Amazon’s Trojan Horse

Plus: Valley. Silicon Valley. That’s who’ll power Aston Martin’s new EVs. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 27, 2023

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TOGETHER WITH

Good morning.

Happy Tuesday. Just don’t call it “Taco Tuesday” — at least until Taco Bell has its day in court. The global fast-food chain is in a legal fight to liberate the trademarked “Taco Tuesday” phrase from Taco John’s, a Wyoming-based regional chain which has owned it since 1982.

In a legal filing on Friday, Taco John’s denied that there is “anything ‘not cool’ about” owning the trademark, a claim Taco Bell made in a petition to the U.S. Patent and Trademark Office in May. Sorry, Godzilla. We think Bambi’s got this one.

Morning Brief

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Can’t someone else do it, Amazon says.

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Aston Martin changes lanes on batteries.

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AI can do more than write emails.

E-Commerce

Amazon Taps Small Brick-and-Mortar Shops for Storage and Delivery

Amazon has figured out how to make use of the few parts of the retail industry it doesn’t already control.

In an attempt to speed up order fulfillment and create new partnerships, the retail behemoth plans to partner with local businesses to act as low-capacity warehouses and delivery services. While this could be a lifeline for struggling mom-and-pop stores, it could also be the next step in Amazon’s retail domination.

Get in the Van

Amazon wants to control every aspect of retail. Since its inception in the early-1990s, it’s always acted as a digital storefront, and over the years, it’s added distribution centers, in-house brands, and delivery trucks to cut out middlemen like FedEx and UPS. But the stretch of road between a distribution center and a customer’s door is the most expensive — and time-consuming — part of the equation. Insider Intelligence reported that last-mile delivery accounts for more than 50% of the total shipping cost per package.

Cutting costs is huge right now for Amazon CEO Andy Jassy. The company has already laid off 27,000 workers dating back to last November, and its online store revenue growth came in flat year-over-year in the company’s recent first quarter. To cut expenses while also minimizing delays, Amazon is throwing a few middlemen back into the mix.

This week, the e-commerce titan started recruiting thousands of small businesses such as bodegas, cafes, clothing stores, and flower shops in 23 states to help with deliveries in, roughly, the final three miles. Operating under the Amazon Hub Delivery program, each business would deliver roughly 30 packages a day and receive about $2.50 per parcel, Axios reported, while Amazon likely breathes down their necks to deliver even more:

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The move could be a boon for small businesses that survived the pandemic but now face historic levels of inflation, higher interest rates, and a worker shortage. According to the US Chamber of Commerce, in Q1 of this year, only 49% of independent store owners said their access to capital or loans was good; six years ago, that number was nearly 70%.

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Amazon wants 2,500 small businesses in the program by the end of the year, and in a statement to Axios, executive Beryl Tomay said the program will “create opportunities for delivery partners interested in growing a business … and supplementing their income.”

The Packages Never Stop: While Amazon pretty much wrote the book on same-day delivery, that often comes at a cost. In 2018, Amazon launched its Delivery Service Partner network, which basically operates like a franchise similar to opening up a local Taco Bell. But the workload and expectations can be frustrating for managers — and exhausting on workers. Drivers have reported delivering nearly 200 packages per day with barely any time for bathroom breaks and an in-truck camera watching them the whole time. If a driver wasn’t living up to Amazon’s standards, corporate could fire them, leaving DSP managers down an employee and susceptible to a fine from Seattle for not having enough drivers.

The system reached a breaking point in the summer of 2021 when two companies in Portland, Oregon — Triton and Last Mile — shut down in protest, demanding Amazon to agree to conditions they hoped would improve revenue and driver safety. Amazon declined, and Triton and Last Mile’s workforces shriveled.

– Griffin Kelly

Automotive

Aston Martin Strikes Battery Deal with EV Startup Lucid

(Photo Credit: Thibaut Nagorny/Unsplash)

Who needs classic German engineering when you can have Silicon Valley startup swagger?

On Monday, Aston Martin and California EV-maker Lucid announced they’d inked a deal for Lucid to supply James Bond’s favorite car brand with battery technology for Aston Martin’s future EV models, which are scheduled to make their debut in 2026. The deal supplants an agreement Aston Martin struck with Mercedes three years ago, and shows how even legacy automakers are getting creative in the face of an ever-turbulent EV market.

