Restarting a blog in the age of TikTok is akin to driving a gas guzzler in the age of Tesla. I love Tesla and tech but unfortunately, I can articulate my thoughts better in words than in 60-second videos. Also, I can’t dance, let alone do a TikTok dance challenge. Long form complete thought is how I (rock and) roll.
I wrote regularly on this blog from early 2000s to early 2010s, chronicling my observations as a naive young adult navigating A Levels, university, and early years as a trainee actuary. Reading them now, the blog posts run the gamut of cringeworthy to unexpected foresights.
Early on, the blog landed me a freelance writing gig for a newspaper (when these still thrived albeit on the wane). I was paid for each 300-words submission. That was a flywheel moment for me; it was a virtuous cycle of writing, getting paid, levelling up on writing, writing more, and stacking fiat money💰. Before long, I blew it all on a white hot 3rd generation iPod (I’m a sucker for tech).
I did dither over buying Apple shares instead of an iPod but access to the US stock market just wasn’t that easy (or cheap) for a 19 year old Malaysian. There wasn’t a Robinhood or a Revolut equivalent back then. Heck, I’m not entirely sure there is a commission-free trading app in that part of the world to this day (would-be entrepreneurs eyeing the Asia Pacific region, this is your cue).
I digress; back to the topic at hand – writing. Good writing informs and entertains. It spreads ideas. It turns the mundane into something significant. The pen, when wielded with malice, destroys. Clichéd as it is, the pen is mightier than the sword. This blog will be an avenue to pursue topics of my interest. I’ll do deep dives and then distill the essence of the topic. No hype, no hyperbole. The odds and ends of subject matters will be broad but focused mainly on tech and business.
My main motivation is to understand technological megatrends at a deeper level. I subscribe to the Feynman learning technique; the gist of which is that “the ultimate test of your knowledge is your capacity to convey it to another”. The underlying motivation is that knowledge can be leveraged into financial reward; I’m on a lookout for tech-orientated investments that are the proverbial “ten-bagger”.
I’m also motivated by this quote:
We try to use the talents we do have to express our deep feelings, to show our appreciation of all the contributions that came before us, and to add something to that flow. That’s what has driven me.
Steve Jobs
Join me as I attempt to add to the flow. The blog posts might or might not be insightful but a funny meme (somewhat relevant to the post) is always guaranteed.
The bottom line: I write to understand subject matters at a deeper level, with the hope that this understanding/knowledge could be leveraged into financial reward.
When I’m not working, parenting or on TikTok, I read. In recent years, my reading material has veered towards biographies and memoirs. I’m fascinated by how great men/women ascend to the top of their chosen fields.
Satya Nadella’s memoir, Hit Refresh, is right up my alley. With his thoughtful leadership, there has been a renewed sense of vigour about Microsoft. When I think of Microsoft, I imagine a benevolent behemoth that’s nimble and ready to dominate the industry again (this time with kindness and empathy). Microsoft has learnt its ways; the evil monopolistic image is so 1990s and has long been eschewed. It’s no accident that Microsoft was excluded from the congressional antitrust hearing in July 2020.
A tale in three takes
Nadella’s memoir is in three parts:
His journey from India to Microsoft;
Microsoft’s transformation;
The next wave of technological shifts, and his thoughts on the resulting economic and social impact.
A series of fortuitous life decisions brought Nadella to Microsoft in 1992 when the company was in its ascendancy. His own rise within Microsoft makes for an interesting read. The meat of the book, however, is in how Microsoft is being transformed under his leadership.
Transforming Microsoft
Before Nadella took leadership in early 2014, Microsoft’s share price languished below US$40. It has since increased by more than 5x. Investors have lucked out because Microsoft could have remained lacklustre without the shift in leadership, strategy, and culture.
