The one about Jeff Bezos
Could the billionaire be wrong?
Friends,
I hope that all is well with you and yours, and that this e-mail finds you on a boat with shoddy connection, in the tropics, three months after I sent it.
Today, we take a slight detour from the scheduled programming to discuss a crucial aspect of strategic adaptation - experimentation - and a quote by Jeff Bezos which has recently been making the proverbial rounds.
Also, as ever, the market vitals and personal notes. This week: why mud is not tea or vice versa, the skills of a three-month-old, US inflation data and what may (or may not) be in store for interest rates in 2025, a worrying sign for low-income consumers, Omnicom and Interpublic, one of the worst pitches I have ever heard and Google surpassing Microsoft.
Now accepting keynotes for 25Q1-25Q3
Every year for the last decade or so, I have created three main presentation decks. For 2025, however, I have (for the first time) added a fourth due to popular demand. They are:
What to Do When You Don’t Know What to Do: How to turn change into a competitive advantage. (Based on the new book by the same name.)
Leadership in a Time of Change: How to steer an organization through a sea of uncertainty.
Resilient Retail: How to build a profitable retail business in the modern marketplace. (Based on the 2025 follow-up to the highly praised 2022 white paper The Gravity of e-Commerce.)
Artificial Intelligence Beyond the Fantasy: How to understand the narratives, risks, opportunities, and best uses of a new technology.
If you want to book me for your event, corporate speaking slot, or workshop, merely send me an email. To make sure I am available, please do so at your earliest convenience; my availability is limited and the schedule tends to fill up fast. More information may be found here.
A couple of updates before we go-go
Apologies for the slightly delayed newsletter; the week has been a bit chaotic between work (including travel for said work) and the eldest daughter’s most recent illness.
Nothing serious; she is fine and back at kindergarten. She was merely ill for a few days because she decided to gulp down a couple of oceans of muddy water (“I pretended it was tea, dad”). Apparently her parents warning her about such stuff was enough only until her best friend conversely considered it a grand idea.
No idea what the hell the kindergarten staff was doing; my wife found them in the mud upon pickup.
The youngest daughter, meanwhile, has proven to have a real talent for face shifting. One second, she looks like Gal Gadot. The next, late career Walter Matthau.
When I made the observation on social media, Bruce Clark quipped that it was obvious who in the family stood for the Matthau likeliness. But I think that is no way to speak of my wife.
As previously alluded to, there will be a longer explanation of, and how-to guide to, my 4E model of market dynamics posted on my website some time in January or February. Client feedback has simply been too good for me not to.
I also threw it into a keynote this week (the last for the year) just to see the response without workshop explanation. The audience, almost entirely made up of chief executives, seemingly loved it. A large number of requests to have it shared also came in after.
The market vitals
US inflation data came in this week and was mostly good. I would be surprised if the Fed does not make another cut before the end of the year and the market seemingly agreed; the Nasdaq Composite topped 20,000 in apparent celebration.
Having said that, I am far from convinced that they will automatically continue their cuts after New Year’s. Housing costs may have declined (at long last), but consumer goods prices increased at the fastest month-over-month pace in 18 months.
PCE (personal consumption expenditure), which is the metric that the Fed tends to focus most heavily on, is estimated to have increased to 3.1%; up from 1.7% in August. We will not get an official number until after the rate decision, but if it continues to move higher, we might be in for a tougher 2025 than most assumed - particularly given the inflationary implications of Trump’s fiscal policies.
One may also observe that Dollar stores, typically considered a canary in the coal mine for low-income consumers, are seeing signs of more frugal behavior. More and more customers are waiting to shop last minute, and late month purchases are declining, indicating that household budgets are more frequently depleted. The potential consequences for mid-market retailers and payment solution providers (credit card companies and BNPL firms) ought to be obvious.
News recently broke that Omnicom and Interpublic are merging into what would be the world’s largest advertising business. The idea, or so Wall Street logic seems to indicate, is that they together would able to better compete with tech companies by “investing in technologies”. As for what those technologies may be, well, I think we can all make a pretty solid guess.
Although I understand the strategic reasoning - gen-AI is upending their market - I am not as convinced as many industry commentators appear to be that it will be quite the clichéd park walk.
Certainly, AI has the potential to create efficiencies, but we have yet to see actual efficiencies realized in practice. If anything, it seems to mainly add costs. But even if the technology does prove to serve its purpose over time, where do you choose to place your money? If the new advertising behemoth wants to better compete with the tech companies that are eating their lunch, there are presumably only two options on the table: invest in firms that are less threatening and/or build the requisite capability for yourself.
Gen-AI remains extremely expensive to develop (to illustrate, Meta capex is exceeding $10B per quarter and it is not even close to the highest spender), which means that only a select few companies will have the ability to pay. The companies in question are also typically those with the allure to attract the necessary talent. Omnicom and Interpublic will thus be fighting a rather steep uphill battle however they proceed.
Building one’s own AI capabilities is far from impossible, but is farther still from easy. A lot of companies seem completely oblivious to this fact. To illustrate, I recently found myself in a hotel lobby working. At one of the tables next to me was, quite clearly, someone making a pitch. They concluded with “and we have a guy who has just started his AI PhD, so we can do that too”. For reference, that is akin to saying “and we have a guy who has just started architecture school, so we can build a skyscraper too”.
Speaking of tech, a recent CIO survey revealed how companies are viewing their IT investments for 2025. Unsurprisingly, 71 of the 81 people asked expected to increase their budgets for 2025. What was more interesting was how Alphabet had surpassed Microsoft as the number one AI infrastructure vendor. Over 50% said they were going to use Google Cloud.
Moving on.
The one about Jeff Bezos
Could the billionaire be wrong?
Last week, we began to discuss strategic adaptation; why it was an inevitable part of every strategist’s reality, what the term meant, involved in practice, and so forth. To sum up, there was a scientific explanation why it is and forever will remain the only sustainable competitive advantage, and there were definable “rules” for how to build the requisite capacity.
My plan was to continue the conversation today with a look at scaling, as adaptive strategy is fundamentally different from conventional strategy in that regard. The topic matters greatly for anyone hoping to actually get their strategy executed properly. However, as so often is the case, something happened that I had not planned for - and unlike most organizations, I actually change my plans to suit.