What Blue Apron needs to do to survive the threat of Amazon – Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From MarketWatch

For a while, it looked as though Blue Apron was destined to become a culinary juggernaut in the American kitchen.

Founded in 2012, the company APRN, +1.89%  carved out a clever business model by mailing perfectly portioned, pre-packaged ingredients and recipe cards to home cooks in need of handholding. It’s not yet profitable, but growth is impressive. Last year, the company had $795.4 million in 2016 by delivering about 8 million meals per month to customers.

Recently, though, there have been challenges. Shares that the company had hoped to sell between $15 and $17 apiece in June were priced at just $10, hurt in part by Amazon’s AMZN, +0.23%   announced acquisition of Whole Foods WFM, -0.02% earlier that month. They now trade for less than $6, pummeled in part by Amazon’s plans to launch its own meal kits.

The twin revelations about Amazon are no doubt unnerving to Blue Apron’s executive leadership team and investors. And yet, they should also see them as encouraging signs. That Amazon sees so much potential in the industry is proof positive that the meal kit represents a new American staple, and not just—pardon the expression—a flash in our collective pots and pans.

True, Amazon is a formidable rival. And yes, the meal kit business is increasingly crowded. (Current contenders include: Plated, HelloFresh, Purple Carrot, and Sun Basket.) But Blue Apron has an opportunity to differentiate itself. To do so, it must focus on the needs, wants, and values of its target audience: mainly millenials.

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Post MiFID II, dark trading should return to basics – Haoxiang Zhu and Carole Comerton-Forde

MIT Sloan Asst. Prof. Haoxiang Zhu

From Oxford Business Law Blog 

On January 3, 2018, the revised Markets in Financial Instruments Directive, or MiFID II, became effective across EU member states. This comprehensive and far-reaching regulation will shape European capital markets in years to come. Among other things, MiFID II puts several restrictions on dark pools in European equity markets: (i) Broker Crossing Networks are essentially banned; (ii) dark pools that rely on “reference prices” on exchanges can only execute trades at the midpoint of exchange best bid and offer; and (iii) dark pools are subject to volume caps of 4% for a single venue and 8% across all dark pools (colloquially referred to as the double volume caps). On the other hand, MiFID II keeps the “Large in Scale” (LIS) waiver, so sufficiently large transactions can still go through without being counted toward, or affected by, the double volume caps.

Jargon and technical details aside, these MiFID II rules essentially push dark trading to return to basics: the matching of large institutional orders to reduce price impact (for both sides). Price impact—the very act of buying or selling moves prices adversely—can be quite costly for institutional investors, especially in today’s market where alphas are hard to generate and high-frequency traders watch every market movement at the microsecond level. By reducing the price impact of trades, investors enhance returns. Read More »

Firma invitada La lógica Trumpista choca con la lógica de la nueva economía–Steven Spear

MIT Sloan Senior Lecturer Steven Spear

MIT Sloan Senior Lecturer Steven Spear

From Retina

En las primeras semanas de la Administración Trump, han surgido dos polémicas separadas con asuntos concomitantes. Una es la supuesta protección del suelo estadounidense frente a una amenaza extranjera, en forma de una muy polémica prohibición de los viajes a EE UU de ciudadanos de siete países mayoritariamente musulmanes. La segunda es la intimidación de Trump a los fabricantes para que aumenten la presencia de sus fábricas en Estados Unidos y la reduzcan en el resto de lugares.

Implícitas en ambas cuestiones hay dos visiones claramente diferentes sobre cómo conseguir una seguridad y prosperidad duraderas para EE UU. Una postura es que competimos mediante la localización y la acumulación de cosas: recursos, instalaciones, y el acceso a ellas. La postura alternativa es que una ventaja sostenida depende de la superioridad sostenida en la generación, identificación y aplicación de buenas ideas en un mundo cada vez más globalizado.

Según el primer punto de vista, “transaccional”, la competitividad se apoya en la conservación de la ventaja posicional y mediante la construcción de barreras que eviten que molestos competidores tengan acceso a mercados y clientes a los que uno ya está intentando atender y para evitar que los clientes actuales se marchen a fuentes alternativas de bienes y servicios. Puede que no sea una coincidencia que alguien que construyó su carrera comercial en el sector inmobiliario, caracterizado por el mantra “localización, localización, localización”, tenga esta visión de la competencia.

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Opinion: MIT-led team is aiming to build a better cryptocurrency – Sandy Pentland

Sandy Pentland, MIT Sloan Information Technology Professor

From MarketWatch

New technologies that make it possible to reinvent our financial system have exploded over the past decade.

Bitcoin BTCUSD, ethereum and other cryptocurrencies are proof that there’s a market for alternatives to the big, powerful players. And yet, it’s unclear how these cryptocurrencies will affect the economic landscape. Problems like bubbles, financial crashes and inflation aren’t going away any time soon. (Ahem, note recent events.)

But in the future, things could be different. These digital currencies and their supporting infrastructure hold great promise for deepening our understanding of the monetary circuit. With newfound clarity, we can build tools for minimizing financial risk; we can also learn to identify and act on early-warning signals, thus improving system stability. In addition, this new level of transparency could broaden participation in the economy and reduce the concentration of wealth.

A crypto alternative

How might this work? Leading cryptocurrencies, with bitcoin being perhaps the most famous, or infamous, example, have considerable logistical limitations. An alternative is needed. Read More »

AI and the productivity paradox – Irving Wladawsky-Berger

MIT Sloan Visiting Lecturer Irving Wladawsky-Berger

MIT Sloan Visiting Lecturer Irving Wladawsky-Berger

From The Wall Street Journal

Artificial intelligence is now applied to tasks that not long ago were viewed as the exclusive domain of humans, matching or surpassing human level performance. But, at the same time, productivity growth has significantly declined over the past decade, and income has continued to stagnate for the majority of Americans. This puzzling contradiction is addressed in “Artificial Intelligences and the Modern Productivity Paradox,” a working paper recently published by the National Bureau of Economic Research.

As the paper’s authors, MIT professor Erik Brynjolfsson, MIT PhD candidate Daniel Rock and University of Chicago professor Chad Syverson, note: “Aggregate labor productivity growth in the U.S. averaged only 1.3% per year from 2005 to 2016, less than half of the 2.8% annual growth rate sustained from 1995 to 2004… What’s more, real median income has stagnated since the late 1990s and non-economic measures of well-being, like life expectancy, have fallen for some groups.”

After considering four potential explanations, the NBER paper concluded that there’s actually no productivity paradox. Given the proper context, there are no inherent inconsistencies between having both transformative technological advances and lagging productivity. Over the past two centuries we’ve learned that there’s generally a significant time lag between the broad acceptance of new technology-based paradigms and the ensuing economic transformation and institutional recomposition. Even after reaching a tipping point of market acceptance, it takes considerable time, often decades, for the new technologies and business models to be widely embraced by companies and industries across the economy, and only then will their benefits follow, including productivity growth. The paper argues that we’re precisely in such an in-between period.

Let me briefly describe the four potential explanations explored in the paper: false hopes, mismeasurements, concentrated distribution, and implementation and restructuring lags.

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