Microsoft was a company on the wane. Sales of personal computers, the computing device Microsoft was dominant in, were declining. Mobile computing platforms like Apple’s iOS and Google’s Android were on the rise. Microsoft’s response was the Windows Phone, an ill-conceived product that was not sufficiently differentiated. Out of desperation to gain grounds in mobile, Microsoft bought Nokia in 2013. The resulting line of phones was a dud and the Nokia acquisition was eventually written-off. Microsoft was in trouble.
Bill Gates and Paul Allen started Microsoft in 1975 with, what was then, an audacious goal to democratise computing:
A computer on every desk and in every home.
Microsoft’s founding mission
Satya Nadella knew that Microsoft needed to hit refresh and return to its roots of democratising technology – making “powerful technology accessible to everyone and every organisation”. His strategy boils down to transforming Microsoft into a “mobile-first and cloud-first” company with the end goal of putting customers’ needs first. In practice, it means making products, that empower others, work across any device and any platform (even competitor’s). Notable examples include making Office work on iOS and Android, Minecraft on Facebook’s virtual reality headsets, and Azure on Linux.
Defining the strategy and vision for the company was the easy part. Like most large organisations, Microsoft was a confederation of fiefdoms. There were established processes and dogmas. Change was resisted. Nadella realised he had to do the following things very well from the outset:
Communicate, clearly and regularly, a shared sense of mission, worldview, and business and innovation ambitions.
Drive cultural change from top to bottom, and get the right team in the right place.
Leadership means making choices and then rallying the team around those choices.
Satya Nadella, Hit Refresh
Microsoft’s transformation is far from being complete. Satya Nadella is setting the stage for the company to dominate in the next wave of technological shifts.
The next wave
Microsoft is invested to lead in three key technologies:
Artificial intelligence – advanced machine intelligence that enables contextual insights;
Mixed reality – immersive environment that blends reality with a virtual one;
Quantum computing – computers that can perform certain calculations exponentially faster than existing ones, which “will make artificial intelligence more intelligent and mixed reality an even more immersive experience”.
The vision is clear; Satya Nadella sees these as the next “run time” i.e. systems on top of which programmers will build and execute applications. This strategy is best encapsulated in the business parable from the California Gold Rush: it was far more lucrative selling shovels (and other tools and services) than it was mining gold. Microsoft is firmly in the tools and services business.
In the book, Satya Nadella also shares his thoughts on how these emerging technologies will bring about economic growth and social good. He is cautiously optimistic, aware, as he is, of the numerous challenges. For example, how do we tackle the short-term economic displacement that will result from automation enabled by technology? Disappointingly, he does not offer definitive answers but raises food for thoughts.
It’s not unreasonable to look to him for concrete solutions. After all, he’s successfully halted the decay (an inevitable plague of large organisations) at Microsoft, and has quietly made the company exciting again.
The bottom line: Hit refresh is an instructive read for leaders who are tasked to turn around a declining business. It also includes valuable lessons on effective leadership, and insights into the next wave of innovation and technological shifts.
Quantum physicist and author, Michio Kaku, writes about the Cave Man Principle in his book, Physics of the Future. He argues that modern humans, despite many advances, still think like our caveman ancestors. Whenever there is a conflict between modern technology and our innate preferences, technology loses out and is not fully adopted. Case in point: remote working (in the pre-pandemic world) did not take off because we prefer interacting with our fellow humans in the flesh.
Corollary to the Cave Man Principle… there will be a premium placed on gossip, social networking, and entertainment.
Michio Kaku, Physics of the Future
With an estimated 800 million monthly active users, TikTok has found the secret sauce that appeals to our primitive caveman brain.
The big idea 💡
For the uninitiated, TikTok is a short-form video platform. Think YouTube but shortened. TikTok videos are capped at 60 seconds – short enough to be digestible but long enough for creative flexibility.
It is not a new idea. Vine, the first such platform, was popular in early 2013. Twitter bought it and discontinued it 4 years later due to dwindling monetisation opportunity and increasing competition from Snapchat and Instagram.
