Yury Molodtsov

COO and Partner @ MA Family where we help tech companies get into the news

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Posts tagged life

Can Markets Regulate Themselves?

June 6, 2024

People arguing about regulation tend to favor one side of the argument and believe that either the government or the market has the capabilities and the desire to standardize and solve consumer problems. Theoretically, both approaches are valid, even if they lead to different outcomes. I wanted to tell you about two particular examples I like the most. And yes, basically I will compare the United States and the European Union.

First is credit card cashback. But we need to take a few steps back first. When you buy something for $100 with a VISA or MasterCard, the seller doesn’t get $100. There are interchange fees charged by the card processing network that are shared between them, the bank operating the card terminal, and your own bank.

This creates a few challenges. The seller gets less money, but in theory, you’re more likely to spend more at their establishment if you can pay with a card. Still, they most likely keep their prices a tiny bit higher to account for this loss. The interchange fees also aren’t totally linear. The advertised Stripe US rate is a good example: 2.9% + 30¢ for each successful card charge. A brick-and-mortar business is more likely to use something like Square, which offers 2.6% + 10¢. But there’s always this fixed part, which makes fees on a small purchase much larger.

If you buy something for $100 with Stripe, the seller will receive around $96.8 (or lose 3.2%). But if the charge is just $5, the seller will get $4.55 (or lose 9%). This makes small amounts very inconvenient and potentially outright unprofitable for the seller. This is also one of the reasons Twitch sells its ‘Bits’ in huge chunks and Apple combines AppStore purchases to charge you once when it can.

Interchange fees are essentially a tax on most consumer transactions in a cashless economy, inflating prices and making certain transactions financially impractical. How do we solve this?

The competition between banks in the US (and some other countries) led them to invent cashback. Instead of pocketing their share of interchange fees as revenue, they give it back to their users to attract and retain their customers. Preferably high-value customers. The kind who will generate revenue for these banks through other products. US banks could pay between 1.5-3% in cashback, depending on a particular card program and purchase category. Technically, they might even overpay and lose money on certain benefits, but the cashback is the key source here.

Cashback addresses the inflated prices, but not ideally, and this is only one of two problems introduced by interchange fees. A policy study conducted by the Federal Reserve concluded that back-reward programs result in a monetary transfer from low-income to high-income people. This makes sense since the best terms of cashback and rewards are available on premium cards.

The Durbin Amendment in 2010 limited transaction fees to 21 cents plus 0.05% of the transaction value for banks with $10 billion or more in assets—but only for debit cards. This is also why many American challenger banks and fintech startups, like Evolve Bank, meticulously chose the partners who’d provide them with this source of revenue.

To clarify, there’s nothing unique about credit cards, as debit cards with cashback are quite common in other countries.

The European Union chose another route. Regulation (EU) 2015/751 limited interchange fees for card-based payment to 0.2% of the transaction’s value for debit cards and 0.30% for credit transactions. Effectively, the EU told Visa and MasterCard: “Look, you guys have won. You can enjoy a profitable business with an extreme moat, but we want to limit the negative externalities.”

Before 2015, it was common to see signs allowing card payments for purchases over €10 in European stores. Almost 10 years later, however, these are much rarer (Germany still loves cash, though). European cards basically have no meaningful cashback programs simply because banks don’t have this revenue source. This seems a reasonable trade-off since the prices are also cheaper.

EV Chargers

Charging ports for electric vehicles are another example. The US and Europe have effectively settled on a particular standard—but different ones. The EU uses CCS2, an extension of the old Type2 port with fast charging, and practically all automakers are committed to switching to NACS (Tesla’s port) in the US.

The former is a case of regulation. In 2014, the European Union adopted CCS2 as a requirement for EV charging networks. The latter is a case of Tesla building the largest charging network in the US to the point that other automakers found it easier to switch (without anybody forcing them).

From the user perspective, NACS looks better as it’s much smaller and lighter. From a technical perspective, CCS2 might actually be better, at least for Europe, with its supposedly superior electric grid with 240V and 3 phases.

