Grant B

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I was initially surprised that Tesco was attempting to pass on the price increases to their suppliers rather than their customers. After all, the customers are the ones who voted to Brexit. However, the initial results are indicating that this is looking like a smart move. From what I could find, it seems as though Tesco’s competition has tried to pass on more of the increase in cost to customer. Meanwhile, Tesco has kept prices increases very low by using their scale to negotiate with suppliers and by cutting costs in other places. The result: in October, Tesco announced their first dividend in 3 years to go along with profits that exceeded analyst expectations (more here: I certainly don’t think this means that Tesco has weathered the storm. To Sam’s point, building up local dairy supply chains will be a long, challenging task requiring more strategic decisions by Tesco. If their performance thus far is any indicator, I believe Tesco can survive and make the best of this difficult situation.

On November 23, 2017, Grant B commented on Amazon’s Last-Mile Delivery is Reaching New Heights :

As Amazon and its competition turns increasingly to automation, the problem of the last mile, or even the last 100 feet (delivery truck to front door), will become a huge focus. As shown in this article, even the most promising solution has many obstacles. In my prior role, I worked in the area of autonomous vehicle safety and certification for a government contractor. We had many systems and processes in place for verifying aerial vehicles to a degree of safety that would satisfy government standards. It was completely apparent that autonomy posed a major challenge to being able to quantitatively prove that one could meet these high standards. I think many of the commercial companies who have tried to enter this space underestimated how inflexible the government would be on this issue. I also believe the government’s inflexibility is completely justified. This is a matter of public safety and from what I saw, commercial companies were not even in the ballpark in terms of reliability so any negotiation was pointless. In addition, this doesn’t solve an important enough problem to justify changing standards. I will be very interested to watch this space unfold. In addition to regulatory issues, Amazon should also be looking into technology to reduce the noise created by UAVs (a potential public nuisance if not addressed) and more advanced localization techniques to supplement GPS. With these capabilities along with continued development of autonomy algorithms, I believe Amazon can bring to market safe UAVs that their consumers will welcome.

I have to say upfront that I know nothing about the fashion industry/supply chain, but I know enough to be dangerous in a conversation about Tesla. I think what Reformation is doing is very admirable and I hope they can continue to grow. Two things stand out when comparing to Tesla’s situation a few years ago: 1) The Model S was a vastly superior product that people were willing to pay a huge premium for, and 2) Tesla had a clear path to bringing the cost down because of the relative immaturity of electric vehicle/battery technology. It seems Reformation has that superior product that at least some subset of the population will pay for, but moving down the cost curve might not be as easy. Nothing in their operations screamed “opportunity to reduce costs by 60-70%” to me, but like I said, this is far outside of my domain. Maybe prices will be fine where they are for a while, but it seems like Reformation eventually wants to reach a much wider customer base and needs to bring costs down accordingly. With cost in mind, I would hesitate to introduce new programs, such as recycling. At a certain point, consumers need to be responsible on their own and not rely on Reformation. Perhaps a recycling education tag on their clothes would be a cheaper way to inform an already environmentally-conscience consumer of the importance of proper disposal. Finally, I would like to see them change their RefScale to a more meaningful metric. Just providing a quantitative comparison to a very inefficient process is not enough. At the very least, I would like to see a percentage reduction rather than just saying “2 gallons less.” I would also like to see them try to start a movement for industry standards, but that is quite an ask for a company at their stage/size.

This is a very interesting situation. My opinion is that NAFTA renegotiations pose very little threat to US natural gas companies. I think you will continue to see Mexico and the US think about what to do under a scenario where renegotiation affects the oil and gas market, but you won’t see any significant investments made because neither side sees it as a legitimate threat. As you mentioned, ETP will continue to look for opportunities to diversify outside of Mexico. I see this as a normal business activity that would/should be occurring with or without the political concerns. And as stated in the NY Times article you cited, Mexico will continue to research backup options – an activity that it more than likely should have been doing on an intermittent basis anyway. Ultimately, the huge benefits of the current arrangement and terrible consequences of renegotiation are too obvious and significant to ignore. Mexico would be left with an energy shortage and US companies would see natural gas prices fall to a point that made some operations unprofitable. Between the fact that it just doesn’t make sense for either side and the involvement of the political entities and people you mentioned, I just don’t see this happening. It is always good to make a plan against potential risks, but ETP doesn’t need to be pressing the panic button just yet.

On November 22, 2017, Grant B commented on Volkswagen’ s New Electric Strategy :

Interesting perspective, Levent. The thing that stuck out to me most was VW’s ambition: aiming for annual battery capacity approximately 6 times more than the esteemed giga-factory. I initially thought that this scale would help them in their negotiations (and it sounds like they did as well), but with the price of cobalt rising steadily for the foreseeable future, miners have no reason to enter into longer-term contracts. Skyrocketing cobalt prices and an inability to lock them in for any reasonable measure of time certainly seem like a threat to the overall initiative. For a company still recovering from an emissions scandal in 2015, having to do an about face on such a large initiative could be another PR nightmare. I think they need to be very transparent in their dealings with mining companies moving forward so if things do continue to go south they can be absolved of blame. I also think it is premature to start thinking about charging stations; the number one thing on my mind is negotiating cobalt contracts and keeping the public 100% in the loop as they continue to build back trust.

On November 22, 2017, Grant B commented on Checking Out Should Feel Like You’re Stealing :

Thanks for the article, Mel! I vividly remember the excitement around Amazon Go’s YouTube in December 2016. Perhaps the only parties not excited were other retailers. This technology and Amazon’s pursuits in this space obviously represent a significant threat, however, I think there is still time for some companies to catch up before significant damage is done. Much of that will depend on M&A and internal development. Other large retailers have been quiet about internal efforts, but there are a number of startups pursuing similar technology, including Poly and Standard Cognition. If trends from the AR/VR and driverless car spaces hold then these startups will likely be acquired by the large companies with the most to lose as a result of Amazon Go. Therefore, we might see a hand-full of winners in the form of large companies that can afford significant investments. In my opinion, the biggest losers here will be the smaller companies who will have to wait much longer for the technology.