TikTok itself is not new. Its parent company, ByteDance, has been operating a version called 抖音 (Douyin) in mainland China since 2016. The app was iterated upon and perfected before launching worldwide in 2018 following its merger with Music.ly, a lip-syncing video app. As TikTok is engineered to appeal to our caveman desire, its popularity outside of mainland China should not be a surprise.
Unlike Snapchat, which is mainly the domain of digital native Gen Z, TikTok is intuitive and user-friendly, making it accessible to an older audience like myself. Having used TikTok casually for the past few weeks, it’s easy to see the appeal. Its popularity can be boiled down to:
It’s super easy for users to discover compelling content;
It’s fun for content creators.
The above creates a powerful network effect. New users are attracted to interesting content, which in turn draw in talented content creators who want access to a sizeable audience.
Optimised for you
TikTok videos range from the silly (e.g. lip-syncing, dance challenges, pranks etc.) to the informative (e.g. tutorials, short-form documentaries etc. #learnontiktok). The overriding theme is that you will find these videos engaging.
The keyword is “you” 👈. TikTok’s “For You” page (#FYP) is a continuous feed of videos which its recommendation engine has optimised based on an amalgamation of data you feed the app. The end result is a stream of highly digestible morsels of pure entertainment.
Netflix and Amazon Prime Video would benefit from TikTok’s secret algorithm; more time is spent looking for content than watching content on these video streaming platforms.
Cosying up to creators
A social media platform lives or dies by its pool of content creators. One of the reasons Vine failed was the exodus of creators to other platforms. TikTok attracts the best creators by:
Making it fun – Hank Green (one of the earliest YouTubers and one of those rare breeds who has had a long-running career as a content creator on the internet) has said that as a creator, he’s found TikTok to be very fun.
Providing the fund – TikTok has been courting creators by paying them to create content regularly.
Making content discoverable – Unlike traditional social media platforms (e.g. Twitter, Instagram), TikTok creators do not need a large group of followers to reach an audience. TikTok’s recommendation engine ensures that good content gets seen.
Monetisation
TikTok’s main business model is advertising. With 800 million monthly active users, TikTok is prime real estate for brands. The very same recommendation algorithm that provides users with engaging videos is likely being used to serve up highly targeted ads. Advertisements on TikTok are seamlessly integrated into the video feed. Some are extremely well done and are entertaining in their own rights.
A potential growth area is live-streaming which is hugely popular in mainland China (Viya, a popular Chinese livestreamer, once sold a rocket launch) but has yet to fully take off in the rest of the world. Creators on TikTok with at least 1,000 followers can broadcast livestreams. TikTok sells an in-app currency called “Coins”, which users exchange real-world money for. These TikTok Coins are then used to buy virtual gifts to reward/tip livestreamers. TikTok has not disclosed the cut it takes from these virtual gifts but it’s safe to assume that this is a profitable side business.
Microsoft ⚭ TikTok
TikTok, like most apps, collects an inordinate amount of data on its users. Its parent company is based in Beijing where it could be subject to demands from the government to hand over data. On national security grounds (and in part geopolitical posturing), Donald Trump issued an executive order in August 2020 that would ban “any transactions” with TikTok’s parent company. Overnight, TikTok’s operations in the U.S. has become a distressed asset that needs to be sold.
Microsoft has emerged as a likely buyer. Buying TikTok would be an uncharacteristic move for Microsoft. The acquisition courts scrutiny and attention, which goes against the modus operandi of CEO Satya Nadella. It is a purchase that only ex-CEO Steve Balmer, with his brashness, could fathom making. Social media is also a toxic business to be in, with a multitude of minefields (e.g. users’ data protection, content moderation, hate speech/harassment monitoring etc.).
With its increasing cash pile (more than US$100 billion), however, there is no better way for Microsoft to deploy capital than to acquire a fast-growing and exciting social media platform. If the deal does happen, Microsoft will have in its portfolio a new golden goose. If anyone understands the value of owning a platform, it is Microsoft (having dominated the industry in the past with Windows).
What’s next?