We’re still a little bit away from all cars having the same ports. In Europe, cars and stations with outdated ports like CHAdeMO still exist, while older Teslas use their proprietary CCS extension. Automakers will only start shipping NACS-enabled cars in the US by 2025, so everyone with an older vehicle like a Rivian R1S/R1T will likely have to upgrade or start using an adapter for Tesla’s Superchargers or new public chargers.

These two approaches have two drastically different outcomes, yet both solve the enormous problem of multiple incompatible ports and chargers.

***

Markets tend to solve consumer problems with the means available, but the outcome is often quite different from a potential government intervention. Both options could also just fail, resulting in a dysfunctional market or an incapable government monopoly.

What’s common between them is the reliance on the pre-existing situation. Anything dominant tends to have a moat. What’s different is the focus on negative externalities. It seems that in the cases of markets regulating themselves, these externalities persist unless some actors are both incentivized to eliminate them and have the capacity to do so.

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life

Uber is Good, Actually

October 8, 2023

There’s a widespread notion that Uber is getting more and more expensive. You can find multiple series of articles produced on this topic each year and entire SEO-optimized webpages for this particular query.

Some people even believe that Uber is worse than conventional taxis right now. Uber’s only advantage to them was the price, and since those prices have soared, they see no value. In fact, these people believe Uber could only grow because of its initial low prices, artificially attracting customers and taking market share, only to leverage its semi-monopoly position later.

I think they completely misunderstand what Uber actually is and what makes it an excellent service.

Uber isn’t the only ride-sharing company even though it was the first. Depending on the country, you could switch its name with Lyft, Bolt, Grab or something else. I’d keep using “Uber” throughout this story.

***

While Uber and its clones dominate most markets, some have been left out due to insufficient volume (imagine a remote island) or government intervention. Bulgaria prohibited global ride-sharing apps. Barcelona (Spain) instituted an artificial 15-minute limit to force you to hail a conventional taxi on the street.

Every time I visit such a place, I realize what Uber is and how difficult it was before.

Photo by Daniel Tong on Unsplash

First, you have to find a cab. You likely need to be in a popular city area to do this, or you will have to wait a long time (or walk to a busier street). Maybe you can order via phone, although you’d need to know the language and have roaming enabled on your carrier plan.

Sometimes, there are entire lines of yellow cabs. When I went to Madeira, I saw a stereotypical line of two-decade-old Mercedes. They spend most of the day waiting, so when you take one, your fare also includes this empty time. You don’t know if they’ll have a terminal to pay with a card. The A/C might be busted, the car can reek of cigarettes or something similar, and if there’s a line, all the drivers expect you to take the first car, regardless of its quality.

A conventional taxi operates very similarly to a tourist-trap restaurant. There’s no expectation you will visit again. They probably don’t want to be completely terrible, but they also have zero desire to make it comfortable for you or invest in this beat-up Mercedes they bought for some unknown reason.

Uber changes this equation by becoming the arbiter. By leveraging their power as an aggregator, they can assign ratings to drivers and riders and execute control over them. Each particular passenger is no more likely to end up in the same car. But each passenger is a rider provided by Uber, something they could give or take back if a particular car isn’t great for their business.

And suddenly, fares go down a bit because Uber cares a lot about supply utilization. Drivers rush to buy a hybrid Toyota Prius with its great mileage (it also has lots of space in the back). And they never just stand in a line waiting for the next customer to walk to them.

The taxi experience before Uber and its clones was miserable. Did they subsidize the rides initially? Yes, probably. But its critics should at least stick to their line of reasoning. Because for many years, they were sure Uber would never be profitable until it suddenly was.

I don’t use Uber because it’s cheap. I’m OK if they raise prices to ensure drivers and the company make enough money. I use Uber because the experience is generally better, and if something happens, I have the company to deal with it.

***

Is Uber perfect? Probably not, as any big company. But we must accept reality and deal with externalities while considering consumer benefit. Do you seriously think a corrupt system artificially limiting taxi licenses to the point that they cost a million dollars in New York City is great? I find it laughable.

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tech
life

What Is Elon Musk

July 25, 2023

Too often, we see two distant sides of the spectrum and nothing in between.

