Thoughts on the Kelly Formula; Jeff Bezos' shareholder letters from 1997 to 2018; Bill Gates explains the Internet 24 years ago; DoorDash steals workers' tips; How Juul Hooked a Generation on Nicotine; Robocall Scams Exist Because They Work

By Whitney Tilson

Tuesday, November 26, 2019

1) My friend and former partner Glenn Tongue and I shared our Thoughts on the Kelly Formula (3:27) in one of our webinars last year.

2) Amazon (AMZN) is one of the great business success stories of all time, so it’s worth studying… regardless of what you think of the stock, company, or founder and CEO Jeff Bezos. I’ve compiled all of his annual letters from 1997 to 2018 into a 76-page pdf here.

Here’s an article about them: What I Learned from Jeff Bezos After Reading Every Amazon Shareholder Letter. Excerpt:

In his 1997 shareholder letter, Jeff Bezos issued a manifesto “It’s all about the long-term” where he laid out his approach to business and to running Amazon. He pledged that decisions would be made with a long-term lens and with a focus on market leadership. This manifesto has been included in every single shareholder letter for the last 20 years! After reading these letters, it is clear that the fundamentals of how Amazon does business remain the same. Talk about commitment and consistency.

A focus on the long-term is important for several reasons. First, for a company that drives growth through innovation, a long-term approach allows for experimentation and an acceptance of short-term failures. “Failure comes part and parcel with innovation. It is not an option.” A lot of Amazon’s growth has been driven by AWS, Marketplace, and Prime. Each of these offerings was a bold bet at first, with many skeptics. In Bezos’ 2014 letter, he noted that sensible people “worried (often!)” that these initiatives could not work. Bezos believed in his vision and stayed heads down.

3) Speaking of blasts from the past, here’s a video clip from 24 years ago of Bill Gates explaining the Internet to David Letterman.

4) This is a tough question: Which is more of a total disgrace, DoorDash stealing its delivery workers’ tips, or Juul marketing to young non-smokers, addicting millions of them to nicotine? The latter I, think…

“Any reasonable consumer would have expected that the ‘tip’ they added to the delivery charge through the DoorDash checkout screenflow would be provided to the Dasher on top of the payment promised by DoorDash for the delivery. But during the relevant time period, that was not the case,” according to the lawsuit, using DoorDash’s moniker for its workers. “Instead, DoorDash used consumer tips to subsidize the Guaranteed Amount payment it promised to Dashers.”

The lawsuit alleges DoorDash’s disclosure about its tipping model was “ambiguous, confusing, and misleading because it encouraged consumers to tip, but did not disclose that a consumer’s tip would, in the vast majority of circumstances, make no difference at all to a Dasher’s pay and would only go toward subsidizing DoorDash’s share of Dasher pay.”

Over the next few years, the company – which became Juul Labs after splitting from Pax in 2017 – would reignite the stale e-cigarette business, grabbing more than 75% of the vaping market and tallying more than $1 billion in sales in 2018. At the end of last year, it was valued at $38 billion, more than the Ford Motor Company.

From 2016 to 2018, the years Juul’s growth became astronomical, the number of adult nonsmokers who began using e-cigarettes doubled in the United States, according to an analysis of federal survey data by researchers at the Johns Hopkins Ciccarone Center for the Prevention of Cardiovascular Disease. The study estimates that 6 million adults were introduced to nicotine via e-cigarettes.

During that time, millions of high school and middle school students began vaping, according to federal health surveys. More than five million youths – one in four American high school students and one in 10 middle school students – now vape, the Centers for Disease Control and Prevention and the Food and Drug Administration said in a joint report this summer. Nicotine is a highly addictive drug that impedes the developing brain, and many teenagers have struggled to quit.

5) What a tragic, scary story – and cautionary tale… Robocall Scams Exist Because They Work – One Woman’s Story Shows How. Excerpt:

The FBI agent sounded official on the phone. He gave Nina Belis his badge number and a story about how her identity had been compromised. She gave him her life’s savings.

For most Americans, robocalls are an annoyance. For Ms. Belis, an oncology nurse in her 60s, a law-enforcement impersonation scam that appeared to have started with a robocall drew her into financial losses that sapped her family’s nest egg and derailed her retirement.

The scale of her loss – nearly $340,000 – and the ease with which the money was moved out of her accounts show why scam calls persist. They work, even on people who think they would never fall for one.

The caller preyed on what psychologists describe as a habitual reliance on people in authority, and kept Ms. Belis in a state of isolation and heightened emotion to cloud her judgment. He told Ms. Belis her Social Security number had been stolen and that crimes had been committed under her name, and persuaded her to transfer assets to accounts he controlled on the pretext of protecting the funds.

Best regards,


Whitney Tilson
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About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to more than $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

Click here for the full bio.