TikTok’s success has spawned countless imitators. Some of them are real contenders. Facebook, with its characteristic “let’s-steal/incorporate-all-good-ideas”, has launched a replica of TikTok on Instagram called Reels. Instagram, with its huge installed base, poses a serious threat to TikTok. Smaller competitors like Triller and Byte are also gaining traction.
TikTok, however, has achieved critical mass and a certain degree of brand affinity among users (for now at least). It has perfected the delivery of short-form videos with its uber personalised recommendation algorithm. It is like crack to our caveman brain.
Download the app and start scrolling through your “For You” page to see what I mean. I dare you.
The bottom line: TikTok is a compelling product. Its proprietary recommendation algorithm serves up irresistible and digestible morsels of pure entertainment.
I’m not a car guy. When I got the Tesla Model S (with the wife’s permission), it was out of my love for tech, and my genuine belief in the environmental ethos of zero-emission electric cars. The love affair started the moment Elon Musk unveiled the Model X. I fell for the car hook, line and sinker when Elon (yes, we’re on first name basis in a parallel simulated universe) promised autonomous driving capabilities.
The Model X was love at first sight. Alas, a car is a financial liability and the Model X, with the then base price of around £95,000, was the epitome of financial folly. So I settled for a modest Model S with a 75 kWh battery pack.
The product
Two years and eight months of union later, the Model S still gets my heart a-fluttering. It’s sleek, it’s cool, and its curves are wet dreams-inducing. To illustrate my point, here are some bokeh-licious photos I took of my sexy beast:
Like any relationship, there are ups and downs. This is my honest opinion of a specific model (a late 2017 Model S 75D). Production processes, hardware, and features have changed in the newer models. Without further ado, the good, the bad, and the ugly of the Tesla Model S for your perusal:
The good
Have I mentioned that this car is sexy and is the pinnacle of car design (a non-car-guy’s humble opinion)? Case in point: the door handle presents itself as you approach, and retracts to be one with the door as you drive away. I will say no more.
It’s sheer utter fun to drive. Instant torque sparks maximum joy. More importantly, each instantaneous acceleration does not spew noxious gas.
Fully charged, the 75 kWh battery pack provides a range of circa 210 miles, eliminating any range anxiety. On longer trips, the car plans the route to include stops at Tesla Superchargers. The very first road trip I made was from (just outside of) London to Scotland. I was impressed by the coverage of the supercharging network; there was even one in the Scottish Highlands! Even more astounding was that I paid zilch for “fuel” (supercharging is free-for-life for Model S and X bought before a certain date). At home, I charge using the Tesla wall connector, courtesy of Tesla as a referral reward. I set the car to charge in the wee hours to benefit from a special tariff of 5 pence (£0.05) per kWh (this works out to be less than 2 pence per mile). Better yet, my energy provider provides electricity from 100% renewable sources.
The semi-autonomous driving capability aka “Autopilot” is not perfect but works wonderfully on motorways. Autopilot keeps the car in lane, changes lane if the car in front is too slow, and exits the motorway automagically. It’s not fully autonomous as the driver’s confirmation is required to change lanes. Nevertheless, the assistance makes for a relaxing drive. On such drives, I listen to my favourite podcasts (Pivot, which inspires the rebirth of this blog, being the main one), and a vast universe of songs on the free Spotify account.
There is ample storage space in the trunk and in the frunk (front trunk) for road trips, or visits to the recycling centre.
The car is a piece of tech. I can program the car to open my remote-controlled house gate automatically when the car approaches the gate. I can control the car (unlock the car, open the trunk/frunk, open said gate, set temperature, set and monitor charging, summon etc.) via a mobile phone app.
