Tag Archives: products

Zuckerberg latest confession spread concerns among users

The latest confession from Facebook has become the latest company to admit that human contractors listened to recordings of users without their knowledge, a practice the company now says has been “paused”.

All the companies, including Facebook, said the data was stripped of any identifying information and was only used to improve their products, and not to help tailor ads to users.

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Facebook says it followed the lead of other companies to “limit human review of non-public audio.” When asked if it also captures audio from its Portal video calling product, the company declined to answer.

The revelation is just the latest in a long string of privacy violations the company has admitted to in recent years, including the Cambridge Analytica scandal, which compromised the data of 87 million users, and a 2018 hack that exposed the personal information of 50 million users. Just last month, the company last month agreed a $5 billion fine with the FTC after an investigation of privacy practices.

Facebook has become the latest company to admit that human contractors listened to recordings of users without their knowledge, a practice the company now says has been “paused”.

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Citing contractors who worked on the project, Bloomberg News reported on Tuesday that the company hired people to listen to audio conversations carried out on Facebook Messenger.

The practice involved users who had opted in Messenger to have their voice chats transcribed, the company said. The contractors have tasked with re-transcribing the conversations in order to gauge the accuracy of the automatic transcription tool.

Why Unilever planned to closure its Head office in London?

Back in 2016 when Brexit emerged and it was announced that it will take 2 and half years for Brexit implementation since than Unilever decided to shut down its London Head-office and continue its operations effectively from Rotterdam Netherlands. What makes them going against their original decision and now they plan to it operative in London.

Unilever, the consumer products giant, has given up on plans to close its London headquarters, responding to shareholder criticism of an initiative to simplify the company’s organization.

The company announced in March that it would make Rotterdam, the Netherlands, its sole headquarters. The move was seen as a symbolic blow to Britain as it negotiates a breakup with the European Union.

“We recognize that the proposal has not received support from a significant group of shareholders and therefore consider it appropriate to withdraw,” the company said in a statement.

For nearly a century, the company — whose products include Dove soap, Hellmann’s mayonnaise, and Lipton tea — has maintained headquarters in both London and the Netherlands. Some investors have pushed Unilever to eliminate the dual structure, arguing that doing so would make the company more agile and better able to pursue mergers

How the most trusted and influential US company can Gobble Assets Management?


If you buy physical and digital products from Amazon, would you consider buying financial products as well?

70% of U.S. households trust Amazon enough to be Prime members (Consumer Intelligence Research Partners, 2017). In all probability, an even greater portion of households owning mutual funds are Prime members. I believe most of these customers would at least investigate the possibility of becoming an Amazon asset management client. It’s also likely that some non-trivial portion of this group would go on to become clients. Jeff Bezos’ disdain for Wall Street is well known, so it’s surprising that he doesn’t appear to have set his sights on asset management. If Amazon could decimate bricks and mortar retailers, what might happen to the asset management industry, where 35% operating margins are the norm?

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How Amazon Can Gobble Assets

In addition to its home page, Amazon is rich with the most important resource in asset management: trust. The firm earned the highest reputation ranking in the U.S. in a 2017 Harris Poll. It was ranked as both the most influential and most trusted company in a 2016 survey by SurveyMonkey. It was the only company to land in the top 5 for both categories. Unlike a surprising number of tech companies, Amazon has paid attention to web security. When you’re handling other people’s money, competently allocating resources for security is critical. There are some asset managers and fund administrators I wouldn’t do business with because of observed technology or culture gaps with regard to security. The public’s familiarity with and trust in Amazon raises its brand to a privileged place in business.

That doesn’t automatically translate to easy monetization in asset management. But Chinese tech companies show how easy it could be. Take a look at Alibaba, which is a Chinese incarnation of Amazon + eBay + Paypal + Mastercard + UPS +… Fidelity. In just 4 years, it has come to manage the world’s largest money market fund, according to the Wall Street Journal. The asset management world watched in awe and horror as the fund amassed $92 billion in its first year alone, becoming the world’s 4th largest money market fund in 2014. At first conceived as a holding place for excess funds held by Alibaba customers at Alipay (similar to Paypal), the fund exploded in popularity by combining an incongruously high yield with NAV principal stability.

Alibaba has expanded its product line to include funds managed by other asset managers. It is possible that Alibaba eventually houses the world’s largest asset manager. Tencent, another Chinese internet behemoth, has also entered the asset management domain. Could Amazon embark on a similar venture?

Thought Experiment on the Amazon Fund Platform

Imagine that you go to the Amazon homepage. You click on a link labeled “Funds”, which is next to the “Prime” link. You are now on a fund products page, featuring a mix of Amazon branded and 3rd party funds. Just as you can buy an Amazon private label sweater for $7 or a branded sweater for $75, you can now buy a large cap U.S. equity index ETF from Amazon with zero management fees or the Vanguard equivalent with 0.04% in management fees.