Rough Ride

Aston Martin has faced a bumpy road over the past few years. The 110-year-old brand went public in 2018, but the IPO sputtered and in 2022 it doubled its losses while selling just 6,400 cars. The one bright spot was four models making an appearance in 2021’s No Time to Die. Aston Martin agreed in 2020 to buy EV and battery technology from Mercedes, itself a shareholder in the iconic British brand. The new deal with Lucid means Aston Martin is off the hook for a large payment to Mercedes and new issuance of shares that would have been due this year. Lucid has also faced difficulties recently: demand for its EV seemed to taper off alarmingly in February, and in March the company slashed 18% of its workforce.

Although neither Aston Martin nor Lucid are exactly the faces of democratizing EVs, Professor Peter Wells, director of the Centre for Automotive Industry Research at Cardiff University, told The Daily Upside the deal was symptomatic of the wider industry:

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“It has proven difficult for both established and new entrant players to create a stable and profitable business model amid high rates of experimentation,” Wells said.

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Wells added that if Aston Martin had stuck to using Mercedes for batteries, it might have lost some branding edge: “the industry has always had to balance economies of scale against brand differentiation. Only this time, the massively complicating factors are the cost and uncertainty involved in the transition to electric.

For Lucid, the deal means diversifying away from being just an automaker, but a supplier, too. It’s not the only EV maker to start stashing eggs in different baskets, with Tesla quickly leveraging its previously exclusive charging network.

Playing Both Sides: Lucid is majority-owned by the Saudi Arabia sovereign wealth fund, a.k.a. the Public Investment Fund (PIF), which just so happens to be Aston Martin’s second-largest shareholder with an almost 17% stake. The irony of an oil-rich nation funding both sides of an EV deal is not lost on us.

– Isobel Asher Hamilton

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For no holds barred coverage of the stories that matter, join Leah here.

Artificial Intelligence

First Human Trials Begin for AI-Designed Drug

Forget college essays. Artificial intelligence has much bigger fish to fry.

Biotech firm Insilico Medicine said Monday that it entered an “AI-discovered-and-designed” drug into Phase 2 clinical trials involving human subjects, a first for the industry. The robots: they may not be so bad after all.

(Artificially) Intelligent Design

AI optimists have long pointed to advances in drug development as a reason for bullishness, and it’s easy to understand why: The sheer data-crunching and protein-identifying prowess of such systems could potentially cut development time in half, and development prices by even more, proponents often claim. In plain English: AI can complete complex math problems far faster than human scientists ever could. Thus, AI and machine-learning tools could help develop 50 new drugs worth potentially $50 billion over the next decade, according to a Morgan Stanley report.

Now Insilico Medicine, a startup backed by major private equity firm Warburg Pincus and Chinese conglomerate Fosun Group, is turning that optimism into reality by using machine-learning tools to develop INS018_055, a novel treatment for chronic lung disease idiopathic pulmonary fibrosis. “For Insilico, [the clinical trial] is the moment of truth,” founder and CEO Alex Zhavoronkov told the Financial Times, adding ”but it is also a true test for AI and the entire industry should be watching.”

The entire industry has already bet big on AI startups like Insilico:

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Investment in AI-led drug discovery hit roughly $25 billion in 2022, according to research firm Deep Pharma Intelligence, roughly triple what it was four years earlier. That contrasts with a nearly 37% year-over-year decline in VC investment in US and Europe biotech firms in 2022, according to EY.

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“Every major pharma company has invested in partnerships with at least one, if not multiple, AI companies,” Eric Topol, Scripps Research Translational Institute founder and director, told the FT.

Second Opinion: As always with AI stories, there’s plenty of reason to not buy the hype. Just last week, London-based startup Benevolent AI laid off 180 employees, or nearly half its staff, after its lead drug candidate flopped in a trial of its own. As many a college student has certainly already learned, just because you’re using AI, doesn’t mean you’re guaranteed an A+.

– Brian Boyle

Extra Upside

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Almost Worthless: PwC Australia sells embattled division for less than a dollar.

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Soccer Wasn’t Enough: Actors Ryan Reynolds, Rob McElhenney and Michael B. Jordan acquire 24% stake in Formula 1’s Alpine team.

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What Hath We Wrought: AI is flooding the web with cheap clickbait and junk content.

Just For Fun

Look closer.

That’s the spot.

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