Regular over-the-air (OTA) updates to the car’s software provides incremental improvements and/or new functionalities. Every OTA was like opening a present; less so today (see next section). These updates also come with Easter eggs, which most will find gratuitous (think farting noises with a click of a button which Tesla calls the “emission test mode”). These Easter eggs reflect Elon Musk’s inner geek and sense of humour. His love for the TV show Rick and Morty, for example, spawned an Easter egg which allows you to say “keep Summer safe” to engage sentry mode (a mode which protects the car from theft and other malicious intent). Voice commands in a Tesla are notoriously unreliable but “keep Summer safe” works every single time. Don’t look to Elon for guidance on how to set priorities in life.
The bad
The build quality is bad relative to cars from established automakers. I’ve had to visit the service centre to sort out minor annoying issues like rattling noises, misaligned wipers, and an inexplicable yellow border (fixed 1.5 years ago but the problem has resurfaced as you could just about see it in one of the photos above) on the otherwise unblemished and functional 17-inch touchscreen. Some basiccomponents are known to have a short lifespan, making these a ticking time bomb for expensive out-of-warranty repairs.
Autopilot is not perfect. It is a massive leap from the current state to full autonomous driving despite Elon Musk’s various promises of the imminent arrival of full self-driving (FSD). Tesla has also been selling FSD as a premium add-on for years even though it’s still largely vapourware. I’m glad I paid for “Enhanced” Autopilot (which has largely been delivered) and drew the line at FSD. Confused by the gimmicky terminologies? This chart provides a good summary.
Over-the-air (OTA) updates to the car’s software does not fully benefit older cars. Recent updates such as video streaming (e.g. Netflix), new games or the ability to use my PlayStation 4 controller to play said games (#firstworldproblems) do not work on my car as it does not have the latest Media Control Unit (MCU). Like any tech products, an ageing hardware means inevitable obsolescence.
The ugly
The battery degrades and loses capacity over time. While I have not experienced any noticeable degradation, one direct impact of this natural wear-and-tear of batteries is that Tesla has throttled down the supercharging rate (normal charging at home is unaffected) for my car, allegedly to reduce battery degradation. When the car was brand new, the supercharging rate was 120 kW; the supercharging rate now averages 60 kW, doubling the charging time required. This is beyond annoying, especially on road trips. These issues are known as #batterygate and #chargegate among Tesla owners.
Despite the bad and the ugly, the Model S has been stellar. This is a car to be enjoyed and be grateful for. When the time comes to replace the car, I will most likely choose another Tesla. Battery degradation is inevitable but Tesla is expected to announce a 1 million mile battery on the “Battery Day” event tentatively scheduled for September 2020.
The company
The recent surge in Tesla stock price has put the spotlight on the company yet again. Tesla’s valuation, which reached an all-time-high market capitalisation of more than US$300 billion on 20 July 2020, is eye-watering considering its minuscule sales volume (compared to the established automakers). The high priest said so himself in May 2020 when the market cap was less than half of the all-time-high:
The valuation is in part buoyed by the broad asset price inflation caused by Central Banks’ stimulus programme. Market participants are also pricing in the company’s future potential. This potential is far from certain and it’s anyone’s guess what Tesla’s real value is, hence the volatility in the stock price. What exactly is the company’s potential?
Before I delve in, I stress that this is my personal view on Tesla and its potential. It is not an investment advice/recommendation. For full disclosure, I’m financially (I own Tesla shares) and emotionally (I’m a long-time fan) invested in Tesla’s success.
The mission and the master plan
Tesla has a lofty mission statement:
Tesla’s mission is to accelerate the world’s transition to sustainable energy.
The mission is being executed by revolutionising two economic activities enablers – transportation and energy, the erstwhile strongholds of the fossil fuel industry. The master plan is devilishly simple:
Build sports car
Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero emission electric power generation options
Create stunning solar roofs with seamlessly integrated battery storage
Expand the electric vehicle product line to address all major segments
Develop a self-driving capability that is 10X safer than manual via massive fleet learning
Enable your car to make money for you when you aren’t using it
Tesla’s range of cars which are in production (Model S, 3, X, Y) have made electric cars appealing. Not too long ago, electric vehicles are synonymous with golf carts. Now, they are aspirational products to yearn for and to attain. The affordable (and sexy) Model 3 and Model Y, in particular, are going to accelerate the adoption of electric cars. Tesla has forced the hands of the stodgy incumbent automakers; they too are transitioning away from internal combustion engines.