Some people (often with blue checks on Twitter) believe he is the most successful businessman on Earth, and we’re literally months away from using Twitter (sorry, X.com) to run our financial lives. That he will finally build the WeChat of the West.

Others believe he’s a rich trust fund kid who stumbled into founding many successful companies changing their industries. These people tell you that he merely invested in Tesla and not found it (which is true, but Tesla didn’t really have much except a great brand and a complicated captable), that SpaceX engineers are the actual heroes lifting all the weight (which is a useless statement since it can be applied to any organization).

Trying to project him into a single dimension is useless since it doesn’t have predictive power. You might believe he’s a fraudster, but many Tesla short sellers also believed this and lost.

It does seem to me the truth is somewhere in between. But reasonable takes don’t get too much engagement.

Elon has done so many stupid things at Twitter. And while trying to revitalize the platform while making it financially successful is an enormous challenge, I thought there were some more obvious things he could have done instead.

Then, Ben Thompson comes out today with a great explanation on Dithering and Stratechery.

I have made the case, including on today’s episodes of Dithering and Sharp Tech, that the same qualities that make Musk a remarkable CEO in physical space — the willingness to push to the limits of what is possible, with physics as a natural governor — make him a terrible software CEO, because there are no limits. But the reality is that for Musk personally it doesn’t matter much.

And this seems to be it. In the physical world, Elon’s fantasy is limited by science, and if he wants to run the next Falcon on palm oil, it just won’t work. The software has limitations but is more subtle – you can still build almost any interface you want. Of course, all of his actions affect Twitter as a platform and nibble at its network effects while also incentivizing many competitors, including Threads, Mastodon, and BlueSky.

If you want to predict the actions of certain people, avoid painting them stupid or blatantly evil right away, as this is likely to be an emotional response that won’t improve your hand.

***

Esther Crawford wrote on her experience working at Twitter before and after Elon took over. You might know her from some terrible coverage attacking her personally. She’s a great founder who joined Twitter after selling them her company.

The key part seems to be this:

Elon has an exceptional talent for tackling hard physics-based problems but products that facilitate human connection and communication require a different type of social-emotional intelligence.

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life

You Can Compete By Being Competent

July 15, 2023

Building a service business isn’t easy. If we compare it to any software company, the worst part is that you aren’t really compounding. Every client requires dedicated work. You can’t just win and move on to capture new ones.

The good part is all your competitors struggle as well. And ultimately, whether сustomers like you depend on two things: results and execution.

Ideally, both parts should be perfect to extreme. There are areas where you don’t fully control the outcome. But you always have full control over your own execution. The way you talk, write, draft documents, make proposals and do everything else.

Sometimes I have to interact with people in other services businesses. This could be an accounting firm offering their services to us or a local PR agency we might need to support our client. 

Too often I see how they fail at basic things, stop responding for a week, don’t make it clear what the process is, or take way too long to revert with an proposal they just copied from their templates without any real customization. 

Perfect your execution. This is the part you fully control. It won’t save you when the results aren’t there, but it can help sustain the relationship while you wait for them.

life

How To Recognize Grifters

July 12, 2023

Grifters have one specific thing in common. Not all of them, but as soon as I see this, I don’t expect them to be serious people. Instead of showing concrete facts and achievements, they list “tags” in their bio and profiles.

“Serial entrepreneur”. “Mentor”. “Web3/Blockchain/AI”. “Founder”(without the name of the company).

This isn’t helpful information. It’s just status signaling. Anything that can help them perceived more important in a certain social group.

Focus on the facts.

life

Some Controversial Things I Believe

March 23, 2023

What are some things you believe almost none of your peers do?

I find this question extremely interesting as it allows one to uncover more or less unique opinions you hold. So here’s a list for me.

