Top Thirty Talk

How to benefit from interactions between companies in the Fortune 500’s Top 30.

We’re supposed to be adults that’s what everyone keeps saying, right? What’s more adult than
staying informed on the most recent happenings with financial superpowers and trying to use
their good will to our advantage financially and health-wise! Amazon, Berkshire-Hathaway, and
JP Morgan have partnered in pursuit of revolutionizing the American Healthcare System with
their new (January 2018), unnamed not-for-profit company; more recently, the firm has
appointed practicing Harvard surgeon Atul Gawande CEO. While the partnership intends to
reform healthcare en masse, we can take advantage of the individual opportunities that result,
especially lower general costs. Gawande has stated that the firm plans to attack “administrative
costs, high prices, and improper healthcare usage,” which, if successful, will benefit us quite a bit
if we choose to participate.1,2

Through their joint efforts, the superpowers intend to eradicate the middleman in healthcare,
which primarily means taking aim at pharmacy benefit managers and transaction costs. Gawande
noted that “One source of waste is our very high administrative costs … There are a lot of middlemen in
the system … [so we should] take some of the middlemen out of the system”; while he has not yet
released a plan to mitigate the influence of PBMs, their elimination would certainly lower costs in all
healthcare sectors. The company has outlined a plan to decrease transaction costs by hiring their own
physicians and setting regulated and interpretable pricing systems.3 The company also believes that
cutting the middleman will simplify and expedite the healthcare process; the new CEO intends to
provide an easily accessible and usable database in which customers can compare the cost and
reputations of potential care providers, then make appointments on the same platform.

Cut the middleman, cut the prices, cut the complexity …sounds good! So, let’s take advantage of
this partnership. Primarily, we have to trust this company; Bezos and Buffett (and Gawande)
have delivered before, so we must believe their success will carry into this new enterprise. We
must then trust their software and physicians enough to use these resources to afford ourselves
the highest quality care at the best price. The company’s plan can only do so much without the
backing of the public, so stay informed on the topic, but do not be afraid to let their vision help
you in the future.
JP Morgan Chase Plays Dirty Trying to Revolutionize Investing

Consider this: Google’s artificial intelligence manager, Apoorv Saxena, candidly sits at his desk,
working on the Cloud Machine Learning Engine, looking forward to getting home to the family.
Suddenly, Jamie Dimon accompanied by four men dressed in black burst through the doors with
a human-sized bag and rush Saxena! Now, he works for JP Morgan. That’s right, this is exactly
how JP Morgan “poached” one of the top AI experts in the game.

Unfortunately, it didn’t exactly happen like this, they probably just offered him some extra
money and a cushier office, but the takeaway remains the same: JP Morgan Chase wants to use
the AI revolution to improve their business, and they want to do it while the movement has
barely risen off the floor. In order to do so, the company brought in Saxena as the new “global
head of AI,” along with former Carnegie-Mellon professor and researcher Manuela Veloso. To
complement, the new personnel, JPMC has allocated 10.8 Billion dollars to the AI and Machine
Learning efforts, 40% of which they intend to use strictly for research.

The firm believes that they can implement AI in all aspects of the company, but especially
predictive investing and interest rate markets. They intend for their new machines to analyze
ridiculously large datasets (they have been testing with 12 years stock market data) to predict
how individual stocks, but more importantly specific markets, will behave over specified time
periods. Effectively, the software will serve the purposes they already have such as for customer
service and general modeling, but now they will become more involved in client consulting,
investing strategy, and various other previously human tasks.

Looking into the future, we could take advantage of these developments and trust the companies
who decide to pioneer the movement, or we could fear this progress and continue trusting
humans. Each viewpoint has its flaws, but machines have predicted subsections of the market
nearly perfectly in the past, so it seems more than plausible that recent developments could
finally outperform humans consistently. The future is starting, and I think we should take an
active role and use it to our benefit rather than sitting on the sidelines.
Amazon Making Friends

Two for one deal this week! That’s right, Amazon recently made friends with Microsoft and
Apple in an attempt to develop two of their sub-products, Alexa and Audible (respectively).

Amazon’s first dealing came with Apple and their SmartWatch. Previously, Apple had not
allowed any third-party applications access to the watch, but Amazon slid their way in with
Audible, as this service can now be used on all Apple devices. While the population with Apple
watches may be much smaller than those with iPhones, this deal shows progress for both
companies. Furthermore, it makes life easier for many consumers who can listen to their books
through their watches, so if you want to listen and exercise, you don’t have to lug your phone
around.

