Wary Of The “Next Warby” via @RedGiraffe

"If a product can be sold on Amazon, you can be sure the margin will asymptote toward zero."

-- @micahjay1

After Walmart started uprooting small towns of small stores, Sam Walton suggested that it might be true that it is hard for small stores to compete with Walmart on price, but they could beat Walmart on value add. What can be the value add for products that can be found on Amazon?

Can your product be custom made for individuals? Amazon could not do that. Can your product be made integral to some service only you can provide? Body oil might be cheap on Amazon, but Amazon does not do massages. Or therapy, for that matter. Amazon sells yoga mats, but it does not give yoga lessons.

When manufacturing itself is customized to each individual, Amazon is totally out of the picture. One size does not fit all. Not always. Maybe never, given the chance.

Well said: "if a product can be sold on Amazon, you can be sure the margin will asymptote toward zero" @micahjay1 https://t.co/iDpHJL3D31

— Sapna Shah (@RedGiraffe) November 16, 2015

Wary Of The “Next Warby”

I fear that many of the more recent consumer product-oriented startups put too much stock in their ability to build a brand, or — even worse — their ability to hire an agency to build the brand for them. Strong marketing is certainly necessary, but not sufficient for building venture-scale businesses. ..... Slick messaging and innovative industrial design capture consumer attention, but it’s the founder’s focus on outsize profit margins that captures VC interest. ....... Eye care in the U.S., and most of the world, is dominated by a Swiss company called Luxottica. You’ve probably never heard of them, but they control 80 percent of the market for eyeglasses. ...... Like Apple, Luxottica has vertically integrated to such a degree that it’s very difficult for anyone else to compete. ...... The $9 billion U.S. mattress market is essentially controlled by two private equity firms who bought up the most valuable brands in the market. The companies that ran these businesses cost-engineered the products to make them cheaper to produce, for instance, by making mattresses singled-sided — which forces more frequent replacements. ........ Mattresses are big and bulky, and rely on specialty retail locations staffed by salespeople that make used-car salesman look honest. Still, limiting competition and channels meant margins were protected. Until Casper came along. ...... Casper cuts through this knot by shipping a full-sized mattress in a conventional box via UPS or courier. ....... Casper has been able to create a differentiated product at a low cost, figure out a better way to sell and deliver, all while keeping margin along the way. ..... Like the market for glasses and mattresses, the $3 billion U.S. razor market is huge and concentrated, with Gillette and Schick accounting for 70-90 percent of sales. ....... Razors have never been better, but that fanaticism for follicle removal comes with an obscene price tag. ..... Basically, if a product can be sold on Amazon, you can be sure the margin will asymptote toward zero. ..... Founders should bathe themselves in the nuance of an industry by attending trade shows and talking to insiders. .......

VCs and founders can act a bit like lemmings.

...... Mattresses were comfy or cost-effective before Casper, but they were never cool.

Vivek Wadhwa: The Smartest Dude In Silicon Valley

(reprinted without permission)

If I am an optimist, it is because Vivek is looking into his crystal ball. I want this guy on my company's Board so bad!

"New trillion-dollar industries will come out of nowhere and wipe out existing trillion-dollar industries."






2014 is ending, but this wave of technology disruptions is just beginning

Dec 22, 2014 23,004 Views 732 Likes 153 Comments

Changes in technology are happening at a scale which was unimaginable before and will cause disruption in industry after industry. This has really begun to worry me, because we are not ready for this change and most of our leading companies won’t exist 15–20 years from now. Here are five sectors to keep an eye on:

1. Let’s start with manufacturing.

Robotics and 3-D printing have made it cheaper to manufacture in the United States and Europe than in China. Robots such as Baxter, from Rethink Robotics, and UR10, from Universal Robots, have arms; screens which show you their emotions; and sensors that detect what is happening around them. The cost of operating these is less than the cost of human labor. We can now have robots working 24×7 and doing some of the work of humans. Over time, these robots will become ever more sophisticated and do most human jobs. The manufacturing industry is surely going to be disrupted in a very big way. This is good news for America, Europe, and parts of Asia, because it will become a local industry. But this will be bad for the Chinese economy — which is largely dependent on manufacturing jobs.

In the next decade, robots will likely go on strike, because we won’t need them anymore. They will be replaced by 3D printers. Within 15 to 20 years, we will even be able to 3D print electronics. Imagine being able to design your own iPhone and print it at home. This is what will become possible.

2. The reinvention of finance.

We are already witnessing a controversy over Bitcoin. Many technology and retail companies are supporting it. Crowdfunding is shaking up the venture-capital industry and making it less relevant because it provides start-ups with an alternative for raising seed capital. We will soon be able to crowdfund loans for houses, cars, and other goods. With cardless transactions for purchasing goods, we won’t need the types of physical banks and financial institutions that we presently have. Banks in the United States seem to be complacent because they have laws protecting them from competition. But our laws don’t apply in other countries. We will see innovations happening abroad which disrupt industries in the United States.

