Sunday Snapshots (08/30/20) – Uncertainty, Fake reviews, Amazon's fitness tracker, and more
The Uncertainty Mindset by Vaughn Tan, The thriving market for Amazon reviews, the business case for Amazon's new fitness tracker, Co-pilot, Boys State, and Yangshuo
Greetings from Washington, D.C.!
This edition of Sunday Snapshots comes to you from I-get-why-it's-called-the-swamp weather here in the nation's capital. Having gotten plenty of experience doing so in the last few months, I'm cooped up inside with my cold brew by my side in a mason jar that has more than the usual amount of ice. Never once in my life did I think that I would be longing for Chicago weather, but I guess that's where I am at today.
The first batch of postcards from last week's requests are going out tomorrow morning, if you want one, just fill out this form that will take 15 seconds to complete:
In this issue of Snapshots, I want to explore:
The Uncertainty Mindset by Vaughn Tan
The dark underbelly of the DTC world and fake Amazon reviews
The business case for Amazon's new fitness tracker
My new favorite personal finance app, Boys State, and Yangshuo
Book of the week
Why are we fascinated by Chef's Table and Jiro Dreams of Sushi? What is it about meals that are outrageously expensive (and don't look that filling) that makes them so alluring? How come the famed Michelin guide says that there are certain meals for which it is apparently "worth visiting the country for"?
I suspect it's the same thing as what fascinates people with high-end watches. The rare spirit of the craftsmen, the hard earned sprezzatura, and an unexplained beauty of something novel. And while luxury watches have platforms like Hodinkee that chronicle the industry's launches and trends, there is nothing for pro-amateurs interested in the high-end dining industry.
Vaughn Tan's new book, The Uncertainty Mindset covers one aspect of this world – how the teams behind the best restaurants in the world operate under the curtain of uncertainty. This is easily one of my favorite books of 2020.
First, we start with the job-to-be-done at a high end restaurant. It's to create and serve innovative dishes efficiently. Creating something special and meeting financial objectives are often in conflict. Everything has to be reliably delicious and consistently cheap.
Second, we look at how the world of truly innovative dishes has exploded in the last couple of decades. As with almost major shifts in the world in that time frame, this was catalyzed by the internet. Fringe ideas about ingredients and techniques were shared on forums and blogs. It was the democratization of high-end cuisine to a certain extent.
Fringe ideas are like asteroids orbiting a planet. They will likely stay fringe in their stable orbits and never collide with the mainstream view of the world. But if another force – let's say another big body exists – the fringe asteroids will be on a collision course with the main stream planet. When these fringe ideas collide with the main stream, they make a big impact.
That's exactly what happened in the world of high-end dining. Propagated by the conversations on the internet, conferences like MAD and cookbooks like Modernist Cuisine made this previously illegible knowledge much more accessible.
This led to a big shift in how restaurants approach R&D work. While it used to be that R&D (research & development) teams were an expensive indulgence compared to the the hyper-efficient kitchens that served lunch and dinner every day to hundreds of people, this made R&D a central part of their business strategy. It's how they made innovative experiences in a style that was consistent with their brands.
Some meta commentary: This book has some great stories. But the problem is exactly that – it's a book. These are stories that are held back by the medium with which they are told. When Vaughn describes cooking processes and colorful personalities, I struggled to keep along. If last week's book should be a Paul Greengrass–directed spy thriller, this should be a Dan Gelb–directed meta-episode of Chef's Table or a standalone film. Even a Craig Mod–styled book could work. The more fundamental question here is how to turn what you see, hear, and smell into text? It's a translation and legibility problem.
Usually when I cover a book across two weeks it's because I wasn't able to finish reading it. But while I did finish the book, I want to catalog more of my lessons in next week's issue of Snapshots. Stay tuned for dessert.
Long read of the week
The Market for Fake Reviews by Sherry He, Brett Hollenbeck, and Davide Proserpio
If you've ever sold anything on Amazon, you're no stranger to the fact that your product ranking on the relevant keyword is everything. It's why Amazon has been in anti-trust hot water about putting AmazonBasics results on the top of the search rankings.
One of the most important inputs into this most important predictor of sales is user reviews. The more and the higher the reviews, the higher the algorithm rates you.
When you set up any system, there will be people who try to game it. Amazon reviews are no exception. This paper by researchers at UCLA and USC explores the large underground industry of fake reviews.
What they find is surprising for those who haven't seen the dark underbelly of pastel-colored subway ads.
