Pandemic Testing as a Service

Tech com­pa­nies are incred­i­bly adapt­able, con­stant­ly learn­ing, chang­ing. As an indi­vid­ual investor, it’s impor­tant to learn how to learn about com­pa­nies because the news is fear-dri­ven, a‑b test­ed non­sense. I find that lis­ten­ing to a com­pa­ny’s CEO is a great way to learn what’s hap­pen­ing. They will often tell us exact­ly what they’re doing as clear as day.

Amazon just did.

Technology com­pa­nies often hard to mea­sure. Apple’s stock price, for exam­ple, has always been priced like a hit-dri­ven busi­ness and the assump­tion priced into the stock is that they’re one bad prod­uct away from destruc­tion:

The result is that the val­u­a­tion of a con­sumer elec­tron­ics ven­dor is based on the momen­tum of indi­vid­ual prod­ucts. Apple has always been val­ued this way. Each hit prod­uct is con­sid­ered to be a stroke of luck/genius and the chances of recur­ring are dis­count­ed to about zero. Regardless of the fact that it has a track record of “home runs”, Apple’s hit rate is not con­sid­ered sus­tain­able. Certainly Apple is not val­ued as being able to gen­er­ate reli­ably recur­ring rev­enues.

Horace Dediu, Asymco

What’s amaz­ing though is how these com­pa­nies take some­thing small, iter­ate incre­men­tal­ly over-and ‑over, until they have a bil­lion dol­lar busi­ness.

Amazon ($AMZN) is at an all-time high, with com­peti­tors Costco ($COST) and Shopify ($SHOP) see­ing huge demand.

As we help thou­sands of busi­ness­es to move online, our plat­form is now han­dling Black Friday lev­el traf­fic every day!

It won’t be long before traf­fic has dou­bled or more.

Our mer­chants aren’t stop­ping, nei­ther are we. We need 🧠to scale our plat­form.https://t.co/e2JeyjcEeC pic.twitter.com/6lqSrNUCte

— Jean-Michel Lemieux (@jmwind) April 16, 2020

Jeff Bezos, Amazon’s CEO, put out a share­hold­er let­ter (PDF) the oth­er day that’s worth read­ing. Something at the bot­tom of the first page caught my atten­tion…

We’ve begun the work of build­ing incre­men­tal test­ing capac­i­ty. A team of Amazonians—from research sci­en­tists and pro­gram man­agers to pro­cure­ment spe­cial­ists and soft­ware engineers—moved from their nor­mal day jobs onto a ded­i­cat­ed team to work on this ini­tia­tive. We have begun assem­bling the equip­ment we need to build our first lab and hope to start test­ing small num­bers of our front­line employ­ees soon. We are not sure how far we will get in the rel­e­vant time­frame, but we think it’s worth try­ing, and we stand ready to share any­thing we learn.

Amazon Shareholder Letter

Everyone is going to need test­ing. Amazon is going to fig­ure out how to do it at scale.

Does this become anoth­er busi­ness? They (along with Apple, Google, and oth­ers) want a part of the health­care oppor­tu­ni­ty (read more about their push to Pharma and Healthcare), this seems to me like a great place to start and one that plays to Amazon’s logis­tics and ana­lyt­ics strengths.

And here they are, telling us what they’ll be doing right on the front page.

While noth­ing I write should be tak­en as “invest­ing advice”, should you wish to get start­ed invest­ing and buy a lit­tle bit of Amazon, read this step-by-step how-to guide to doing so (just switch Apple to Amazon, but oth­er­wise it’s the same).

Disclosure: Long Amazon