Episode 36: Qantas' Huge Move, the Shrinking Tiger Global, are we in a Recession and the rise of Lime Bikes
Adam and Adir chat about the big Qantas loyalty move, Tiger Global's new fun and have we hit peak VC, the dynamics of the Scooter Rental market and the guys talk Recession and Inflation.
What will it take for Adir to watch a movie?
At least 20 years, apparently. With the logic that “if it’s stood the test of time, it’s probably a great movie”, it’s hard to disagree when the result is movies like Sunset Boulevard, Citizen Kane, and Casablanca (although the podcast does open with Adir’s recount of Kung Fu Panda 4, which is a 7/10).
What follows is a choose-your-own-adventure path of discussion: from old movies to parking revenue at shopping centres adjacent to train stations, to who owns which department stores that are the most full during school holidays, to Accent Group, who own the Australian license for Hoka One One (which Adam doesn’t wear because he runs barefoot), to the ups and downs of Nike and Adidas’ share prices. What an intro 😅
Are we in a recession?
Unemployment hasn’t diminished and inflation being the last sticky element, the guys discussed whether we’re in a recession. Since 2019, the price of eggs has gone up 63%, bread has gone up 34%, and sports drinks have gone up 80% (Adir’s ingredients for a sports drink: “water, a bit of sugar, and some marketing”).
Consumer staples are up 50% on average in the US compared with pre-COVID, so even though unemployment is down, inflation continuing to go up means living standards are down. COVID has cost everyone around 25% on what they buy, which is inconsistent with wages - “if something's going up 40% in five years, it's 7% a year of inflation, there is no way that people's wages at the bottom end of the market have gone up by 7% a year.”
So if it’s not a recession, what is it? Some have called it a silent recession, but Adir has named it a “repression” - i.e. maybe you want to go buy this thing but you’re going to repress the urge to shop, which includes how corporates are approaching it.
You won’t see the impact of our “repression” in the GDP numbers, but you may in the AFR and The Australian after Adir shared permission to use the new term.
Qantas’ huge loyalty revamp
Firstly, it’s a debate whether the favourite topic of this podcast is Cettire or loyalty programs (or Qantas).
Secondly, Qantas has introduced a new Classic Plus tier of their loyalty program. They’re aiming to add 20 million new rewards seats on top of its current five million classic reward seats. The interesting thing is their new dynamic pricing: 1c per point for economy, and 1.5c per seat for premium cabins.
This is pretty revolutionary in this space given every other program is essentially based on distance, not what the traveller is willing to spend.
Adam and Adir agree that this is a long-term, customer-centric move that’s bold and designed to fill seats on longer flights where you may have thought Qantas would otherwise be too expensive.
Adam went from never using a Qantas point outside of domestic travel to now actively looking at Qantas redemptions in a move he categories as “long-term greedy over short-term greedy”, which took the conversation down the path of succession planning for founders and CEOs.
Adam: “You should be able to put an idiot in the job and have the idiot still do well.”
Adir: “If the idiot is doing dumb stuff in two years, then the previous CEO and board should pay a price for putting an idiot in the job.”
The rise and rise of scooter rentals
Lime scooters announced Australia is one of its most profitable markets globally, with an 135% increase in rides and is now profitable in this market.
Do you know who the fastest company to unicorn status in history at the time was? Bird, the original “micromobility company” who filed for US bankruptcy in December 2023. Also, do you know who the fastest company to hit $1b in sales before Groupon? Segway. (Adir: “That’s a nice segway to nothing”).
Bird was famous during COVID because they fired 400 staff (40% of their team) over a two-minute Zoom call. Many thought they were going to be the next Uber. So, what makes Lime unique and destined to avoid the dreaded path of others like Bird?
The unit economics on these businesses could be great. On average, it costs $14 to rent the scooters for 60 minutes, and the guys suspect the hardware cost around $700, so it doesn’t take many trips to cover costs (obviously not including maintenance, which is a big factor in their business model).
But, they only work in a particular type of city with density and good weather. So, the question is whether Lime can maintain defensibility in a city like Melbourne where the only perceived defensibility is that many people have, and trust, the app.
The incredible shrinking Tiger Global
Tiger Global closed its 16th round, raising 2.2b despite setting a target of 6b. Have we reached peak VC?
Tiger became, rightly or wrongly, a lightning rod of criticism after going on an investing rampage in 2021, backing the equivalent of a new start up every single day. Which is consistent with Adir’s own view: “most of my remorse in life has come from not investing in an opportunity than in investing in an opportunity”.
What ensues is a view of what you need to be successful as a VC (luck and resilience are common themes), before bouncing between an Adam-Adir love-fest (you’re a better operator; no, you’re a better operator etc.), and then back to contrarian views of the future of venture capital (which has too much survivorship bias for Adir).
To end on a bleak note: “I don’t think we’re past peak VC, a bigger future is ahead of us. But anyone who thinks the winter of startups is behind us and spring is here will be sadly mistaken. I think winter is in year’s time.”
Five other stories worth following:
Tesla slashed its Full Self-Driving (FSD) subscriptions in half for customers in the US and Canada, to $99 per month. The company is calling the software “Supervised FSD,” an acknowledgment that the cars are not yet fully autonomous. Tesla also announced a 10% headcount reduction.
Meta is trying to make their Quest VR headset a central piece of school equipment. As educators grapple with AI and other new tech tools, a deep-pocketed push to turn VR into a classroom staple raises new questions about the future of learning.
South Korea and the US spend billions on chip investments as the lines blur between AI development and nationalism. AI’s rise has put semiconductor demand into warp speed as nations race to become top producers
All on eyes on the only major profitable streamer, Netflix, reporting this week. In Q4, it added 13M subscribers, hitting a record high 260M paid subs as it culled password-sharers from their cousin’s ex-girlfriend’s account. Netflix’s Head of Film left the company in January.
Elon Musk is planning to charge new X users a small fee to enable posting on the social network and to curb the bot problem. Elon said “Current AI (and troll farms) can pass ‘are you a bot’ with ease.”
