🍋 Amazon's Yuge Returns Problem

Together With

Good Morning! Hope y'all had a good weekend. Congrats to 25-year old Scottie Scheffler for winning his first Masters. Elon Musk spent the weekend trolling Twitter with his polls and thoughts on how the business model should work. "Is Twitter dying?" he tweeted in reference to the quiet accounts of T-Swift and Biebs. Elon completed the perfect troll when late Sunday night Twitter CEO Parag announced that Elon reversed his decision to join the board... Elon responded with a laughing emoji but deleted it shortly after (sometimes you gotta pick sh*t-posting over joining a board)

***

Today is the final day to get 40% off Short Squeez Insiders.

Here’s what’s inside our premium membership:

(1) Exclusive interviews with top talent at investment banking, private equity, hedge funds and big tech firms

We ask the questions everyone’s afraid to ask so you get insight into their investment portfolio, career advice, and stock and crypto picks. This is your chance to be a fly on the wall while leaders at top firms reveal everything about their money and career that’s normally kept secret.

(2) Resources to help you level up your career in finance (or break into IB, PE, and VC)

Insider’s unlock access to The Vault - a growing collection of investing and recruiting guides, modeling courses, salary and comp data, institutional research, and much more.

(3) A tight-knit community of finance professionals

Join our private discord and network with fellow bankers and professionals. Get referrals and recruiting help for top firms from Wall Street to Silicon Valley. And get access to us, The Short Squeez Editors.

Like what you see? Join Short Squeez Insiders Here.

(The 40% off discount ends tonight at midnight)

1. Story of the Day: Amazon's Yuge Returns Problem

The number of returns that Amazon has to deal with has increased dramatically. The trend is causing huge issues for the company, and the planet.

A survey by the National Retail Federation says a record of $761 billion worth of merchandise was sent back to retailers in 2021. That's higher than what the US spent on national defense last year, at $741 billion. Amazon did not share their figures, but the federation estimates 16.6% of all merchandise purchased during the holidays was returned, up 56.6% from the year before.

Online purchases had a higher average rate of return at almost 21%, compared to 18% in 2020. Considering their $469 billion in net sales last year, it's safe to say Amazon's return numbers are yuge.

According to Optoro, a return solutions provider, US returns generate 16 million metric tons of carbon emissions and 5.8 billion pounds of landfill waste each year. Former CEO of Sears Canada said, "The reverse logistics are always going to be nasty because the merchandise, in most cases, cannot be resold as it was originally. The most expedient pathway is into a dumpster, into a landfill."

Amazon told CNBC they don't send items to landfills, but rely on "energy recovery" as a last resort. All that means is they're burning the products, justifying it as energy conversion of one form of matter to another. 

Amazon launched a donation program in 2019 which allows sellers to donate excess and returned items automatically. This also creates potential tax write-offs, which you know Amazon is all about.

Another arena they're expanding their efforts is the booming secondary market. Sustainable shoppers have influenced the trend and Amazon started offering some sellers a Grade and Resell option for returns.

Short Squeez Takeaway: Amazon's head of North American returns said, "We encourage a second life on all of the products that we receive back." They attempt to sell as new or used, send back to the supplier, or donate them. Hopefully some of these changes stick, because Amazon has always been a trailblazer when it comes to logistics. Other major companies could learn from the GOAT, and potentially stop burning all them good goods.

Source: CNBC

2. Markets Rundown

Stocks were lower on the week amid continuing inflation fears, lockdowns in Shanghai, no end in sight for the conflict in Ukraine, and rising rates as a cherry on top. Crypto was up as the Bitcoin 2022 conference in Miami came to a close.

Movers & Shakers

• (+) Bicycle Therapeutics ADR ($BCYC) +25% after Phase 1 results of their tumor treatment showed preliminary positive signs.

• (+) Lyra Therapeutics ($LYRA) +22% after announcing it will sell securities in a private placement with expected gross proceeds at approximately $100.5 million.