Trading in either ETF would occur with zero transaction cost for non-professional traders. Since placement on the Amazon platform is so valuable, external fund managers pay Amazon a fee, allowing Amazon to charge no transaction cost. Presentation of fund performance, performance attribution, and risk decomposition are standardized, colorful, and informative. It is superior to similar presentations by industry incumbents because Amazon specializes in presenting information clearly and quickly. At the first layer of detail, the information suits average retail investors. At the second and third level of detail, quant PhDs are satisfied.

Just as Amazon doesn’t care which sweater you buy as long as it’s ordered through them, the company is indifferent to the debates between active vs. passive, open end fund vs. ETF, 60/40 vs. 130/30, domestic vs. international.

If you want to buy it, Amazon will sell it. Do you like Southeast Asian casinos with artificial intelligence croupiers? You can find a niche ETF that holds that group of companies in either market cap weighted or equal weighted form. Amazon might even offer its own private label ETFs on simple indices (constructed by Amazon itself to save on fees it would otherwise have to pay to index providers). It might also offer private label risk factor strategies and unabashed active strategies, which will probably do no better, but no worse, than their peer groups.

What we do know is that Amazon’s active strategies will be cheaper. The website offers funds that have both weak and strong historical performance because Amazon knows that historical performance is no indication of future returns. Amazon will offer it all, but provide adequate quantitative and qualitative disclosure so that end investors can decide. You choose to sweep cash into the Amazon short term investment vehicle, which doesn’t guarantee NAV stays at $1, but tries hard to. Maybe Amazon uses funds from this account for corporate purposes, driving its negative net working capital into more negative territory. Account holders benefit from a slightly higher yield than they might otherwise get (due to Amazon’s low investment grade debt rating), and Amazon has a cheap funding source.

Portfolio Management

Perhaps Amazon identifies you as a top 0.01% trader in terms of hit rate, profitability, and drawdowns for 5 years running, across every 12 month period. Amazon’s analytics determine that you are achieving these results with statistical robustness, devoid of risk factor exposures that make strategies unscalable (small cap, illiquidity risk); therefore, you’re offered a chance to run your own fund with infrastructure, compliance, and reporting handled by Amazon at no fixed cost and 10% of whatever management fee you propose.

Amazon assists you with marketing on the website and seeds you with $10mm. The only condition is that you hold all personal liquid investments at Amazon (for compliance oversight), and Amazon itself custodies the assets. Soon Amazon has a virtual stable of in-house portfolio managers, all over the world, managing trillions of dollars, at minimal cost to end investors. Marginal distribution costs are zero and almost all compensation goes to the portfolio manager. Due to the law of large numbers and the culling of its entire user base, Amazon’s active managers are in the top decile of all active managers in all active management categories.

Maybe you’re a deeply knowledgeable and conservative investor, preferring funds from established asset managers. You like a specialist emerging market active manager whose fund you’ve owned for 10 years but suspect you don’t understand how to fairly analyze their relative performance vs. other active managers or vs. passive or risk factor ETFs. Amazon has a tool that analyzes the fund’s SEC filings, and derives the most efficient combination of index and risk factor ETFs to replicate the active fund’s performance. You also see costs compared to its proxied combination of passive or smart beta or risk factor exposures. Amazon’s technology delivery and process optimization caters to clients of varying degrees of sophistication.

Investment Advice

Amazon recommends Huckleberry Finn because you ordered Tom Sawyer last week. When you go to the Funds page, you get a recommendation to look at a combination of 3 ETFs that mimics (at 1/10th the cost) a branded bond fund that you looked at earlier.

Amazon has a robo-advisor available with the latest in AI and human voice-modulated response. If you want to trade internationally without being gouged on FX costs, you can do that too. Perhaps you want to be informed of the 10 biggest movers in the tech sector at 9:45 am every day. Alexa gives you a shout out and stands by to take your limit order afterward. Amazon also has an army of Series 7 certified advisors, freshly hired from Vanguard and other old guard companies. When you speak with them on the phone, you marvel at how energized and enthusiastic they are. Because of Amazon’s overall relationship with you, these reps are armed with knowledge about you that comparable financial firms could not hope to know.

Who Benefits? Who Suffers?

I have no personal knowledge of a fund management skunk works at Amazon, but as an Amazon shareholder, I’d be disappointed if they don’t already have one. I think the biggest beneficiary of an Amazon entry into fund management will be retail investors, as it should rightly be. Many investors understand that they’re not informed investors, but also don’t care to spend much time learning. For them, trust is paramount, and Amazon has it in spades.

