In JC’s Newsletter, I share the articles, documentaries and books that I enjoyed the most in the last week, with some comments on how we relate to them at Alan. I do not endorse all the articles I share, they are up for debate.
I’m doing it because a) I love reading, it is the way that I get most of my ideas, b) I’m already sharing those ideas with my team, and c) I would love to get your perspective on those.
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👉How Apple does M&A: Small and quiet, with no bankers (CNBC)
Very interesting learnings about Apple M&A strategy, how they price engineers, how they integrate very strongly, and how it aligns with their culture.
We have just done our first acquisition at Alan with Jour. We decided to give a lot of autonomy to the team while integrating them progressively in the process, and letting them define the strategy within the context of Alan strategy. And we are very happy with that! We will soon share a blogpost on our M&A process.
Apple identifies where it has technical challenges and then buys companies that address them.
The goal is to speed expansion in fields where it needs technical talent or it sees a specific technology that could set it apart from its rivals.
Apple is particularly interested in technical staff and is less interested in hiring sales or support staff.
How to value the company:
It assigns value to companies based on the number of technical employees, with a price tag of around $3 million per engineer, instead of basing it on the start-up's revenue or fundraising track record.
Characteristic of the M&A:
Apple is generally not interested in continuing the acquired company's line of business, and forces acquired units to discontinue future products or shed customers (knowing that the revenues of the acquired companies are generally immaterial compared to Apple Revenues).
Apple put conditions on transactions that a certain number of technical employees must join Apple or the deal would fall through.
These technical employees get what are called "golden handcuffs," or large stock packages that vest over three or four years. Acquired staff also get paid for their equity in the company that was acquired.
M&A in line with Apple secretive culture:
Apple generally doesn't announce small acquisitions and warns staff at the acquired companies not to update LinkedIn profiles to say they were acquired by Apple.
Apple bought 100 companies in the past 6 years, mostly small firms, not publicly known:
AuthenTec in 2012 led to the iPhone's fingerprint scanner.
Workflow, which is the basis for Shortcuts app.
Texture in 2018, which reemerged as Apple News+.
🏯 Building a company
👉Brain Food: Flexible frameworks (Farnam Street)
"The risk of becoming too steeped in any one framework is you start to be “subject” to that framework, you can only look through its lens, not at the lens. I recommend trying to hold a handful of frameworks in your mind simultaneously in order to maintain flexibility."
👉Ram Parameswaran - Alibaba: A Giant Among Giants (Join Colossus)
Assumption that it sells e-commerce, yes, it sells e-commerce, but it monetizes mostly on advertising
Really interesting take (same as Amazon): retail is a break-even thing to attract advertising.
They had 800 million active customers in 2020. Each person on average bought something on Alibaba twice a week.
What's incredible is that your typical user starts year one buying around $400 per year. And by year five goes to $2,000 per year.
So, while JD builds JD Logistics a standalone high-quality, self-contained ecosystem for itself, this was Alibaba's hack, "Let's build a software layered on top of all these suppliers of delivery systems and then let's put equity stakes in every one of them so we have soft control on them." What is amazing about Alibaba is because they grew up in an environment of frugality and they grew up in an environment where nothing was given to them, they always had their hack their way into scale be an asset-light methodology.
Super interesting strategy of investing in partners to have soft power in them.
Pinduoduo took a very different approach to business building. They bought a gamified business model, which basically offered products for very, very, very cheap. Again, this is back to reducing friction for the user.
Number two is you take friction to zero. So what did Pinduoduo do? They took prices to zero, effectively, by giving very cheap prices to consumers.
Now they are 600, 700 million people in active buyers.
How do we bring the price of care to very low while increasing the quality of outcome?
🗞In the news
👉TSMC Earnings, Semiconductor Economics and Auto Microcontrollers, TSMC’s Advantage (Stratechery)
It’s far away from you to say that we try to have bargaining power. In fact, we work with our customers closely and we want to help them to be successful while we get a proper return. That’s all I can answer for you for our pricing.
What Wei is articulating here is the number one reason why TSMC will be so difficult to displace from its dominant position.
TSMC knows better than anyone that it succeeds when its customers succeed — the company’s very existence is predicated on it — which undergirds the decision to not take margin just because it can.
👉Philosophy and Power; Advertising, Targeting, and Tracking; The Real Winners (Stratechery)
Is advertising good or bad? Are targeted ads good or bad? Is tracking good or bad?
The Real Winners:
Here is the kicker, though: none of these questions are actually up for debate. The advertising one is obvious: it’s not going anywhere. It’s the same thing with targeted ads: the limitations of the analog world were not due to some sort of societal consensus, but to the limits of technology; as those limits have retreated, targeting has and will continue to be ever more specific. What is perhaps a surprise to many, though, is that tracking isn’t going anywhere either: the question at play is who gets to do it.
Would be one thing if Apple were anti-ads, or anti-targeting, or anti-tracking, but the reality is that Apple is interested in all of those things, they just want it to be done on their terms, which is another way of saying on their phones. The company is leading a push to shift the entire advertising stack to your device — not unlike FLoC! — which would make Apple (and Google) the only intermediaries for effective targeted advertising.
👉Apple Struggles in Push to Make Healthcare Its Greatest Legacy (WSJ)
So far, some Apple initiatives aimed at broadly disrupting the healthcare sector have struggled to gain traction
To test that and other bold healthcare ideas, it took over clinics that catered to its employees and built a team with scores of clinicians, engineers, product designers and others.
Today those ambitions, which aren’t widely known, have largely stalled
A digital health app launched quietly this year has struggled to keep users engaged
The team decided one of the best ways to realize that vision was to provide a medical service of its own, said people familiar with the plan, linking data generated by Apple devices with virtual and in-person care provided by Apple doctors. Apple would offer primary care, but also continuous health monitoring as part of a subscription-based personalized health program, according to these people and the documents.
Apple has struggled to move Casper past a preliminary stage
A recent initiative for Dr. Desai’s team, a digital health app called HealthHabit that is being tested on California-based Apple employees, has struggled with low engagement since the app’s launch roughly six months ago, according to documents and people familiar with the app.
HealthHabit offers to connect people with clinicians via chat and encourages them to set health challenges such as “I will exercise more this week.” Those with a history of hypertension can be connected to health coaches who can send them a blood-pressure monitor and scale and advise them on healthier habits.
Half the people who had downloaded it as of May hadn’t enrolled and engagement among many who have enrolled has been low, according to the documents and people familiar with the app.
👉What Ever Happened to IBM’s Watson? (NYTimes)
It turned out to be not useful or flexible enough to be a winning product. At the end of last year, IBM discontinued Watson for Genomics, which grew out of the joint research with the University of North Carolina. It also shelved another cancer offering, Watson for Oncology, developed with another early collaborator, the Memorial Sloan Kettering Cancer Center.
Another cancer project, called Oncology Expert Advisor, was abandoned in 2016 as a costly failure. It was a collaboration with the MD Anderson Cancer Center in Houston. The aim was to create a bedside diagnostic tool that would read patients’ electronic health records, volumes of cancer-related scientific literature and then make treatment recommendations.
IBM continued to invest in the health industry, including billions on Watson Health, which was created as a separate business in 2015. That includes more than $4 billion to acquire companies with medical data, billing records and diagnostic images on hundreds of millions of patients. Much of that money, it seems clear, they are never going to get back.
Important to be careful of the hype and focus on our members, and deliver value to them!
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