Bezos then partnered with Microsoft to make Skype available through Amazon’s Alexa
products. Now, you can tell Alexa to call people through Skype, and if your Alexa has a screen,
you can even Skype directly through the device. Since Skype has been losing popularity and
Alexa currently has no video call capabilities, this partnership could ameliorate both issues. For
consumers, those who prefer Skype to FaceTime may find communicating through Alexa more
convenient and efficient. If Amazon can succeed in the SmartHome business (a current goal of
the company), this partnership could prove especially notable. Landline phones have largely
gone out of style, but Skyping through Alexa could bring back the “home phone” if the house
runs on Amazon.

While neither partnership may seem monumental right now, Amazon’s willingness to collaborate
and expand (also seen through the healthcare partnership discussed in Blog 1 and their purchase
of Whole Foods) could have massive implications for all business sectors and even our every-
day lives. Amazon could reincarnate the home phone with the added face-to-face benefit, render
paper books in the gym (yes, some people do bring their books to the gym) and other
inconvenient places obsolete, and still have the potential to find a partner in any industry and
revolutionize that too. Make sure to stay up to date with Amazon’s endeavors, because soon
enough they will almost certainly have some easy-access thing that will appeal to you (if they
don’t already). Some fascinating progress could be made very soon if Bezos maintains this
momentum.
Reemerging Music Powerhouse

Apple is back! Okay well maybe Apple never really left, but now they’re making their way back
into the music market after being largely overthrown by streaming services from Spotify,
Youtube, and Amazon, among others. To resuscitate the relatively unpopular Apple Music,
which has approximately 50 million subscribers to Spotify’s 83 million, Apple officially
acquired Shazam, a 1+ billion user music recognition service. Through the $400 million
purchase confirmed earlier this month, Apple intends to use Shazam to improve its users’
abilities to find and experience new music.

While Shazam has been available on Apple devices nearly since the App Store’s inception,
Apple believes that this direct partnership, which intends to customize a user’s playlist by his/her
preferences using Shazam’s ability to recognize trends in music habits, will draw people to
Apple Music. Apple intends to give its listeners a better overall experience through this
personalization, and to bolster its bottom line through the 7.5 million or more new customers it
will attain through Shazam. A mathematical aside: if Apple can get 7.5 million new paying users
through this acquisition, then the $10/month subscription implies that the company will make its
money back in just over 5 months.

Apple believes it can simultaneously help itself and its users (and it can be astoundingly difficult
to do both) by formally partnering with Shazam, so let’s take a look at how it can help you.
Apple will take advantage of Shazam’s song trend data to pick the next trending songs, which
you will hear first by listening to Apple Music. Even if unsuccessful, this can serve as a fantastic
marketing tool because many people want to predict the eventual mainstream and get their hands
on it before it becomes ultra-popular, so any chance to beat the rush will attract them.
Furthermore, Shazam will use individual trends to find songs that best fit you, which could
expose you to your next favorite song.

The deal is complete, so whether you’re a music junky looking for the next hit, or a casual
listener seeking something new, consider giving the new partnership a try. You never know what
these two music superpowers will be able give you.
Is Amazon Nice or What?!

On October 2nd of this year, Amazon made a revolutionary minimum wage change from the
governmental floor of $7.25/hours, with which Amazon had a median salary of $28446/year, to
$15/hour, which will yield a minimum of $31200/year. Will this potentially risky choice benefit
Amazon in the future and what does its success (or failure) implicate to us?

The reputational effect on Amazon assumes center stage here, as almost everyone sees that
Amazon raised its minimum wage and therefore acquiesced to its employees’ demands quality of
life, along with providing an incentive to work harder to get and keep a job with the company.
This being said, Amazon had to find a way to retain as much profit as possible, which it
approached by cutting monthly bonuses and stock bonuses. A common perceived threat of
increasing the minimum wage is an increase in unemployment due to layoffs; Berkeley and
Phys.org actually show a decrease in unemployment and no real job loss correlation
(respectively) with a heightened labor price floor, indicating that this common economical worry
could be unfounded in practice. Regardless, Amazon has not mentioned any layoffs to mitigate
their new financial undertaking, but the bonus cuts could decrease employee morale despite the
actual wage increase.

As consumers, labor-providers, and civilians, Amazon’s decision could influence us in several

direct and indirect ways. We could see an increase in price of Amazon’s goods or a small
reduction in the quality of its services (Alexa, Audible, Prime, etc.) to combat the increased
payouts. However, this small price increase or quality decrease could be worth paying due to the
potential for other companies to follow Amazon’s lead and increase their minimum wage despite
the $7.25 defined by the government. A large-scale wage increase could, again, result in
increased unemployment or cost of living, but we have yet to acquire any empirical evidence of
such; only economic models indicate the likelihood of this trend. A wave of wage increases
would undoubtedly affect each and every one of us, but a higher-figure salary does not mean
much when the price for a hamburger consequently doubles. So, while NPR’s MIT economist
(see first link above) does not believe Amazon’s decision will catalyze this sort of chain reaction
in wage increases, the implications of such a future pose interesting considerations and would
have some effect, one way or another, on our lives.
Yet Another Netflix

In the midst of a streaming frenzy dominated by powerhouses like Netflix and Amazon and
already potentially diluted by entries from Disney and Walmart, AT&T with its recent
acquisition WarnerMedia have decided to jump in and give it a go. While the proposition does
not have a name, a price range, or a niche (or really anything else tangible as of now), AT&T has
set a timeline saying that they intend to roll the service out to customers by the Fall of 2019.

