Issue 20

Thinking at the margin

Delivered on 17 February 2019 by Justin Pyvis. About a 5 min read.

Good morning and welcome to Issue 11/2019! It seems we can't go a week without another case of NIMBY-ism (Not In My BackYard) rearing its ugly head, this time in New York:

"Amazon on Thursday canceled its plans to build an expansive corporate campus in New York City after facing an unexpectedly fierce backlash from some lawmakers and union leaders, who contended that a tech giant did not deserve nearly $3 billion in government incentives."

"A number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward," Amazon said in a statement.

It appears as though a small minority of politicians - namely Alexandria Ocasio-Cortez and her socialist cronies - managed to sufficiently dissuade Amazon from opening its campus in New York.

I'm mixed about the decision. On the one hand, I loathe corporate welfare and subsidies. But on the other hand, good on Amazon for refusing to tolerate what was going to be a long period of harassment by a small group of vocal politicians. However, I think on net the decision is bad for both Amazon and New York City, because:

My understanding is that the direct subsidies amounted to ~$505 million, with the rest of the quoted $3 billion resulting from city/state tax concessions through schemes available to all businesses. Don't get me wrong, the $505 million should never have been offered given that Amazon would have grown its presence in New York for free (and still will, albeit more slowly). But just because it wasn't the "best" possible deal doesn't suddenly make it a bad deal. A few rotten apples really have ruined this for everyone (except for Virginia and other regions where Amazon might now expand instead).

However, where Amazon really erred was with its highly publicised"competition" to select a site, pitting cities against each other when it was always going to select New York. The whole charade was nothing but an attempt to get itself some sweet, sweet corporate welfare and now it has blown up in its face. Bezos has no one to blame but himself.

Anyway, enough about Amazon.

New frontiers

Enough of the 5G Hype »

In an ideal world, FTTH would be the standard for home broadband. Unfortunately, not a single human being lives in that world. We have these things called politicians with their own ideas and interests, which often move in very different directions to that ideal. So while FTTH would be great, 5G is infinitely cheaper to deploy and doesn't have the same regulatory hurdles. That's a winner in my books.

Stripe valued at $23 billion and has no plans to IPO, says CEO »

There's always space for improvement, no matter how small it may seem. Coincidentally, John's brother Patrick was on Russ Roberts' Econtalk podcast the other day discussing technological progress (not affiliated with EconByte). Worth a listen.

Traditional media

The logic behind Apple’s give-us-half-your-revenue pitch to news publishers »

Whenever Apple does something it's sure to get a lot of attention, no matter how late it is to the party. I'm very interested to see how this develops; subscription-based news aggregators haven't had much success in the past so I'm firmly on the sceptical side of the fence (I also won't be subscribing).

Social media

Reddit users are the least valuable of any social network »

I don't think so. As regular readers know, I'm no fan of the advertising model, but I don't have a better model (yet!). Reddit has been around for a while, but came close to death under the mismanagement of former CEO Ellen Pao. It's a different beast now and its ARPU will only rise from here (Reddit has a LOT of duplicate accounts, fyi), so Tencent's $150 million - remember this is a company with a market value of over US$500 billion - is probably not a bad punt.


Uber sues to overturn New York City’s cap on new ride-hail drivers »

From the city that brought you rent controls and "socialist" politicians willing to cut off the nose to spite the face (read the Amazon feature above) comes restrictions on rideshare companies. If you ever needed an example of politicians acting against their constituents' interests, look no further than New York City.


Apple iPhone shipments plunge in China with Huawei gaining ground against wider industry slump »

It's true that the Chinese economy is slowing, but that's not why Apple is losing ground. Compared to its Chinese rivals, Apple just can't get away with the 'iPhone tax' in China anymore (neither can Samsung). If it's really worried about losing market share in China, it needs to improve its product or lower its prices.

Incidentally, the credit floodgates have just been opened in China, which should help Apple in the short-term.


JP Morgan is rolling out the first US bank-backed cryptocurrency to transform payments business »

To be fair, 'JPM Coins' are a completely different kettle of fish to most of the cryptocurrencies we know. They will only be used internally for "big institutional clients of J.P. Morgan that have undergone regulatory checks, like corporations, banks and broker-dealers can use the tokens", and they are pegged to the US dollar. I like seeing blockchain technology used but when it's a big bank helping its big clients, meh.Side note: HSBC has been operating its own blockchain for a year, saving ~25% per foreign exchange trade.


Activision-Blizzard just had an awful earnings report. Here's why now might be a good time to buy its stock »

Blizzard makes good games. Destiny 2, which it acquired from Bungie, was not one of them. I've written about Blizzard's problems in the past (Issue 9/2018), but Blizzard is "due" for a new, in-house game sometime soon. Cutting the fat that was Bungie's Destiny 2 will only help.

Image of the week

The mighty A380 is no more, with Airbus announcing that it will end production of the superjumbo following a failure to attract new orders. It follows a decision by Emirates - the world's largest purchaser of A380s by a long way (see the image above!) - to cut back an outstanding order for A380s from 53 to just 14.

Like the Concorde before, it doesn't matter how good the technology is if the economics doesn't stack up. RIP A380.

Issue 20: Thinking at the margin was compiled by Justin Pyvis and delivered on 17 February 2019.