3. Health care.

Apple recently announced Healthkit, its platform for health information. It wants to store data from the wearable sensors that will soon be monitoring our blood pressure, blood oxygenation, heart rhythms, temperature, activity levels, and other symptoms. Google, Microsoft, and Samsung will surely not be left behind and will all compete to provide the best health-data platforms. With these data, they will be able to warn us when we are about to get sick. AI-based physicians will advise us on what we need to do to get healthy.

Medical-test data, especially in fields such as oncology, is often so complex that human doctors cannot understand it. This will become even more difficult when they have genomics data to correlate. Over the last 15 years, the cost of human genome sequencing has dropped from the billions to about a thousand dollars. At the rate at which prices are dropping, the cost of sequencing will be close to zero in a few years and we will all have our genomes sequenced. When you combine these data with the medical-sensor data that the tech companies are collecting on their cloud platforms, we will have a medical revolution. We won’t need doctors for day-to-day medical advice any more. Robotic surgeons will also do the most sophisticated surgeries. We’re going to disrupt the entire health-care system.

4. Now take the energy industry.

Five years ago, we were worried about America running out of oil; today we’re talking about Saudi America — because of fracking. Yes, fracking is a harmful technology; nevertheless it has allowed America to become energy independent and will soon make it an energy exporter. And then there is solar energy, which some people have become negative about. But it is a fact solar prices have dropped about 97 percent over the past 35 years, and, at the rate at which solar is advancing, by the end of this decade we will achieve grid parity across the United States. Grid parity means it’s cheaper to produce energy at home on your solar cells than to buy it from utilities. Move forward another 10 or 20 years, and it will costs a fraction as much to produce your own energy as to buy it from the grid. This means that the utility companies will be in serious trouble. This is why they are beginning to fight the introduction of solar. If solar keeps advancing in the way it is, it will eclipse the fossil-fuel industry. Solar is only one of maybe a hundred advancing technologies that could disrupt the energy industry.

When we have unlimited energy, we can have unlimited clean water, because we can simply boil as much ocean water as we want. We can afford to grow food locally in vertical farms. This can be 100 percent organic, because we won’t need insecticides in the sealed farm buildings. Imagine also being able to 3D print meat and not having to slaughter animals. This will transform and disrupt agriculture and the entire food-production industry.

5. Communications.

Yes, even this industry will be disrupted. Note how AT&T, Verizon, and Sprint have seen their landline businesses disappear. These were replaced by mobile—which is now being replaced by data. When I travel abroad, I don’t make long-distance calls any more, because I just call over Skype. Soon we will have WiFi everywhere, thanks to the competition between companies such as AT&T and Google to provide superfast Internet access. We will be able to make free calls over open WiFi networks.

***

In practically every industry that I look at, I see a major disruption happening. I know the world will be very different 15 to 20 years from now. The vast majority of companies who are presently the leaders in their industries will likely not even exist. That is because industry executives either are not aware of the changes that are coming, are reluctant to invest the type of money that is be required for them to reinvent themselves, or are protecting legacy businesses. Most are focused on short-term performance.

New trillion-dollar industries will come out of nowhere and wipe out existing trillion-dollar industries. This is the future we’re headed into, for better or for worse.

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Manufacturing Was Never Going To Go Away

Global Warming (album) (Photo credit: Wikipedia)

Cheap labor should be allowed to compete globally. That is only legitimate. But so should advanced manufacturing. The next industrial revolution will produce smarter goods in smarter ways with smarter energy. And goods are not going away. It is not like we have evolved to only consume food and broadband. And it is only a matter of time before China competes in advanced manufacturing as well. And that is good news. A robust China prevented the world going into a deep recession in 2008. China is successfully competing on bullet trains and clean tech, is it not? But if you believe in the expanding pie, it is a win win situation.

Cost is the reason reshoring is happening. Cost is the reason clean energy will happen. Bad air is a huge health expense, and health costs have to be factored in. Sandy - caused by global warming - cost tens of billions. That's a cost of global warming and has to be factored in.

Literally every good can be connected to the Internet. Every good can be made to be smart.

Transportation costs are also very real.

Just like a strong China is good for the world, a strong America is also good for the world. The global economy benefits the more giants it has.

And China is not going to stop manufacturing. Rising wages there is a sign domestic consumption in China is expanding.

Made in America, Again

“reshoring.” Although Chinese wages are a fraction of U.S. labor costs, rising shipping rates, quality problems, and the intangible costs of being far from headquarters all add up. That’s why some companies have begun to rethink the manufacturing equation....... Chinese wages are doubling every four years .... the vast majority of what Americans consume isn’t high-tech at all. We need to efficiently make ladders and hammers and paper and lights .... A refrigerator is made up of very little intellectual property and a lot of weight.

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Intelligent Manufacturing

Factories getting carted away to Mexico was that "huge suction sound" Ross Perot heard way back in 1992. That image still persists. The Great Recession has made those fears much more concrete and real. Those jobs that are gone are gone. That seems to be the thinking.