktok is eating at google’s core products

sash found this article about amazon’s latest acquisition interesting

bootstrapping vs external funding 💸

When it comes to getting a business off the ground, there always comes the age-old question: whether to bootstrap your company, or try and raise external funding?

This decision is not to be taken lightly. It has implications for how you structure your business and ultimately can determine the success or failure of a business.

Let's go through the terminology. 📖

Bootstrapping, also called self-funding, refers to the situation in which an entrepreneur starts a company with relatively little capital and relying on money other than outside investments. They build a company from personal finances or the operating revenues of the new company.

In contrast, external financing involves raising capital through bank loans, angel investors, venture capital firms, etc.

Like with most things, there are advantages and disadvantages between the two approaches.

Bootstrapping 🩹

Advantages:

• Full ownership: When you bootstrap your business, you and your co-founders will remain the sole owners of your company, your team receives 100% of the 💰.

• More control: Without investors who you have to appease, you have better control over the direction you take your company in.

Disadvantages:

• Financial risk: Putting your own money into a company means that you directly are impacted by any failures of the business.

• Less credibility: It can be harder to find the requisite resources to build up a brand and prototype a product without the backing of established investors.

• Slower growth: It can be difficult for a bootstrapped company to achieve exponential growth. A more constrained budget means less money for marketing channels, less money to hire more resources to build out functionality faster.

There are a lot of examples of big companies today that successfully bootstrapped themselves…

• Meta (formerly Facebook): In 2004, Mark Zuckerberg launched “The Facebook”, a social media website he had built in order to connect Harvard students with one another. 

• Nike: While it was still called “Blue Ribbon Sports”, founder Phil Knight funded his sneaker business through bank guarantees for years before pivoting from the low-margin importing of shoes to producing (in-house) high quality products.

External Financing 💸

Advantages:

• Accelerated growth: External financing allows companies to fund growth projects that their regular cash flow would not allow. For example, new factory space and machinery to increase output to meet growing demand.

• Advice and expertise: Good external sources of funding usually offer more than just finance. Established VCs, for example, have connections with many resources of expert advice, be it legal, technological, financial etc. Upon securing funding they are (typically) invested in the success of the business.

Disadvantages:

• Ownership: Some sources of external financing require an entrepreneur to give up part ownership of the company in exchange for the funding. This is often accompanied by loss of control. For example; an investor would have a say on company direction.

• Interest: External funding sources require a return on their investment. Banks require interest on loans, investors require a rate of return.

When to use each approach ⌚

Choosing a means of funding is heavily dependent on the stage the business currently finds itself in.

Tim Berry talks about a sweet spot at which it is appropriate to seek out funding. This point exists between inflection points. Inflection points are points where a business’ value changes significantly within a short amount of time (see two dotted lines above).

Valuation in the context of the graph refers to an agreed upon exchange rate of equity vs money. The higher the valuation, the less equity an investor would get for the same amount of money relative to earlier in the business’ lifetime.

After the first inflection point, there is reduced risk to potential investors because the need has been validated by meeting some initial milestones, such as developing a minimal viable product (MVP), onboarding users, registering intellectual property, satisfying regulatory constraints etc.. This translates into the value of the business increasing. The business has proved its utility.

It is after this point that external funding can be put to good use as the company has a clear idea of where to apply the extra capital and the investors have a good idea of the viability of the company based on real data.

The extra capital can help:

• Fuel the exponential growth seen after the second inflection point based on a proven concept.

• Can de-risk continued growth of a business whose core product might be easy to imitate through other (better funded) competitors.

Takeaways 🎯

Some key takeaways to keep in mind:

• Never take on investment capital unless it is really needed: There is a high price tag attached to accepting funding. Diluting too early leaves founders with lesser equity and lesser control for future fundraising needs.

• Investors should have more to offer than just money: Good investors should ideally be able to offer access to otherwise hard to obtain resources, such as other founders and individuals with expert knowledge that can help propel the business further.

• It’s often a question of when: Even if they started off by bootstrapping, most large companies end up taking funding at a certain point in their lifetime to fuel their growth. (e.g. Nike, Facebook).

“Bootstrapping is a way to do something about the problems you have without letting someone else give you the permission to do them.” - Tom Werner

claude

matt enjoyed this pod, that covered everything from scaling businesses to dopamine detoxes

remember sash’s piece on bereal? well, he’s not surprised that instagram is trying to copy it

mo(bile) money 📳

R24 billion - the proposed price tag on Telkom, following an acquisition bid from MTN, one of Africa’s telecom giants. After the announcement, Telkom shares soared, increasing 33% on the day, which marked their highest ever daily increase.

Telkom comes with a solid customer base and could solidify MTN’s entrance into the fibre business - a must for expanding its 4G and 5G mobile services. Of course, it would also provide a boost in MTN’s user base, with 15.3 million additional customers… all potential clients of MTN’s revamped mobile money offering, Momo. 🤔

Mobile Money 🤔

…is a closed loop system, effectively a wallet that you pre-load with money to make digital financial transactions by leveraging a telecom provider's network. 

