What I Have Been Reading – January 2020

The $2 million Apple Mistake

On Tuesday, November 28, 2000, I purchased 500 shares of Apple at 18 1/16 for a total cost of $9,051.25, including a $20 commission. On March 5, 2001, I sold the 500 shares for $20.25 for proceeds of $10,105 after another $20 commission. My short term capital gain was $1,053.75.

Apple shares split 2-for-1 in 2005 and split again 7-for-1 in 2014. This means that the 500 shares I sold in early 2001 would be the equivalent of 7,000 shares today. If you take $317 and subtract $1.446 ($20.25 divided by 14) and multiply by 7,000, you get a horrifying $2,209,000!


The Cost Of A Franchisee

All told, it might cost a franchisee upwards of $2m to develop, build, and buy the right to open a McDonald’s or a KFC. Many chains won’t even look at your application unless you have a net worth of $1m and $500k in readily spendable cash sitting around.

But there’s an exception to this: A franchise at Chick-fil-A — one of America’s oldest, largest, and most profitable chains — can be yours for just $10k

According to Chick-fil-A, 60k people apply to be operators every year — and only ~80 are selected.

With a 0.13% acceptance rate, it’s harder to become a Chick-fil-A franchisee than it is to get into Stanford University (4.8%), get a job at Google (0.23%), or even become a special agent for the Secret Service (1%).

The average chain we looked at requires an applicant to have a minimum net worth of $1m ($500k of which is liquid). Burger chains and chicken chains appear to have the highest barrier to entry: To launch a Wendy’s, you need to have at least $5m in the bank, with $2m in liquid assets.

At an average of ~$30k, franchise fees make up only a small part of a franchisee’s total investment. The rights to big burger chains like Jack in the Box and Burger King will set you back $50k; sandwich chains like Subway can be had for $15k.

Overall, the average fast-food franchise costs between $777k and $1.9m to open. Though, according to the franchisees we spoke with, it’s realistic to expect to be on the higher end of this.



The rise of Tik Tok

US users spent 15 million hours on TikTok in 2018.

They spent 85 million hours on it last year. More time than they spent streaming Amazon Prime.



The Genius of Google

Recaptcha is the now widely used system whereby a Google-linked website asks you to type out words that are written in squiggly handwriting as a means of proving that you are not a so-called “bot” or malicious software. An estimated 200 million people have to do this every day, and Luis invented it. Recaptcha, which was solely owned by Luis, was bought by Google in 2009 for an undisclosed eight-figure sum.

What is little known is that the words you have to write out are not chosen at random. Instead they are words from old physical books that Google is digitising, and its software is struggling to decipher. So every time you do one of those security tests you are an unpaid Google worker. If, say, 10,000 people all agree on a certain spelling, then Google accepts that as correct.



The most popular library books:

1. “The Snowy Day,” by Ezra Jack Keats (485,583 checkouts)
2. “The Cat in the Hat,” by Dr. Seuss (469,650)
3. “1984,” by George Orwell (441,770)
4. “Where the Wild Things Are,” by Maurice Sendak (436,016)
5. “To Kill a Mockingbird,” by Harper Lee (422,912)



The next time you hear Sir David Attenborough say: ‘Anyone who thinks that you can have infinite growth on a planet with finite resources is either a madman or an economist’, ask him this: ‘But what if economic growth means using less stuff, not more?’ For example, a normal drink can today contains 13 grams of aluminium, much of it recycled. In 1959, it contained 85 grams. Substituting the former for the latter is a contribution to economic growth, but it reduces the resources consumed per drink.

As for Britain, our consumption of ‘stuff’ probably peaked around the turn of the century — an achievement that has gone almost entirely unnoticed. But the evidence is there. In 2011 Chris Goodall, an investor in electric vehicles, published research showing that the UK was now using not just relatively less ‘stuff’ every year, but absolutely less. Events have since vindicated his thesis. The quantity of all resources consumed per person in Britain (domestic extraction of biomass, metals, minerals and fossil fuels, plus imports minus exports) fell by a third between 2000 and 2017, from 12.5 tonnes to 8.5 tonnes. That’s a faster decline than the increase in the number of people, so it means fewer resources consumed overall.