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The Diff is a newsletter exploring the technologies, companies, and trends that are making the future high-variance. Posts range from in-depth company profiles, applied financial theory, strategy breakdowns and macroeconomics.
Where Apple Can Own I/O
This piece is a guest post from Evan J. Zimmerman. Follow him on Twitter and Medium.
This piece is a guest post from Evan J. Zimmerman. Follow him on Twitter and Medium.
Elsewhere
The Great Inflation
An interesting twitter thread breaking down the early stages of the 1960s-1970s inflationary cycle. Inflation was a concern before the oil crisis—a very common one, because there wasn't a good monocausal explanation. One cause of inflation was demographics (reflected, in this case, in higher clothing prices; this was a time when US apparel manufacturing was moving South for cheaper labor, but wages around the country were rising) and because 60s-era health programs took a long time to ramp up. "Inflation" is an aggregate phenomenon, but even when there's a high-level cause like growing deficits and elevated borrowing, the effects show up in different industries at different times.
Two-Way API Businesses
There's a broad category of companies that represent literal or figurative APIs that help other companies plug a new feature into their products. Twilio is a literal example; use their API, and your product can now interact with customers through text, phone, email, and messaging. And DoNotPay is a more figurative case study, wrapping paperwork- or phone call-intensive tasks into an app. Sivo, the "Stripe for debt" is interesting because it's a two-way example of this. Sivo lets companies add financial services to their products; they cite the example of helping Uber offer drivers vehicle loans and advances. But Sivo itself is converting its customers into a ready source of easily-acquired customers, which is generally the limiting factor for lenders. The model of bootstrapping on someone else's customer acquisition has worked very well for Afterpay and Affirm, and it makes sense to apply it outside of consumer lending.
Zoom and Cities: The Five-Century-Old Case Study
Anton Howes has a piece looking at how improved sailing technology might explain the growth of London in the sixteenth and seventeenth centuries. As he notes, the city grew by nearly 10x in that period, an extreme change that demands an explanation. Faster ships (with better guns) were a major part of this. What's interesting is that cheaper transportation's first-order effect is to make geography matter less; if there's something that can be built more cost-effectively outside of London, the city should import it in order to focus on its comparative advantage. But the second-order effect of that is to make city-level agglomeration effects more important; when more can get outsourced, the city can focus even more on what it does best. The comparison to telework is imperfect in many ways, but it's an interesting possibility: technologies that make people more productive no matter where they are can have the most outsized impact on people's productivity when they're in the same place as all the other high-productivity people.
From ETrade to eToro
Marc Rubinstein has a great piece comparing the public market debuts of ETrade and eToro. eToro figured out that there's a social component to risk-taking. The two things traders want are:
The ability to make any bet, on any asset, with any amount of leverage, and
Outside guidance telling them exactly what to trade and when.
eToro accomplishes the latter by letting traders follow other traders and clone their transactions on the site. One trader, for example, has users with $130 million in assets following his trades. This is a very interesting model since it meshes typical consumer-facing approaches—get users to generate content other users will enjoy—with an exaggerated version of the tendency for institutional investors to trade ideas and end up with very similar-looking portfolios.
Hardware-as-a-Service
Smartphone companies in India are selling phones on credit, and using apps to disable phone features when buyers don't pay. This is getting attention because some phone buyers resell their phones without disclosing the payment plan, but the model makes sense; it's a way to charge based on usage, and a way to automatically collateralize a loan without depriving the user of access to their collateral. They can also make collections a more gradual process:
Within three to four months, [the app will] have gathered enough information about these people to figure out what’s the risk profile...Datacultr uses a laundry list of techniques to force borrowers into paying. The app starts by sending audiovisual prompts in regional languages as reminders. If the user misses their first repayment, it forcefully changes the wallpaper on their cellphones...Juriasingani said that, of all of Datacultr’s nudges, forced wallpaper changes are the most likely to result in a payment. Replacing wallpaper images of family or friends with messages like, “Your EMI is due” makes the reminder difficult to ignore. “We see almost 50% of these people pay within three days of just putting up the wallpaper,” he explained, “and almost 70% in seven days.”