• (–) Hour Loop ($HOUR) -20% as roughly 20% of the stock's float is held by short sellers.

3. Top Reads

• Japan's central bank slowed down ETF purchases (Yahoo!)

• Uber is not trying to become Expedia (WSJ)

• Employment markets aren't only tight in the US (Economist)

• Canada's jobless rate is at record lows, rate hikes on the horizon (BNN)

• Big difference between owning part of the stock market, and part of a company (WSJ)

• Citigroup gets back into Saudi Arabia (WSJ)

• Wind energy company will pay $8 million for killing 150 eagles (NYT)

• S&P places Russia in "selective default" (WSJ)

• Harvard endowment's debate shows PE's China struggle (BB)

A Message from Gemini: One-stop Shop For All Your Crypto Needs

If you are looking to get into crypto and earn on your investments every day, y’all gotta check out Gemini.

Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn bitcoin, ether, and 70+ other cryptocurrencies. 

Open a free account in under 3 minutes here and use code WALLST20 and get $20 of bitcoin after you trade $100 or more within 30 days.

4. Book of the Day: Hidden Games: The Surprising Power of Game Theory to Explain Irrational Human Behavior

We like to think of ourselves as rational. This idea is the foundation for classical economic analysis of human behavior, including the awesome achievements of game theory. But as behavioral economics shows, most behavior doesn’t seem rational at all—which, unfortunately, casts doubt on game theory’s real-world credibility.  

In Hidden Games, Moshe Hoffman and Erez Yoeli find a surprising middle ground between the hyperrationality of classical economics and the hyper-irrationality of behavioral economics. They call it hidden games. Reviving game theory, Hoffman and Yoeli use it to explain our most puzzling behavior, from the mechanics of Stockholm syndrome and internalized misogyny to why we help strangers and have a sense of fairness.  

Fun and powerfully insightful, Hidden Games is an eye-opening argument for using game theory to explain all the irrational things we think, feel, and do.

“Hidden Games is a pair of x-ray specs for your mind; it gives you the ability to penetrate surfaces and see what's going on at a deeper level.”

5. Short Squeez Picks

• No deal-maker should have to spend half their week creating contacts or logging interactions in a CRM. Save time, work smarter, and close deals with Affinity

• Why market timing is so difficult

• Funny excerpts from "The Wall Street Dream Market"

6. Daily Visual: Retail Leaving Robinhood?

Robinhood daily stock price Jul 29, 2021 to Apr 8, 2022

Source: Axios

7. Daily Acumen: Forgotten Failures

Survivorship bias is a common logical error that occurs when we assume that past success tells the whole story. 

People like Bill Gates, Jeff Bezos, and the Beatles are good examples of people who broke the rules without the expected consequences. However, when we only pay attention to those who survive, we end up misunderstanding how selection processes actually work. 

Most people who try hard and become successful get discouraged by the fact that most people do not become rich or famous. We all love to hear stories of those who beat the odds and became successful, but we ignore failures.

Survivorship bias is the tendency to ignore the failures while lauding the successes. We ignore the role of coincidence, timing, luck, connections and socio-economic background, and instead focus on the visible, embedded, personal, narrated, and tangible.

Most people do not become rich or famous. Most leaps of faith go wrong. It does not mean we should not try, just that we should be realistic with our understanding of reality.

If you read about a success story, think of all the people that tried to do what that person did and failed. If you want to cut through the noise, think about survivorship bias.

Source: Farnam Street

8. Crypto Corner

• Banks have a "big problem" thanks to crypto according to Cathie Wood

• Crypto industry helps write and pass its agenda in state capitols

• Top 10 UFC fighter signs Bitcoin payment contract

• The future of crypto is hiding its infrastructure

• Pudgy Penguins NFTs attempting a comeback

• Yellen says crypto-like digital dollar is years out

9. Memes of the Day

Insiders | Advertise | Wall Street Shop