Beneficiaries in the existing asset management industry exist too. It will be those active managers who truly add value by generating excess returns above and beyond the risk factor loadings inherent in their portfolio. Their inclusion on the Amazon platform would amplify their exposure to end investors, without the layer of costs introduced by mediation through RIAs, investment consultants, and the Rube Goldberg fund distribution machinery. Another possible beneficiary is a growing class of portfolio managers who want to free themselves of the politics and endless meetings at a typical asset management firm. Millennial money managers, especially, may enjoy working in a streamlined, virtual asset management firm without comically useless 7:00am market update meetings. A zero cost distribution channel provided by Amazon might attract entire fund management teams who can now work in peace, charge less, and make more.

The bundling of compliance overhead made possible in part, by the replacement of lawyers with AI, could drive marginal compliance costs down to zero. That’s a boon for folks who want to just manage money. In my experience, the compliance cost center has driven a large portion of expenditures in HR and technology at the largest asset managers over the past 10 years. Madoff cost his investors tens of billions of dollars, but cost the industry (and by extension, all end investors) hundreds of billions for what may be nothing but the illusion of safety.

Fixed income managers of retail assets could be in a pickle because most fixed income “alpha” relies on simple biases in systematic risk factors. Taxable core and core plus fixed income mandates typically generate their pseudo-alpha by: 1) taking excess credit risk; 2) taking excess interest rate risk; 3) selling volatility through securities with embedded short call options. The bigger the fund, the more simplistically systematic this overweighting becomes because taking such overweights is the only way to move the needle when the manager needs to keep an eye on maintaining a liquid portfolio.

In emerging markets fixed income, pseudo-alpha is generated by: 1) taking excess credit risk; 2) taking out-of-index FX risk; 3) taking illiquidity risk (i.e. buying bonds that rarely trade and trade with a yield premium as compensation). Furthermore, EM fixed income managers start ahead of the index because most indices used for marketing are sub-optimally constructed. It’s simple to avoid glaring errors such as buying a market cap weighting of the most indebted companies, and active managers shouldn’t be paid extra to avoid this silly error. Amazon’s performance attribution and disclosures, simply presented, could reveal much of fixed income alpha to be glorified beta. You would be able to compare the fund vs. a true risk benchmark, not the fund firm’s marketing benchmark.

The continuing development of better risk factor ETFs will also make it easier to outperform “active” bond funds by offering cheaper ways to take exposures to the risk factors that are overweighted by the active managers. Equity managers will have it slightly easier compared to bond managers because taking idiosyncratic risk in equities still has potential positive payoffs. One position in a tech stock may boost the overall portfolio’s performance in a big way. The story is different for fixed income. Because the upper bound on a bond’s price return is par, 20-baggers don’t exist to make up for a default incurred elsewhere in a concentrated bond portfolio. Consequently, long term bond investors are usually ill-served in taking concentrated idiosyncratic risk in bonds held to maturity. A bond’s realized return is generally its yield-to-maturity (assuming no default and reinvestment rates on coupon income that are in line with the yield-to-maturity at time of purchase).

Intermediaries in the advisory space, and others who are involved in that twilight between advising and asset allocation, will probably not be helped by an Amazon incursion, especially if it implements a human advisory function.

Implementation Risk and Priorities

Starting up a virtual distribution shelf for investment funds is no easy task, but I believe it is much easier to do today than what Amazon managed to do in its primary business of delivering physical goods from the biggest virtual storefront in the world. Investment funds take no physical space, no warehouses. You don’t need to account for bathroom breaks by human workers. In a sense, this business is ideal for Amazon as a new entrant and dovetails perfectly with the management discipline and proven execution that Bezos has shown.

Some might say that it would be hard for Amazon to be more cost efficient that Vanguard, especially given Vanguard’s mutual ownership structure. I beg to differ. I think it not only possible, but probable, that Amazon could do it both cheaper and better. Until recently, most of us believed that Walmart defined retail efficiency. Amazon’s hidden advantage is its ruthless commitment to per customer profitability. I’m willing to bet that the firm has our number. It knows our lifetime value as customers and how we stack up against our cohorts by age, zip code, film preference, etc.

Similarly, Amazon has shown that it doesn’t hesitate to fire unprofitable customers who abuse the return privilege. If it exercises the same discernment in avoiding the worst clients, incumbent asset managers stand to lose. Amazon has no legacy costs and no legacy relationships in asset management. Furthermore, it will not plead for such relationships. If you’re a 3rd party fund manager, for instance, getting on Amazon’s platform will be like the Godfather’s offer you can’t refuse.