  1. Targeted advertising is good because it enables free and abundant services available for everyone with internet access. Written about this at length before.
  2. To follow this, subscriptions aren’t the ultimate answer for everything and don’t solve problems automatically. That doesn’t mean I don’t believe in subscriptions – I’m paying for so many apps, services, media publications, and newsletters.
  3. Algorithmic feeds can be good. Following over 150-200 people makes catching up on everything they posted impossible. You just miss things differently. I want my social apps to show me the most important things. Yet I agree that algorithms are often demonized for mixing content from people you don’t follow.
  4. Digests are a superior way to consume content compared to infinitely scrolling feeds, and they would solve many problems people associate with social platforms. Yet nobody uses them in the fight for engagement (although BeReal tried something close to this).
  5. Certain people from tech and media circles like to speak for all of their peers and fuel a war of sorts. Radicals are never right. I’ve seen enough bad actors at both ends. Better to evaluate individuals and companies alone.
  6. Smart home as a concept is mostly a gimmick. A very expensive one. There are useful things, like being able to easily play your favorite music across the house or opening the shades in the morning. And there are stupid things, like smart light bulbs that make sure you can’t just use the knob to turn them off.
  7. Remote work is as productive or even better in that regard compared to onsite work. But you must build the right kind of company to leverage it and ensure everything goes smoothly. I’ve written about working remotely and running a remote team.
  8. Google Meet is better than Zoom. It’s fully capable, it doesn’t force you to install and update an app, you already pay for it.
  9. Properly cooked medium-well steaks are the best. Works for most (but not all) cuts of meat. Sorry.

Sometimes I get back to this post to update it.

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life

Your Inner Voice and the Value of Silence

May 28, 2022

Despite my interest in certain genres of music throughout my life, I’ve slowly realized that I don’t really like listening to music much. I do listen to it in the car, but generally, I prefer music in social contexts, enjoying some beats with my friends, whether we’re in my living room or at a 25,000 people rave. But I don’t really listen to it when I work or when I relax.

Podcasts, on the other hand – I do love podcasts, whether I’m walking my dog, doing some exercises, or cleaning the dishes. Without them, most of those menial tasks feel empty as if I’m just wasting my time when I could learn something. I subscribe to shows covering technology, my hobbies, such as racing and F1, and reviews of all kinds of brand-new media content ranging from TV series to video games.

But recently I’ve started feeling that constantly putting on AirPods and pumping spoken words into my ears might be too much. First, there’s nothing wrong with being bored and enjoying the silence for a bit. But most importantly, it feels like both music and podcasts tune off my inner voice, that intra-cranial conversation people have where we get ideas and inspiration. I can recount so many times when I was working on a particular problem, couldn’t crack it at the desk but suddenly realized the mistakes I made while simply walking on the street.

Social media might add to that. It’s just something so antagonistic to meditation and active thinking. Nothing wrong with being connected with your friends and people you’re interested in. But it’s also the most affordable and attainable dopamine you can get. Blindly scrolling through a seemingly endless feed doesn’t mean you stop thinking. Yet I do think it blocks your inner dialogue from going into more interesting places.

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life

Why I Dropped Apple Watch for a Mechanical Watch

January 12, 2022

I’ve always been into watches and for the last 5 years, since Series 2, I’ve been almost exclusively wearing an Apple Watch. Recently I pulled a trigger on a mechanical timepiece I wanted a long time ago and have been enjoying it since. There’s a lot of people who went in the opposite direction but I haven’t seen too many people who got out. In the end, mechanical watch movements are an obsolete technology and a basic quartz watch can challenge Rolex for its accuracy, while an Apple Watch can provide you with unique complications and features, such as notifications, weather, or calendar alerts.

But first, why wear a watch in the first place? We all have precise atomic time on our phones. Well, to me that’s simply not enough, I want to be able to just glance and get a feeling of time. Not sure how you can be punctual without that. Therefore, I need a watch.

Apple Watch has some amazing capabilities for a $400 device. Let’s start with easily-accessible powerful complications with a user-friendly interface like timers, stopwatches, and alarms. And then there are unique complications you won’t find on any other watch: weather, calendar, notifications from your phone. Yet, in the end, I wasn’t compelled.

Below are five reasons one might prefer a classic watch instead.

Distractions

Apple Watch wants too much from me. Unless you proactively disable and mute notifications you’ll be bombarded with every alert you’re getting on the phone and watch-induced requests, like suggestions to stand up, exercise, or marvel at your partner’s fitness achievements. Sometimes you want that but in the evening I just wanted to get rid of it.

