Ray Dalio

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Interesting topic. I feel that online and offline services are eventually converging. To maximize profits, Taobao.com must create more value for customers and stakeholders by integrating the entire supply chain. Similarly, in America, Amazon did the same thing by acquiring Wholefoods.
But one question I have is that isn’t distribution system the key issue? As long as the distribution channel is well-developed (refer to the super efficient and sophisticated distribution in Japan), most problems mentioned in the essay could be naturally addressed.

On December 1, 2017, Ray Dalio commented on Nissan after Brexit: Driving Manufacturing out of the UK? :

The essay reminds me of a discussion I had recently with some bankers. We raised the question “who really benefited from Brexit”. One interesting perspective is that at least for banking, New York i/o Dublin or Frankfurt is the final beneficiary. Because in the short run, neither Dublin nor Frankfurt has the infrastructure such as housing, hospitals, educational institutions to satisfy the need of employees in finance. Consequently, financial institutions will rather choose to move their services back to America.
What I want to point out is that although Brexit is an act of isolation, the impact is an example of globalization. Isn’t that ironic?

On December 1, 2017, Ray Dalio commented on Apple Inc. – Powered by 100% Renewable Energy :

What I hope to better understand is the interaction between economic benefits and social responsibility. If the such initiative is against companies’ economic benefits, is it really sustainable? For example, if Apple forces its suppliers to use renewable energy, which is more expensive than the traditional energy, the total cost for the entire society shall increase. I still believe it’s crucial to align social responsibility with economic benefits and incremental changes i/o radical ones should be made to achieve this goal.

On November 30, 2017, Ray Dalio commented on Who is making your next iPhone? :

Although labor shortage is a big challenge, I would not think that to bring manufacturing back is an unrealistic slogan. Apple can achieve cost savings in rent, utility and tax reduction. What I am worried about is the sell price. If iPhone was made and assembled in US and export to other countries such as China, the foreign governments shall impose high tarriffs on it and eventually push up the retail price. Given the increasingly competitive environemnt in the smartphone and tablet market, will customers still choose Apple?

On November 30, 2017, Ray Dalio commented on Maersk’s Shipping Lane in the Fight Against Global Warming :

What I found interesting is that while to flight against global warming leads to additional capital expenses to many companies, it’s economically beneficial for Maersk. I realized that it is optimal to align corporate social responsibilities with economic interests. But I started to think whether it is the economic benefits that push these changes or it is the environmental initiatives. In addition, for other companies in the value chain such as oil producers, trading houses, and refineries, there might not be sufficient incentives for them to drive the change.

On November 30, 2017, Ray Dalio commented on BP: Blockchain Petroleum? :

I was deeply impressed by BP because although it operations in a traditional industry, it is making great efforts to try and apply new technology to optimize operations.
Some of the benefits of blockchain I can think about are:
1) Cost reduction: because it is de-centralized, cost is minimized and is shared equally among all players
2) Transparency: Except for the transaction details, all other data in the system is open. The information-sharing is highly efficient.
3) Stability & safety: because data is permanently saved and can’t be overwritten, it is very reliable and stable.
But some challenges I can think about are:
1) No privacy: because of transparency, there is no privacy in the network. It is extremely difficult for any entity to hide information.
2) Capacity: since data is permanently stored in the network, would the system gradually slow down because it cannot process that much information? It will explode in the end!
3) Systematic error: if there is any deficiency in the technology and someone hacks, the entire system would collapse.

My exlanations are:
1) The margin is not yet “too low”. Typically for a physical trading house in oil/gas industry, the profit margin is 0.5% more or less. The volume is the key driver of profit.
2) Many players have quited the industry already. For example, many investment banks span off their physical trading business after the financial crises because of the regulations as well as the extremely low ROA.
3) Because of the thin profits, many trading houses must aquire assets to achieve synergies. They are also exposed to volitile price risks. As we can refer to what happend to Noble and Glencore.
4) It is very hard to pass on the cost to refineries. Most refineries in the world are losing money, so their profit margin is negative. Similarly, it is difficult for refineries to pass on the cost to end consumers like us. Therefore, it’s common to see oil companies use profits earned in upstream & downstream to subsidize their refineries and distributors.