Leveraging Technology – BUTTONS

In early September I was working at home, I managed to almost get myself killed in our driveway by an Amazon delivery driver.

It is not lost on me (or my wife) if the driver succeeded in his aim it would have made for an enlightening discussion around natural selection. Anyway; he missed, so I go on.

I retreated back into our home armed with a photo of the package (delivered to our neighbours’ house), my memory of the driver’s number plate and a range of adrenaline fuelled emotions; a blend of rage, anger and indignation. He was not having the final word, zooming past me, down our street and away – that is not how this disagreement was going to end.

I knew full well that the driver was not an Amazon employee, not even close. I didn’t know though where else to start; so I typed “Amazon complaint” into a Google search, expecting to spend an entirely unsatisfactory afternoon in call centre hell.

I was immediately redirected into a complaints section within my personal Amazon account and given 3 options 1) a dropdown section with “does your complaint involve the following?” 2) start typing the detail of your complaint HERE or 3) Push this BUTTON and we will call you.

I clicked option 3), I pushed the BUTTON.

Immediately, my mobile was ringing, my hand was still sitting on the mouse.

“Hello I am sorry that you have a complaint, could you please give me the detail of what has happened?”

This was a real person, likely assisted by voice recognition software. It wasn’t straight forward to convey the details. The package was delivered to a neighbour, not me. It was a delivery driver not a direct employee where my concerns were directed. I went through the detail twice, the person at the other end of the phone got their arms around the issues (from my perspective at least!) and their response was along the line of  “do you mind holding for about 60 seconds, I would like to connect you to the appropriate person at Amazon logistics Australia, we would appreciate you reconveying the details to them”. As described, less than a minute later I was talking to a local Amazon representative – my sense was they were already across the key points.

I hung up the phone, less than a minute later I received an email to confirm that I considered the issue closed. I did, I conveyed this in my response. I didn’t get feedback if the individual towards whom my anger was directed to was strung up and quartered, or if my complaint was just put in the bin for entitled Sydney eastern suburbs residents.  Regardless, I felt like I had the final say, I was reasonably satisfied.

Subsequently, I have regularly reflected on this interaction. I’m haunted to a degree by the option of “Push this BUTTON and we will call you”, then, backed up by the immediacy of a call and the efficiency of response. Using technology in this manner inverts the relationship between the customer and the service provider. This contrasts to recent call centre experiences with a telco for an NBN install and a general insurer for a property claim. Once you push the BUTTON, given the choice, you don’t go back.

Fund Positioning 30_09_2018

Fund Positioning 30_09_2017

The Narrative

The fund currently owns investments in Akzo Nobel N.V. and Whole Foods Markets Inc.  We have detailed our thesis around both investments previously. There are obvious risks and these are not insignificant; but we regard these risks as worth taking in the fund because if our view proves correct, the equity value of both businesses will appreciate multiple times over the next decade.

The current corporate activity around both businesses has caused strong recent appreciation of their share prices. It has also generated a lot of media narrative that is critical of the director’s of both businesses. In these two instances, we regard the narrative as being generally opportunistic and misplaced. This narrative has real economic consequences.

The longer term upside we perceive there to be in both investments is largely subjective and is hard to defend. Director’s may hold similar views to us about the opportunity, but they are exposing themselves by rebuffing the current corporate interest because of the subjectivity of these views.

We suspect the suitors also hold similar views about the longer term opportunity. Their objectives are to use the narrative to force the directors to the table and entice and cajole a majority of shareholders into accepting the short term gain. 

Ultimately, the owners of the businesses need to decide. We are hopeful that there are enough of them that hold a view similar to ours, that it is rational in these two cases to take the risk and uncertainty of a longer term investment horizon, for the potential rewards.

Fund Positioning 30_09_2016

So you want to invest in UK and European bank shares: Seriously?

When we think beyond PEs and NTAs and whatever other sanitised numbers the market looks at and focus on the actual nature of banking as a business and what is going to protect our downside if we are wrong; we inevitably throw banks onto the too hard basket with regard to being genuine long term investment prospects.

We regard banks as being businesses with the following common characteristics:

• Low ROAs;
• Low transparency;
• High leverage;
• Economically sensitive;
• Cyclical;
• Generally disliked by their customers; and
• Trapped, a bit like mice on a wheel, relentlessly selling homogonous, commoditised products.

Not much has to go wrong for any business with these characteristics, for their equity to be wiped out.

The differentiators are credit culture and maybe, to lesser extent processing costs. We find the cost argument as being conflicted though because, if you believe you have a cost advantage you will push aggressively for scale to leverage this advantage and on some level inevitably (we think) you will compromise on credit.

Given the inherent leverage banks carry in their capital structures valuation measures like PEs or NTAs are meaningless to us with regard to offering downside protection of equity values. The people selling bank shares at todays prices are more than aware what their share prices have done recently and what the market thinks of their current valuation.

Maybe there is an argument that extended quantitative easing has had its desired effects and the system has healed… and therefore it makes sense to deploy capital into the banks today. Our concern though is all it has really done is just papered over the cracks, in which case the volatility we have seen since the Brexit vote is going to be with us for a while longer yet.

Long Tail Asset Management – 5 year anniversary

Fund Positioning 31_03_2015

Mario Draghi, President of the ECB

Q & A: 22 01 2015 

Question: There’s a big debate at the moment as to whether what matters most is the flow or the stock, the buying of assets or what is already held on the balance sheet. I’m curious as to where you come out on that particular debate.

And second of all, what would you say to those who are concerned that when the ECB is buying up bonds, electronically printing money, whatever one calls it, this is the first chapter in a story that leads inevitably towards hyperinflation. What’s your response to that?

Draghi: On the first point, the way the introductory statement reads says that both things are important. The overall amount but also the scale of these purchases, the monthly flows are quite meaningful, as is the overall amount.

The second question, I think the best way to answer to this is, have we seen lots of inflation since QE programmes started? Have we seen that? And now it’s been quite a few years since they started. Our experience since we have these press conferences goes back to a little more than three years. In these three years we’ve lowered interest rates I don’t know how many times, four or five times, six times maybe. And each time someone was saying this is going to be terribly expansionary, there will be inflation. Some people voted against lower interest rates way back at the end of November 2013. We did OMT. We did the LTROs. We did TLTROs. And somehow this runaway inflation hasn’t come yet.

What I’m saying is that certainly the jury’s still out. But there must be a statute of limitations. Also for the people who say that there will be inflation, yes, when, please? Tell me, within what?