The goal of AT&T’s idea is not to mimic Netflix according to WarnerMedia’s CEO, but to offer
an HBO-like service which includes old Time Warner productions and original series among
other things. While it sounds pretty similar to Netflix with a potentially smaller TV selection
(since the company wants to stay within Warner Brothers productions for now) and larger movie
selection (since AT&T already owns HBO), the company appears to be targeting a different
audience, specifically those already committed to HBO and Warner Brothers’ work. AT&T
believes that this direct approach to a streaming service (again, like Netflix) will bolster its
already growing HBO, as they have already shown they can keep people hooked with shows like
Game of Thrones which garnered the attention of 10 million legal viewers and many more
million illegal viewers for the premier of the latest season. WarnerMedia also believes that a
subscription based service will not hurt the company too much as subscription revenues would
cancel out licensing costs.

While this service could work out well for AT&T given they already hold some stake in the
game, the competition seems very vicious making any big breakthrough unlikely. The potential
impacts this service would have on us as consumers centers around our ability to purchase things
in bundles and our accessibility to shows and movies we like. Regarding the former, it seems
extremely likely that AT&T rolls out a bundle package including cell-phone service, internet
provisions, this streaming service, and anything else they offer in some capacity. This could
make AT&T a viable low-cost high-quality option for most of our technological needs in the
future. On the other side of things, AT&T could also remove its holdings (anything HBO or
Warner Brothers) from other streaming services, making it more difficult for those of you with
Netflix, Hulu, Amazon Prime, etc. to watch everything you want. Ultimately, we will see how
things play out over the next few years, but keep AT&T on your radar for some new low-cost
opportunities or a potential necessity if you live and die with Warner Brothers or HBO.
Did you notice Google+ went missing?

It’s hard not to trust Google when we see statistics saying that the service received a mind-
boggling 6 Billion searches (and counting) today1. How can we neglect the validity of something
people so frequently use and trust for the bulk of their information? Well, this influential firm put
itself under quite a bit of scrutiny in the past two weeks over the mishandling of user data from
its Google+ system. The release of nearly five-hundred thousand users’ accounts to unauthorized
third-parties and attempted cover-up had Google scrambling over Google+ proceedings and its
reputation. Not that too many people will actually notice provided only about 5% of people
actively use Google+, but the company has decided to shut down its primary social media
service.

The company has not faced heavy economic resistance as its stock dropped about 5% but has
since recovered about three-quarters of that. However, while Google appears to have owned up
to the problem now, the fact that it chose to do so only after the leak went public has some
potentially negative indications for its customers’ security and trust, even for non-Google+ users.

While Google closing its Google+ service may have an impact on some of us, enough
replacements exist (i.e. Instagram, Facebook, etc.) that this collapse itself will most likely have
very little ultimate impact. The more pressing concern here lies in how much trust we have
retained for one of the most popular companies and services in the world. No information has
indicated that any search records, Gmail information, or any other Google service information
has been released, but the tech giant’s failure to inform its users that their data may have been
leaked three years ago puts the morals of the company into question. While this is deliberately
overexaggerated, the key point is this: who knows if your personal information on Gmail is safe,
because Google won’t tell you if it isn’t.

Eco GM

The Trump administration decided to try to effect an act which to will completely mitigate any
potential effects of President Obama’s long-term emissions plan. This post, however, will not
have much to do with Trump. GM burst unto the scene this past week in adamant opposition to
president Trump’s plan; in fact, they had a little idea of their own. The company decided to
implore Washington to forego its current plan in favor of a new nationwide mpg requirement (by
company), whose standards would increase until 2025. The plan could induce a shift to zero-
emission vehicles (ZEVs), and explicitly requires ZEV to account for 25% of a company’s
production by 2030. It seems odd for a company like GM, who consistently sells upwards of 8
million gas vehicles annually, to advocate for an electric revolution. Also, what does this mean
for both the automobile industry, and how will it affect our lives day-to-day?

