The partnership between China and Western governments & corporations has hit a rough patch recently, namely the Hong Kong protests and how the NBA, Apple, and gaming company Blizzard have handled various responses to them on their platforms. I don’t have a lot to add on the matter, but I have read some interesting takes in the past few days that you might also want to take a look at.
Ben Thompson, The Chinese Cultural Clash:
I am not particularly excited to write this article. My instinct is towards free trade, my affinity for Asia generally and Greater China specifically, my welfare enhanced by staying off China’s radar. And yet, for all that the idea of being a global citizen is an alluring concept and largely my lived experience, I find in situations like this that I am undoubtedly a child of the West. I do believe in the individual, in free speech, and in democracy, no matter how poorly practiced in the United States or elsewhere. And, in situations like this weekend, when values meet money, I worry just how many companies are capable of choosing the former?
John Gruber riffing on Thompson’s piece:
The gist of it is that 25 years ago, when the West opened trade relations with China, we expected our foundational values like freedom of speech, personal liberty, and democracy to spread to China.
Instead, the opposite is happening. China maintains strict control over what its people see on the Internet — the Great Firewall works. They ban our social networks where free speech reigns, but we accept and use their social networks, like TikTok, where content contrary to the Chinese Community Party line is suppressed.
Farhad Manjoo, Dealing With China Isn’t Worth the Moral Cost:
The People’s Republic of China is the largest, most powerful and arguably most brutal totalitarian state in the world. It denies basic human rights to all of its nearly 1.4 billion citizens. There is no freedom of speech, thought, assembly, religion, movement or any semblance of political liberty in China. Under Xi Jinping, “president for life,” the Communist Party of China has built the most technologically sophisticated repression machine the world has ever seen. In Xinjiang, in Western China, the government is using technology to mount a cultural genocide against the Muslim Uighur minority that is even more total than the one it carried out in Tibet. Human rights experts say that more than a million people are being held in detention camps in Xinjiang, two million more are in forced “re-education,” and everyone else is invasively surveilled via ubiquitous cameras, artificial intelligence and other high-tech means.
None of this is a secret.
Om Malik, Our Collective Chinese Conundrum:
We in the West should very well know what and who we are dealing with — China might be decked out in Louis Vuitton, but underneath, it is still a single-party, quasi-communist nation. Knowing the Western desperation for growth and the insatiable needs of the stock markets, China also knows it can yank anyone’s chain.
Huawei isn’t a recent problem. It was a problem a decade ago. The dynamic in this spat between the NBA and China isn’t new — China gets what China wants, not the other way around. Why are we being outraged now? The West signed up for this.
Malik quotes from Ian Bremmer’s newsletter:
in the west, the past decades have been marked by a view that china would eventually adapt to western norms, institutions, political and economic systems. but from an asian perspective, the opposite appears more likely. after all, of the last 2,000 years, china and india have led the global economy for the first 1800; europe and the united states only flipped the script for the last 200. now that’s about to change. and when it does, it’s going to happen quickly, powered by 1.4 billion increasingly urban, educated and technologically-connected chinese citizens. take the long view (and an asian perspective) and it’s a better bet that the west will adapt to the realities of chinese economic power, not the other way around.
Kevin Systrom and Mike Krieger, the two co-founders of Instagram, have resigned from Facebook.
Mr. Systrom, Instagram’s chief executive, and Mr. Krieger, the chief technical officer, notified Instagram’s leadership team and Facebook on Monday of their decision to leave, said people with direct knowledge of the matter, who spoke on condition of anonymity because they were not authorized to discuss the matter publicly.
In a press release, the pair explained their decision a little:
We’re planning on taking some time off to explore our curiosity and creativity again. Building new things requires that we step back, understand what inspires us and match that with what the world needs; that’s what we plan to do.
Facebook released a statement from CEO Mark Zuckerberg on Twitter (for some weird reason):
Kevin and Mike are extraordinary product leaders and Instagram reflects their combined creative talents. I’ve learned a lot working with them for the past six years and have really enjoyed it. I wish them all the best and I’m looking forward to seeing what they build next.
Sarah Frier’s piece at Bloomberg suggests the pair left because Zuckerberg and the mothership were meddling more and more with Instagram:
Kevin Systrom and Mike Krieger, who have been at the company since Instagram’s acquisition by Facebook in 2012, had been able to keep the brand and product independent while relying on Facebook’s infrastructure and resources to grow. Lately, they were frustrated with an uptick in day-to-day involvement by Zuckerberg, who has become more reliant on Instagram in planning for Facebook’s future, said the people, who asked not to be identified sharing internal details.
Without the founders around, Instagram is likely to become more tightly integrated with Facebook, making it more of a product division within the larger company than an independent operation, the people said.
For years, Systrom and Krieger were able to amicably resist certain Facebook product initiatives that they felt went against their vision, while leaning on Facebook for resources, infrastructure and engineering talent. A new leader may not be able to keep the same balance, or may be more willing to make changes that help the overall company at the expense of some of Instagram’s unique qualities.
Instagram is my favorite app by a mile — it eclipsed Twitter some time ago in that category — and might be the best mobile-native app ever. It is also, I believe, the future of Facebook Inc., a better product with a more favorable trajectory than the sprawling (and now heavily tainted) main FB service. I think Facebook would be doing Instagram and its users a real disservice if they folded it into the mothership instead of giving Instagram room to be the best service it can be on its own terms. This is a strangely conservative move on Zuckerberg’s part, an optimization where a higher degree of freedom and experimentation is called for. I guess we’ll see how this plays out.