Some competitors have decent offerings; Volvo and Geely’s Polestar and the Honda E come to mind. The competition, however, is at a disadvantaged position. Tesla has had years to build its Tesla-only charging infrastructure. A Tesla owner could simply drive up to a Supercharger and plug in to start charging. In contrast, a non-Tesla owner has to contend with a disjointed array of charging stations operated by third parties, each with its own payment system and membership requirement.
Tesla’s slew of consumer energy solutions are elegant in form and function just like the cars. The solar roof (solar panels embedded into roof tiles) is beautiful and can withstand hailstones. The Powerwall, a battery pack which stores electricity, is so sleek that it’s a crime to hide one away in the garage.
Tesla has also been making in-roads into grid-scale battery packs. The most famous deployment is in South Australia, which started as a bet Elon Musk made on Twitter.
Tesla will get the system installed and working 100 days from contract signature or it is free. That serious enough for you?
Tesla has three more core products in the pipeline:
The Cybertruck is a pick-up truck like no other. Within a week of its launch, 250,000 units had been pre-ordered despite the “failed” demo, and without any marketing expenses.
The Tesla Semi promises significant cost savings to truck owners and operators through lower energy cost. A fully autonomous version will further reduce operational cost.
The Tesla Roadster is a supercar with specifications that put the £2,750,000 Buggatti Chiron to shame. Enough said.
Tesla has also taken a leaf out of Apple’s book by offering services that are built on top its core range of products:
Subscription services – Tesla’s first subscription service is a £9.99 per month “Premium Connectivity” subscription. The recurring revenue business model makes sense and has revived the fortune of many a software companies.
Insurance – Teslas are notoriously expensive to insure. I was quoted a ridiculous £4,000 for 1 year of coverage (some motor insurers deliberately price themselves out of insuring certain risks). Fundamentally, insurance is about utilising data to provide a competitive price (including profit margin), and to set aside sufficient reserves to pay out claims. There is no one better to provide insurance coverage for Teslas other than Tesla itself. Elon Musk has called for “revolutionary actuaries” (see tweet below) to further develop the insurance proposition.
Tesla robotaxis – When full self-driving is no longer vapourware, Tesla aims to launch an autonomous ride-hailing service in direct competition with the likes of Uber. The dream is that this will reduce the cost of ownership by allowing owners to put their cars to work at will.
Electricity trading platform – Autobidder is Tesla’s best kept secret. This cloud-based software helps battery owners maximise their revenue. It’s a key step in Tesla’s foray into becoming a virtual utility. Watch this space.
We are actually looking for revolutionary actuaries for Tesla Insurance! Please inquire, if interested.
Tesla’s business is super capital intensive. If free cash flow cannot be sustained, it will need to issue debt or sell more equity.
Its success relies on 1) scaling production as cheaply as possible, and 2) achieving full self-driving. These require engineering, technical, and regulatory breakthroughs that are not guaranteed. In short, it is a difficult business to be in, and a risky one to invest in, especially at an outsized valuation.
If anyone can make a success of it, it is Elon Musk (and his team). Do not bet against Elon Musk; he is highly motivated (he needs the moolah for his spacefaring ambitions), and he is more than capable of delivering Tesla’s potential. It is just a matter of when (likely to be later than promised).
The bottom line: Tesla makes innovative transportation and energy products that are beautiful and functional. More importantly, they wean us off fossil fuel.
Disclaimer: This is my personal view as a long-time Tesla fan. It is NOT investment advice/recommendation. I write on this blog in my personal capacity; my opinions are NOT endorsed by my employer or the actuarial profession.
Disclosure: I am financially and emotionally invested in Tesla’s success. I own shares in Tesla and I have a vested interest in an increased valuation.
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