As you probably expected, GM is most likely not acting out of the goodness of its heart, nor out
of an insatiable desire to save mother earth. While these factors may play in a bit, the potentially
more relevant motives stem from marketing and industrial competition. From a brand
recognition perspective, GM desires to keep its loyal generational customers while defining itself
with the younger generations; to maintain its position as top global car manufacturer, GM knows
it needs to advertise to the next generation of car buyers. Since the millennials’ market presence
already approaches 30%, and is expected to far surpass that number in coming years, GM acts in
its own self-interest and advertises to this new demographic of environmentally friendly
consumers. In addition, GM will only grow its own ZEV market share, as its sub-brand
Chevrolet has already produced two eco-friendly cars and intends to continue this progress.

While GM may have been acting in neither its consumers’, nor the environment’s best interest,
the consequences of the company’s proposal would undoubtedly have an interesting effect on
both. The potential for environmental progress through ZEV’s is well-documented and
established, but the effects on the car industry and on us as consumers may go a bit deeper. A
shift toward eco-friendly vehicles could have an impact in both the social sphere, and personal
economics. Socially, this burgeoning trend could either come into style very quickly, which
could have a broader effect of making “doing good” very popular. We could also experience the
opposite, in which the populous and the media shun the new development and no such positive
social trends develop. Economically, while gas vehicles cost less up-front, the long-term savings
with electric costs outweigh the initial price difference. Therefore, we might end up even seeing
some positive personal financial benefits, alongside the potential for a shift in the popularity of
“goodness.”
Amazon Making things easy

Amazon is really nice; did you know that? They just keep trying to make things easier for you!
Or maybe they know that they are masquerading a brilliant supply-chain cost reduction behind a
shipping novelty for their premier customers. This intelligent, albeit a bit sneaky, company has
now rolled out “Amazon Day,” which allows select users to choose on which day of the week
they want their packages delivered. While no special perks incentivize using “Amazon Day,” the
new service has the potential to decrease theft and increase convenience for its users.

From the business end, shipping costs comprise about a third of Amazon’s expenses, totaling
$6.6 Billion. The company’s strategists most likely identified this number as a threat to the
bottom line given the expense’s 22% growth last year, and went about finding a quick-and-easy
mitigation. The “Amazon Day” solution will decrease the overall quantity of physical packages
delivered, while subsequently decreasing the distance travelled and therefore quantity of mail
carriers needed for Amazon’s product alone. While no numerical analysis on “Amazon Day’s”
potential impact exists quite yet, once rolled out on a less selective basis, the service could save
Amazon many millions of dollars. How? Amazon ships 5 billion packages per year, averaging
$1.32 per package. If the company can consolidate shipping by sending one package on one day
to a house that previously would have received four packages at four separate times, then it just
saved about $4. Compounded millions of times, that $6.6 Billion will shrink fast.

While the beauty of Amazon’s business strategy never ceases to amaze, the company may indeed
have your best interest at heart as well. Package theft per capita reaches above over eight in
several states, meaning there are literally more packages stolen than there are people in these
states. Specific day shipping will allow users the convenience of being home when their package
arrives, and therefore the security of receiving it safely. Well, maybe Amazon is nice after all.

Free Holiday Shipping!

Why would Walmart, Amazon, and Target go out of their ways to help you this holiday season?
Maybe they really want to get in the holiday spirit or maybe they think free shipping will lessen
your financial burden. More likely they just want to increase their bottom-line, but can all three
companies successfully do this?
First taking a look at the brick-and-mortar retailers: Target and Walmart possess extremely loyal
customers, so these retailers will look to convert one-time holiday shoppers into consistent, long-
term, and loyal customers. Free two-day shipping with no minimum price may effectively
encourage customers to break away from Amazon for the season, but the bigger challenge will
almost certainly lie in retaining these newfound patrons. Both companies will find difficulty in
keeping customers when faced with Amazon’s top-performing customer service, as Walmart
consistently falls near the bottom in this area and Target appears to go completely unranked.

Amazon has a similar goal in their free-shipping scheme, but they look to increase subscriptions
for their Prime service. By offering universal limited-time free-shipping, Amazon effectively
gives all consumers a short-time free-trial of Prime, hoping to convert some portion of these
users to members following the holiday season. This free-trial almost teases its users as they only
experience 5-8 day free shipping opposed to typical Prime’s 1- or 2-day, and the added benefits
of music and movie streaming among others.

The primary potential implications for consumers lie in convenience and cost-effectiveness, as
unlimited and unrestricted (price) free-shipping will allow for easier and cheaper ordering. The
two retail stores will let their customers forego the overcrowded in-store experience by
purchasing online without the discouraging shipping charge, while Amazon will try to give you
the Prime experience without you having to subscribe. The takeaways remain: if you want free
and fast shipping (2-day) on a good amount of items, use Walmart or Target; and, if you want
free and slower shipping (5-8 day) on nearly countless items, as well as a taste of the Prime
experience, then give Amazon a try this holiday season.