To me, asset management is the type of utility business that Amazon could easily disintermediate, for both its own benefit and the benefit of average investors worldwide. If you thought the overbuilt status of bricks and mortar retailing provided the kindling to the Amazon explosion in retail, the abundance of asset managers (especially active asset managers) provides the uranium for an apocalypse that could be much worse.

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Amazon moving towards new delivery endeavor

Amazon confirmed that it intends to expand into a new delivery endeavor, but the company did not provide details on the schedule or scope.

“We’re always innovating and experimenting on behalf of customers and businesses that sell and grow on Amazon to create faster low-cost delivery choices,” spokesperson Kristen Kish told the E-Commerce Times. Amazon has relied on third-party shippers for many years, but those firms have tended to become overwhelmed and backlogged during the critical Christmas holiday delivery season.

The move marks Amazon’s latest effort to increase its control over logistics, which have been a central focus of the company as it has grown to become the most powerful e-commerce retailer in the U.S.

The company plans to launch the new service within weeks, The Wall Street Journal reported Friday. It initially will pick up goods from third-party sellers that already work with Amazon and deliver them to customers. The service eventually will expand to merchants that currently do not work with Amazon. It will launch in Los Angeles and expand to other U.S. cities over time, according to the Journal.

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It did what Walmart did decades ago but better. Amazon & Whole Foods

Jeff Bezos is a vibrant man he and his recent move towards grocery have been in the works for a while now. But it’s not a gamble, nor was it a binge purchase (unlike what a lot of us do on Amazon.com). There are a number of good reasons for the acquisition, the expansion of Amazon Fresh and Amazon Go, and the need for multisensory experiences during purchasing being just two of them. But the most important is this – brick and mortar Amazon stores are set to revolutionize shopping because of a new Secret Product coming to a store near you.

First, think about the average user who has signed up for Amazon Prime. Let’s call her Robin. Robin is willing to (and can afford to) pay a premium every month for quicker guaranteed deliveries. She also orders enough from Amazon every week that she believes Prime is worth the investment.

Think about the average user who shops at Whole Foods. Let’s call her Robin. Robin is willing to (and can afford to) pay a premium every month to shop for groceries. She believes that the quality is worth the investment.

The demographics of Amazon Prime users include this – they’re middle-aged, there are more than 80 million of them, they spend almost double as compared to non-prime users, and they make good money.

And so, Amazon might have just set itself up to give its customers a brand new Secret Product – customized grocery stores that cater to each of its audiences.

This demographic is eerily similar to the demographic at Whole Foods. So, this does explain why Whole Foods, but why grocery stores at all? And what’s this secret product that Amazon can suddenly bring to these customers with the purchase of Whole Foods?

To understand that, we need to understand why Walmart became successful.

Just bear with me; it’ll make sense in about 60 seconds (and the stopwatch starts now).

In 1975, according to Newsweek, when Walmart was a tiny fish in a sea of supermarket sharks, it did what no one else dared to – Walmart bought a computer.

It started to collect data. It started to sort that data. And it started to use that data. With the introduction of barcodes on every product, Walmart knew everything about its stores. It knew which brands sold well, and which ones just took up shelf space. So if Central New Jersey hated Colgate products, Walmart wouldn’t waste too much space or money on them. If Southern California was a huge fan of Crest, dental aisles would be stocked heavily with them. Walmart was a mile ahead of its competitors.

But Amazon took that idea – and converted it into something much bigger and better.

Walmart knew a lot about its stores as a collective. But Amazon knows a lot about its individual customers. It knows about the products you’ve bought once in your life. It knows about the products you buy every two weeks. And as scary (or comforting, depending on who you are) as it sounds, Amazon knows where you get those products delivered.

Today, Amazon can build a national heat map of every product available on its website – they can tell where Colgate is the hottest brand for toothbrushes, and where Crest reigns supreme, down to the city. They can tell where Coca-cola is popular, and where Pepsi has the upper hand, down to the zip code. In short, it knows where and what each and every one of its 300 million customers buys, down to the house.

It did what Walmart did decades ago – but better.

Why is this relevant?

Can that be applied to the newly purchased, and long-time struggling grocery stores? Can Amazon customize each Whole Foods to be relevant to the customers they are meant to serve? It might not be immediate since Amazon Fresh only has so much data to provide, but over time, can’t Amazon tell which grocery products are incredibly popular in Central New Jersey, and which ones rarely sell in Southern California?

The traditionally 1% profit earning industry, is set to transform itself into a moneymaking behemoth. Amazon will soon be capable of composing each of the 430 Whole Foods stores with primarily only the products that are going to sell – then it becomes clear as to why Jeff Bezos is a hundred miles ahead of his competitors, and why my future grocery shopping visits are about to be a lot more pleasing. No shelf space wasted. All products sell. Costs are reduced. Profits will soar.