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Firehose #175: 🔥 Close to home. 🔥
Living at the intersection of dual disasters. Plus: USPS is essential, reviewing "The Last of Us: Part II," Chinese keyboards, and a millennial neutron star.
One Big Thought
This week writing about business seems trivial in light of the dual disasters hitting California: COVID-19 and wildfires.
Together, they feel like a cruel joke. Because of COVID-19, we can only participate in outdoor activities, but the fires mean we can’t do anything outdoors. Living in San Francisco, I’ve found myself checking the air quality index (AQI) in different parts of the city each morning, finding a park near the green/yellow spots, and dashing the kids out of the house to go play before the air quality gets too bad. Otherwise, there’s little else we can do except hunker down indoors with air purifiers on full blast.
I’m sympathetic to the number of Californians who live close to one of the 23 major wildfires currently burning. They must evacuate to indoor centers that pose significant COVID-19 risk. Some evacuation centers allow the displaced to set up outdoor tents, but many are opting to sleep in their cars instead, fearing infection from strangers.
COVID-19 has intersected with the wildfires in another unexpected way. The state’s firefighting capacity depends significantly on prison labor. Since the 1940’s, California has employed inmate firefighters to serve as its primary “hand crews” that manually lay down “fire lines” to stop the progression of a blaze. In the past few years, nearly a quarter of the state’s 15,500 firefighters are drawn from inmate populations. While they literally sit on the front lines of firefighting, these inmates are paid between $3-5 per day. The average firefighter in California makes $52K per year (25-50x more).
COVID-19 has hit prison populations especially hard. In California, prisons have seen 8.8% of inmates infected. That’s 449% higher than California’s overall infection rate. The death rate is also 75% higher than the state overall. As a result, fewer inmates are available to fight fires in an operational model where they are essential.
With the persistence of the pandemic and the increasing effects of climate change, we’ll increasingly see COVID-19 make other natural disasters even more difficult to bear. Multiple hurricanes are already threatening the south and southeast, and severe winter weather will start hitting the midwest and northeast in a few months. Iowa suffered through something called an “inland hurricane,” which left a quarter of a million people without power. COVID-19 will make responding to these disasters, potentially without federal support, even more challenging than usual.
A piece in The Atlantic asked the right question this week: “How can we plan for the future in California?” In other words, why build a business, a home, a farm, or anything else when it could be wiped out arbitrarily by nature? What discount on the future to do we apply today when we don’t have the political will or financial resources to prevent the catastrophes? What is the opportunity cost of inaction?
COVID-19 has brought these questions to the surface. I am hoping that it is the proverbial straw breaking the camel’s back. My hope is that, coming out of COVID-19, we have the will to catalyze political change and financial investment around proactive prevention measures for natural disasters. This isn’t just California’s problem. Each region of the country will see its own version of COVID-19 impacted disasters and will need to respond accordingly. I hope they look to California and start preparing now.
Tweet of the Week
Links I Enjoy
Web Smith of 2PM wrote about the vital role that the USPS plays in e-commerce. Outbound shipping can be ~10% of net revenues for typical e-commerce businesses, which is a significant cost line if gross margins are 20-40%. Furthermore, fast shipping increases conversion rates on purchase, effectively lowering the customer barriers for e-commerce and growing the overall addressable market.
Americans take the USPS for granted, like electricity or running water. At Lightspeed, we invest all over the world, including some countries with underdeveloped or fragmented logistics networks. The founders of companies that touch physical goods in these regions wish they had something like the USPS at home.
At the start of the pandemic, many (including me) predicted flight from urban areas into less dense, suburbs, where it’s easier to social distance. Zillow data now shows that movement in the rental market, where urban ZIP codes have seen falling rents relative to suburban ZIP codes. The difference in home sales, however, seems to be relatively similar pre and post pandemic. The exceptions are cities like NYC and San Francisco, which have seen for sale properties flood the market.
I love highlighting clear, thesis-driven thinking on businesses. Coho Capital’s Q2 memo on Spotify* is such a piece. Several of the points raised are ones I’ve reiterated in the past: (1) size of global addressable market, (2) data flywheel, (3) continued category leadership despite the “best” competitors (AAPL*, GOOG*, AMZN*), (4) gross margin accretion from podcast strategy and increased scale of demand.
You have to be a bit of a masochist to play The Last of Us: Part II during a pandemic. What can I say? I loved the first game and couldn’t wait to play the second!
The game is a masterpiece. Both games are, really, but in different ways. I heard someone remark that the first game has an ending that seems happy, but is really tragic, while the second game is the reverse. I think that’s accurate. I’d also add that the first game is ultimately about love, while the second is about hate. The two games mirror one and other in lots of interesting ways.
The brutality of the game stays with you far beyond the ending — not the violence necessarily, but the harsh reality created by humans trying to survive in a wild world in which civilization is all but gone. The game highlights the relationships that form in the midst of this chaos and what it means to be human in that context. The Last of Us: Part II handles these concepts masterfully and unexpectedly, far better than any other “zombie apocalypse” narrative I’ve seen in TV or movies. It shows that games have the potential to be the highest form of storytelling.
I won’t say much else because SPOILERS, but if you want to read a fair take on the game, check out this post. I’d recommend playing it first, starting with the original.
RadioLab discussed the history of the Chinese keyboard. I have to admit that I was totally unaware of how difficult is was to translate the written Chinese characters into something compatible with a keyboard, especially in the 70’s and 80’s when computers were less sophisticated.
The internet spilled a lot of digital ink on OpenAI’s GPT-3 over the last month. I liked Adam Keesling’s review of the various applications. He also asks the right question: what will this change? He identifies verification, propaganda, and influence as the low hanging fruit. Just in time for the U.S. election…
Astronomers may have found a neutron star that’s only 33 years old! It will hopefully give fresh insights into the process by which stars are born, since the previously observed youngest observed star is 10x older.
McSweeney’s published, “NEW YORK IS GONE FOREVER (ACCORDING TO ME, A BABY WITH NO OBJECT PERMANENCE).”
This is my favorite type of satire:
I regret to inform you that New York no longer exists. Unfortunately, as soon as it was out of my sight on our family trip earlier this year, it disappeared forever. As someone who loves both big things and shiny things, I am distraught. I’m one of those babies who really thought I could make a life for myself there, but now it’s gone.
Regrettably, and you are not gonna believe this, my mother’s face is gone as well. It was here and then suddenly — oh wait! It’s back! No, no, I was mistaken. I only see the backs of her hands, and so her face must be lost to the passage of time. I totally thought I saw her. That’s disappointing. I would never have imagined becoming the daughter of a faceless woman. Fate is a cruel mistress, indeed. I’ll sure miss — wait! There she is aga — ah, nope. She’s gone once more. Just hands. Wow, what a turbulent afternoon.
Yeah, NYC’s not over. Neither is SF. But saying so does make a good headline. :-)
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Disclaimer: * indicates a Lightspeed portfolio company, or other company in which I have economic interest. I also have economic interest in AAPL, ADBE, AMT, AMZN, BABA, BRK, BLK, CCI, CRM, GOOG/GOOGL, FB, HD, LMT, MA, MCD, MSFT, NFLX, NSRGY, NEE, PYPL, SHOP, SNAP, SPOT, SQ, TMO, VEEV, and V.
Header image credit: https://www.mercurynews.com/2020/08/22/hey-california-with-wildfires-blackouts-bloody-protests-pandemic-could-2020-get-any-worse/