The vast majority of fake review solicitations compensate the reviewer by refunding the cost of the product via a PayPal transaction after the five-star review has been posted. Sellers advertise that they also cover the cost of the PayPal fee and sales tax. We observe roughly 15% of products also offer a commission on top of refunding the cost of the product. The average commission value is $6.24 with the highest observed commission for a review being $15. Therefore the vast majority of the cost of buying fake reviews is the cost of the product itself. Only reviewers located in the United States are eligible to participate, and they must prove to the seller in advance that they are located in the United States with a valid Amazon account. The reviewer then actually buys the product and therefore it is listed as a “Verified Purchase”, and the reviewers are encouraged to leave lengthy, detailed reviews with photos to seem authentic and organic. In these markets reviewers must show proof of leaving a positive review to receive compensation.
Business move of the week
Amazon's latest fitness tracker
Amazon released Halo, a new fitness tracker, along with a membership program that analyzes all the data. The tracker is priced at $99.99 (there is a 35% discount during the Early Access period) and the membership program is priced at $3.99/month.
One of Amazon's core strengths is to create internal tools, iron out the kinks in those tools, recognize that they would be valuable to others, and make external versions of these internal tools. The most famous example of this is AWS – their on-demand cloud computing platform that first started as something for the Amazon e-commerce website to be hosted on.
A while ago, Amazon announced that it would be releasing a new insurance program for its employees in partnership with J.P. Morgan and Berkshire Hathaway. The program had a pilot that started about eight months ago. The results of these pilots must have been encouraging. If the employees on this pilot program had lower risk profile due to the intervention of a digital wearable like Halo, then the business case for something like this is self-evident. Lower risk profiles = lower premiums = lower overhead costs for Amazon. Even small savings per person can roll up to large number when aggregated over its 840,400 employees.
If we look at it from the consumer angle, the flywheel for this product looks something like this (assuming that Amazon does a partnership with an insurance company which has to be a part of the plan): More health data via the Halo leads to some part of the insurance premiums cut going to Amazon. The data can also lead to suggestions for product. See an increase in weight? Recommend some low-carb snacks. See that your sleep quality has been decreasing? Recommend a sleep mask or melatonin tablets. It could integrate with another Amazon product, PillPack, to manage your medications and how it's interacting with your body. The possibilities are endless.
But does it make sense in the current competitive landscape?. The bear case is that Apple stands firm with the Apple Watch with Google nibbling at the bits with its WearOS and Fitbit acquisition. Add to that the fact that Amazon has never been good at consumer products (remember the Fire Phone?) and it’s just not in their DNA. The bull case is that because of the way it can create platforms out of internal projects, they are well positioned to integrate the world of atoms and regulations into a compelling experience for the end user. The physical device is not important at all as long as it has feature parity with the competition – it's the services that integrate with it that offer Amazon a chance at redemption in the consumer device space.
I'm all ears to hear your thoughts on this. Do you think Amazon will succeed against its odds? You can send me a note by replying to this email or send me a message on Twitter.
Odds and ends of the week
Three very different things this week:
💰 Co-pilot: I've really enjoyed using Co-pilot as my primary personal finance app over the last couple of months. It's like if Mint took a time machine from the early 2000s and came back to 2020. The UI is intuitive, you can review every transaction, and it uses a secure Plaid backend to pull in all the information you need. You can flag subscriptions and set weekly budgets that you view at a glance via line trackers. It's a delight to use the product. I highly recommend it.
🏳️ Boys State: Recommended to me by many people as soon as it came out, this movie is a journey into the weird and fantastic world of Boys State Texas. Explore a political landscape that mirrors our own in deeply uncomfortable ways where manufactured authenticity reigns supreme. Boys State is now streaming on Apple TV+.
On a side note, it's distributed by A24, a company that not enough people are paying attention to. I want to fix that by writing a deep dive on the company. Please send any recommendations for collaborators or domain experts (including yourselves) my way:
🚁 Yangshuo, China: I recently did a digital clean of my hard drive and found some drone footage from the summer of 2018. I spent a couple of months in Southern China, specifically the town of Yangshuo near Guilin in Guangxi province, learning Mandarin and enjoying the incredible hospitality of the town. I compiled a soothing video of all the drone footage I took from that summer and published it here:
That wraps up this week’s newsletter. You can check out the previous issues here.
If you want to discuss any of the ideas mentioned above or have any books/papers/links you think would be interesting to share on a future edition of Sunday Snapshots, please reach out to me by replying to this email or sending me a direct message on Twitter at @sidharthajha.
Until next Sunday,