Having a “dumb” watch allows me to separate contexts. I can put off my phone and nothing will disturb me, unless it’s something truly urgent – then people will probably call me. You can go and disable all notifications on the watch, but it kinda raises the question of whether you wanted it in the first place.

Design

Apple Watch is by no means terrible, but unless you buy a stainless steel version it still looks like a fitness gadget. I just don’t enjoy looking at it, especially compared to my quartz and mechanical watches. Whether it’s a $50 G-Shock or a $1000 mechanical timepiece, they just have a lot more character in them. And since you’re going to replace it in a couple of years I feel a bit weird paying for that steel and sapphire.

That is also part of the reason you might want a mechanical piece. Most esteemed watch companies, with the exception of the likes of Grand Seiko, are focused on mechanical watches. If you want something truly beautiful and exquisite you likely will go mechanic.

Readability

The same applies to watch faces. Apple Watch is fantastic in the way it allows you to build your own watch using the design you like and the complications you need at the moment.

When I was a kid, I did have issues with reading analog watches – simply because for the first twelve years of my life, I didn’t have them at home. But I’ve learned and now I can read analog watches with a single quick glance. Apple Watch has gotten much better since Series 5, when Apple added an always-on display. Still, I realized I need to spend a few tenths of a second more to grasp it. Unfortunately, Apple’s watch faces just aren’t great. Marco Arment wrote a pretty extensive post 4 years ago and not much changed since then. Designers at Apple clearly know watches and recreated many classic designs like Divers and Chronographs. But they often lose important nuance making it’s quite hard to read the analog time quickly. For instance, all hour markers are usually the same, both hands have the same thickness, and so on. The only good analog watch face is California.

Apple Watch is clearly better as a digital watch, and I believe there’s an opportunity to improve. You either have Infograph Modular with a clock that’s rather small or artsy faces where digits take the entire screen with no place left for complications.

What I want is something like this. On Apple Watch Nike there’s a similar watch face but it’s not pretty, has visual bugs, and one slot is always taken by Nike Running, which I don’t use.

Longevity

To me, my watch is almost like my friend (don’t worry, I have friends). It’s with me all the time. I change my clothes but I wear the same watch. It might very well still be on my wrist in 20 years’ time. And from that we got the most massive disadvantage Apple Watch has – it’s short-lived. Even if you replace the battery on your Watch, in a few years it’d look painfully slow and you’d have to upgrade. It’s a replaceable gadget.

Both mechanical and quartz watches can survive for decades with basic care and maintenance. With mechanical watches, you need to have them serviced and while that can be quite expensive, especially in the case of in-house movements powering complicated watches, it’ll at least work perfectly afterward. Quartz watches are easier, you just need to replace the battery and ensure they won’t leak. Even some of the first quartz watches from the 70s are still running. Although, if something does break inside finding a replacement part might be challenging. With simpler mechanical movements it’s a bit more obvious.

And if you do that, your kids can wear the same watch. Whether you cherish that idea or not is entirely up to you, but I like it. My father had a collection of mechanical watches and I enjoyed looking at them as they were telling me about his life.

Battery Life

Apple Watch needs to be charged every night to operate properly. If you go out late at night you might end up with a dead watch. If you travel, even only for a weekend, you have to bring a dedicated charger.

Quartz watches live between 2 and 10 years on a single battery. There are some fantastic pieces that operate on solar power so you only need to replace the accumulator when it’s just dead – most outlive the 10 years period stated by the manufacturer. Mechanical watches usually live between 40-80 hours, but most of them are automatic, meaning they utilize the kinetic energy of your movement to charge. It’s a fantastic device, both mechanically and philosophically, as it’s literally powered by your own body.

The fact I can trust my watch to continue going however late it is, take it off my wrist, and just put it on in the morning while it’s still running is a blessing.

***

Maybe this isn’t forever. Maybe Apple Watch Series 9 will be able to track my blood pressure and glucose 24/7 and it will become a necessity for sustaining health and I’d switch. And I’m still using Apple Watch for training and sleep tracking (mostly for the silent alarm feature). But for the moment I’m enjoying watches that don’t add anxiety in my life.

life
gadgets