Michael Aft

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If you take into account the incredibly high cost of hiring full or part time employees (often up to 30% of base salary), it would be difficult to foresee a world where any consumer marketplace such as Uber could both scale and hire full time employees as opposed to contractors. However, I’ll push back on the idea that utilizing driverless cars is a better alternative. While this may be the way of the future and happen out of necessity, I do not necessarily think that Uber will stand to drive substantially higher profitability. Pursuing a driverless car strategy whereby Uber owns, operates, and maintains its fleet would ruin the core beauty of their business model – the marketplace. Converting from a technology platform and marketplace to an asset intensive fleet management and services company would signal a fundamental shift in Uber’s business model and core competencies, let alone the tremendous increase in risk. I’d suggest that Uber should find creative ways to more effectively partner with drivers, focus heavily on managing the driver relationship in order to improve supply, and aggressively target markets where an opportunity exists for long-term profitability under their current business model.

This is a great piece, thanks Graham. One thing we haven’t necessarily addressed here is the impact of job displacement via digitalization on employees who actually REMAIN with the company. There is a huge risk that, if not handled properly, these trucking and logistics companies could do irreparable damage to their cultures. When employees are laid off through no fault of their own, I believe employers are responsible for doing what they can to ensure those people find a new home. Several software and services solutions exist for the process of “offboarding” that help find new jobs through interview preparation, resume help, job postings, etc. If employers don’t make helping these employees a priority, they could send an extraordinarily negative message to those who remain.

Excellent post David. I find myself wondering if the airlines fully comprehend the long term ramifications that increased regulation, larger unions, and reliance on subsidies will have on their own businesses. While short-sighted from a globalization perspective, it seems that the US3 are placing themselves at great risk of significantly increased exposure to the political climate within the US and demands of unions in the future. I won’t comment on the efficacy or need for unions here, but I will say that the US3 need to be weary of the shift in power they may cause by attempting to undermine the ME3 in the near term. Perhaps most curious though, is that these points seem somewhat obvious. The analysis here is sound, but how are airline executives or their boards not asking the same questions? Do they know something that we don’t, or are they incentivized based on near-term earnings targets more than long-term value creation?

On November 28, 2017, Michael Aft commented on The Beef with Beef :

Based on this article, it almost sounds like producing beef at any reasonable scale that comes even remotely close to meeting existing consumer demand is not sustainable. While investing in R&D may help to mitigate part of the problem, it sounds like our only truly sustainable alternative is to A) shift consumer demand away from beef, or B) provide a substitute product for beef. In either case, the underlying driver must be consumer demand – ultimately this is the most important driver in meat production. So, with that in mind, I’ll pose a different question – how can we fundamentally change the way that consumers think about food and meat consumption in a time frame that keeps us from hitting the climate change tipping point so many are worried about? Companies like Impossible Foods are aiming to provide substitute, vegetable based products, but the fact remains that the vast majority of meat consumers are not currently concerned enough to shift their behaviors. Will it take dramatic price increases to sway consumer demand, or are there other tools we can use to address the issue from that side of the marketplace in the near term?

On November 28, 2017, Michael Aft commented on Siemens’ choice on Brexit Island :

This is an excellent post, and does a great job articulating the key issues Siemens is facing related to Brexit. As many here have pointed out, in many cases of uncertainty I think the best course of action is to “wait and see”. I’ll make the analogy of a car that is spinning out of control. Our gut tells us to over-correct, slamming the wheel from side to side, which ultimately perpetuates the problem and leads us down a more dangerous path. The far better alternative is to keep both hands on the wheel and help guide the car along its existing course towards safety. If Siemens tries to predict the outcome in such uncertain times, it runs the risk of over-correcting or missing entirely. While I agree there are steps they should take to diversify away from the UK as a general business principal, I do not think they should do so as a reaction to the current instability in the region.

On November 28, 2017, Michael Aft commented on Striding forward: Nike’s quest to reinvent its supply chain :

While I agree that Nike must digitize its supply chain and increase transparency in order to keep up with market trends and consumer demand, I want to challenge the assumption that NIKEiD and customization are the drivers here. As athletic footwear gains casual traction via the “athleisure” movement, it’s far more important for shoe and apparel companies to iterate quickly and change their designs to keep up with consumer behavior than it is to offer customizable products. The colors and materials of a shoe are important, but the key driver is the baseline shape and style. These shoe designs are what drive consumer purchases, and often the most highly sought after shoes are designed by the shoe company or via collaboration as opposed to individual customer customization. Adidas is a great example of this, given the recent success of their Ultra Boost technology and partnership with Kanye West.

So, then, the question becomes whether or not digitization is important for the traditional shoe supply chain. I think the answer is unequivocally yes. All of the things this post mentions around efficiency, scalability and transparency are becoming ever more important for the core offering of shoe companies. Digitization, in this case, is a necessity.