• It’s been accredited with transforming the financial inclusion landscape across emerging markets. 

• It provides access to a plethora of financial services for the unbanked and un(der)served.

  • Starting with the ability to send, remit, receive, save and borrow money.

The proliferation of mobile phones has aided the adoption of mobile money, as shown above. Last year, over $1 trillion flowed through mobile money networks across the globe - 70% of that was in Africa! 

While this has been painted as a tool for financial inclusion, which it is, make no mistake - the convenience of mobile money puts Apple Pay into question 🤷🏽‍♂️. We’ve covered the basics, now imagine being able to pay any municipal bill or even a parking ticket (without touching a machine 😏) in your country. No more feeling guilty because you have no cash for your loyal car guard considering the seamless peer-to-peer (P2P) payments. All of this through a USSD (basically anything from the Nokia 3310) enabled phone. If we move to smartphones, capabilities increase drastically. Mobile money players now have super apps, connecting their users to a host of third party players from National Health Insurances to public transport.

The Players ⛹🏽

• M-Pesa 🇰🇪

  • Pesa is money 💰 in Swahili, the ‘M’ is for mobile. 📱

  • Owned by Safricom and generates more than half of their yearly revenues.

  • Operational in 7 countries with more than 51 million users and 600 000 agents throughout Africa.

    • Kenya being the first and the leader of the pack with over 30 million users.

  • More than 50% of Kenya’s GDP flows through M-Pesa. 🤯

• MTN’s Momo 🟡

  • Operational in 12 different countries with over 57 million users and 974 000 agents throughout Africa.

  • 602 000 users in South Africa, and is powered by their banking partner, Ubank.

• Airtel Money 💨

  • The African subsidiary of India's Bharti Airtel. 🇮🇳

  • Operational in 10 African countries with around 21.5 million mobile money users.

    • 277 000 users from Kenya.

  • Recently (last week Thursday) split from its parent company, Airtel Kenya, after Airtel Money raised $550 million from different investors including Mastercard. 👀

Curveball ⚾️

Earlier this month, the biggest downside within the mobile money space was changed. The Kenyan Central Bank ruled to make mobile money fully interoperable, opening up that closed loop we spoke about. This means that mobile money payments can cross any mobile carrier boundary, reducing the stronghold Safaricom and M-Pesa have had in space.

And in SA? 📱 💸 🇿🇦

Despite SA having one of the most sophisticated digital banking sectors in the world and one of the continent's highest mobile penetration rates - mobile money has not been able to survive in the country.

Why? 🧐

• Regulation 👩🏽‍⚖️ 

  • South African regulations require merchants to have a specific financial service provider licence. As you can see above, all telecom attempts at bringing mobile money offerings into the country were ‘powered’ by a bank.

    • This very problem holds true as the requirements to be a mobile money ‘agent’ are also stringent. This drastically reduced the number of ‘branches’ that one could convert cash to mobile money and vice versa.

  • Countries like Kenya and Tanzania do not have these kinds of regulatory hurdles and therefore, the growth of their mobile money usage has been exponential and more seamless.

• High bank account penetration 🏦 

  • The percentage of people over the age of 15 with bank accounts in SA currently sits at 84% in 2021. This begs the question of the need for mobile money, when people have access to a bank account.

    • While this puts into question the use case for mobile money today, in 2011 it sat at 54% - and so then it was less of a deterrent.

• Market share 🥇

  • Given the fact that mobile money has historically operated on a closed loop system, one would require a significant user base in order for the use case to make sense. It’s the common atomic network problem. Greater network = easier distribution.

  • Although Vodacom (±42%) and MTN (±30%) had and still have a significant market share of all mobile network operators in South Africa, Safaricom almost owned the Kenyan market with their collective shareholding in 2007 (±70%, but closer to ±63% today). This kind of single player market dominance enables easier distribution.

    • M-Pesa currently boasts 98.5% of the mobile money market share, with people often opting to own more than one mobile money offering because of the distribution problem that often arises. Whether this will persist given the move to interoperability is another question.🧐

• SA Banking Mafia 👯‍♂️

  • Incumbents have been relentlessly holding onto their power and market share. It would be amiss to not factor in their power and influence when looking at SA’s mobile money failures.

  • The sector operates with 5 major oligopolies, for a refresher on this give Sash’s vol.26 a read.

Where to now? 🔮

Given Airtel’s recent move to split its telecoms and mobile money business coupled with the looming pressure from the Kenyan Central Bank for Safaricom and M-Pesa to do the same, I think the telecom-only mobile money reign is coming to an end. Airtel’s new ‘relationship’ with Mastercard and M-Pesa’s with Visa is signalling a new future, one deep within the realm of financial services and one reliant on strategic partners. Perhaps a read on Claude’s vol.10 piece on neobanks would set the scene more appropriately.

karl

after witnessing what happened to snap, sash is interested to see how the rest of big tech’s q2 earnings calls go this week

karl was saddened (but not surprised) to see the competition commission’s warning on the low level of racial inclusion in the sa startup funding space