Update: Ben Thompson at Stratechery has a keen take on why the Instagram founders left: ultimately, Mark Zuckerberg is the CEO of Instagram and has been since the acquisition.
This is the context for whatever dispute drove Systrom and Krieger’s resignation: not only do they not actually control their own company (because they don’t control monetization), they also aren’t essential to solving the biggest issue facing their product. Instagram Stories monetization is ultimately Facebook’s problem, and in case it wasn’t clear before, it is now obvious that Facebook will provide the solution.
My take is still that FB shouldn’t lean so heavily on Instagram for monetization. Even after many years, the service still has some growth and evolving to do to develop into the heir apparent Zuckerberg & his executive team is looking for. (thx, david)
The always pertinent Ben Thompson considers Apple and Amazon (plus Facebook and Google) and how they each focus on customers. He starts by wondering which of these companies has the best chance at hitting the one trillion market cap first. Focusing on the first two, he offers this interesting comparison.
I mean it when I say these companies are the complete opposite: Apple sells products it makes; Amazon sells products made by anyone and everyone. Apple brags about focus; Amazon calls itself “The Everything Store.” Apple is a product company that struggles at services; Amazon is a services company that struggles at product. Apple has the highest margins and profits in the world; Amazon brags that other’s margin is their opportunity, and until recently, barely registered any profits at all. And, underlying all of this, Apple is an extreme example of a functional organization, and Amazon an extreme example of a divisional one.
Two very different business operating in very different ways.
Both, taken together, are a reminder that there is no one right organizational structure, product focus, or development cycle: what matters is that they all fit together, with a business model to match. That is where Apple and Amazon are arguable more alike than not: both are incredibly aligned in all aspects of their business. What makes them truly similar, though, is the end goal of that alignment: the customer experience.
I’ll skip over much of his section on disruption and Clayton Christensen but if you don’t already know about his take on the matter, have a look at his thorough analysis of Apple vs the disruption theory. Basically, the theory doesn’t account for user experience and Apple manages to not overshoot the price customers want to pay because it understands the value its superior user experience provides.
Apple seems to have mostly saturated the high end, slowly adding switchers even as existing iPhone users hold on to their phones longer; what is not happening, though, is what disruption predicts: Apple isn’t losing customers to low-cost competitors for having “overshot” and overpriced its phones. It seems my thesis was right: a superior experience can never be too good — or perhaps I didn’t go far enough. (Emphasis mine.)
Thompson then looks at Amazon’s focus on custom experience, including an important aspect which Bezos explained in his most recent letter to shareholders.
One thing I love about customers is that they are divinely discontent. Their expectations are never static — they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’. […] (Emphasis mine.)
What is amazing today is table stakes tomorrow, and, perhaps surprisingly, that makes for a tremendous business opportunity: if your company is predicated on delivering the best possible experience for consumers, then your company will never achieve its goal.
By focusing on user experience, Amazon is constantly aiming higher and never overshooting what customers want to pay, thus making itself very hard to disrupt.
He closes with Facebook and Google who are focused on advertisers, which makes them less (end)user focused and less popular.
Both, though, are disadvantaged to an extent because their means of making money operate orthogonally to a great user experience; both are protected by the fact would-be competitors inevitably have the same business model.
Amazon’s New Customer is a really great analysis by Ben Thompson of Amazon’s strategy and why Amazon bought Whole Foods: they purchased a new customer for Amazon infrastructure, not a retailer. Early on in the piece, Thompson lays this one on us:
Amazon’s goal is to take a cut of all economic activity.
No qualifiers. All economic activity. In the world. Sort of a Dutch East India Company for the internet age. Thompson explains how they’re going to do it and why fresh food is such a strategic hole for them.
As you might expect, given a goal as audacious as “taking a cut of all economic activity”, Amazon has several different strategies. The key to the enterprise is AWS: if it is better to build an Internet-enabled business on the public cloud, and if all businesses will soon be Internet-enabled businesses, it follows that AWS is well-placed to take a cut of all business activity.
On the consumer side the key is Prime. While Amazon has long pursued a dominant strategy in retail — superior cost and superior selection — it is difficult to build sustainable differentiation on these factors alone. After all, another retailer is only a click away.
This, though, is the brilliance of Prime: thanks to its reliability and convenience (two days shipping, sometimes faster!), plus human fallibility when it comes to considering sunk costs (you’ve already paid $99!), why even bother looking anywhere else? With Prime Amazon has created a powerful moat around consumer goods that does not depend on simply having the lowest price, because Prime customers don’t even bother to check.
This, though, is why groceries is a strategic hole: not only is it the largest retail category, it is the most persistent opportunity for other retailers to gain access to Prime members and remind them there are alternatives. That is why Amazon has been so determined in the space: AmazonFresh launched a decade ago, and unlike other Amazon experiments, has continued to receive funding along with other rumored initiatives like convenience store and grocery pick-ups. Amazon simply hasn’t been able to figure out the right tactics.
When I heard about the Whole Foods deal, the first thing I thought about was Amazon Go. The company has been trying to experiment with different retail environments, but without the proper scale, it doesn’t make a lot of sense. Whole Foods gives them a chance to develop their fresh food delivery infrastructure at scale…so that they can offer it to other customers just like they do with AWS.
P.S. Whenever I think about Amazon as a business, I recall this 2012 post by Eugene Wei on Amazon’s low-margin strategy. I suspect Thompson’s post will join it in my thoughts.
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