How did elevators get so valuable?


March 3, 2020

Monday’s major market rebound wasn’t good news for everyone. Stocks surged after a prolonged sell-off sparked by fears over the spread of coronavirus. But users of Robinhood, a popular trading app, found themselves stuck in neutral while the markets 📈. Robinhood said “system-wide issues” caused a service meltdown, as its users melted down on Twitter. Today:

  • The elevator biz can be quite fraught
  • Quitting Facebook might not be for naught
  • The market for ice wine’s a little too hot
Going Up

After ups and downs, Thyssenkrupp sells its elevator business at a top-floor price

Thyssenkrupp, the German engineering giant, announced last week that it would sell its elevator business to a group of private equity companies for $18.9B — more than 2x the value of the entire parent company.

The sale was a last-ditch attempt to turn around years of declining profits.

But it was also the largest private equity deal in Europe since the 2008 financial crisis.

Wait a second: How did elevators get so valuable?

Simple: The market is dominated by an elevator-gopoly that keeps prices at the top floor.

Four companies command more than 60% of the elevator market: 

  • Otis 🇺🇸
  • Kone Oyj 🇫🇮
  • Schindler 🇨🇭
  • and Thyssenkrupp 🇩🇪

In 2006, these 4 companies (along with rival Mitsubishi Elevator Europe) were found guilty of price fixing. They paid fines but continued to dominate the lucrative lift business.

But even oligopo-vators couldn’t lift Thyssenkrupp’s load

After years of declining revenue in a struggling German economy, even Thyssenkrupp’s moneymaking elevators could no longer hold up its other businesses. 

Thyssenkrupp’s debt got so heavy — $7.1B on its latest earnings statement — that activist investors began to call for the company to sell off its elevator business to pay down debts.

And so they did… for $18.9B, or about 2.8x the entire parent company’s market cap of $6.7B.

Next stop? Elevators-as-a-service

The elevator market is expected to remain strong thanks to increasing construction of tall buildings, particularly across Asia (more than 60% of new elevator installations occur in China).

And as elevators become more complex, giants like Otis have begun to sell subscription-based management services.

That service revenue is going up… and fast. In 2018, Otis raked in $12.9B in revenue. The company says 45% of its revenue comes from the sales of new equipment and 55% comes from service. 

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Why sticking a pencil in your mouth will make you a better speaker

On this ep of our pod, Sam and Shaan talk about…

  • Buying a cheap “checklist” software company, then cranking the prices up from $2/mo to $8/mo to turn it into a $70k/mo cash cow.
  • How Axios is using AI to optimize internal company emails — and, in turn, is making their company crazy efficient.
  • The Shark Tank application process (it starts with a 50-page app that takes 40+ hours to complete)

Plus, an idea for how to create an “internal MailChimp” and more. Click below to listen — if you don’t, it might cost you a million dollars. 

🎧 Listen here: Apple / Spotify / Google

⭐️⭐️⭐️⭐️⭐️ – “I never write reviews. That’s how much I love this podcast” -SWFTYKEN on iTunes

Digital Detoxes

What happens to your well-being when you stop using Facebook?

Maybe you’re tired of your uncle’s political tirades. Maybe you’re sick of wall-to-wall baby pics. Maybe you’re staging a teeny-tiny privacy protest.

We all have reasons for quitting Facebook. But have you ever thought about what happens to you if you do? Some economists studied precisely that.

They recruited (through Facebook ads, of course) 2,743 people to unplug from Facebook for 4 weeks. Here’s what they found:

1️⃣ You might get an hour of your life back. For the average unplugger, walking away from Facebook freed up 60 minutes per day.

2️⃣ You might spend less time consuming news. The unpluggers reported spending 15% less time gorging on headlines.

3️⃣ You might be less exposed to polarizing news. That being said, deactivating didn’t affect people’s negative views about another party.

4️⃣ You might be happier. There were “small but significant” improvements in “self-reported happiness, life satisfaction, depression, and anxiety.”

5️⃣ You might consider Facebook’s role in your life. Unpluggers said they thought more about whether the platform is really good or bad.

One thing’s for sure: It’s not easy to drop the ‘book. The researchers had to pay their subjects a hefty amount — some as much as $102! — to get them to unplug in the first place.

Their findings are also most relevant for individuals, not large groups. It’s not clear what would happen if everyone Facebook Cleansed at once.

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Sponsored

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So Sad, Sommelier

The ice-wine market is overheating

That shattering you hear is the sound of thousands of German Weinliebhaber hurling their glasses against the wall. 

For the first time in recent history, the German Wine Institute announced a freeze on the country’s high-end sweet wine — ice wine, or eiswein.

That’s because temperatures failed to get cold enough this winter. They need to drop below 19 degrees Fahrenheit to bring ice wine up from the vines and into the crystalline goblets of the global elite.

Climate change is coming for your wine noses

The ice-wine market is tiny — only about 0.1% of the German wine market overall. Prices for different varieties start at ~$20 and shoot up from there — sophisticates love it.

Other ice wine hubs, like Canada and northern Michigan, are still going strong this season. Canada, for one, has overtaken Germany as the global leader, boasting $6.8B+ in revenue. But even it is witnessing a thaw in production as the number of cold days shrinks.

Iced wine is for phonies

To qualify as ice wine, grapes must freeze on the vine. When temperatures drop below 19 degrees, workers race through the night to harvest and press them, toiling in unheated buildings so the fruit stays frozen.

The result is the kind of rich sweetness that you don’t even have to feign classiness to enjoy.

But to be clear: Wines labeled “dessert wine” or “iced wine” are commercially frozen poseurs, and several countries forbid them from calling themselves ice wine. Pay attention to that extra “d.”

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The Hustle Says

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Subscription Heavyweights

A boxing-centric streamer goes global — can it KO ESPN+?

DAZN, the sports-streaming service with the oddball name that built its brand on boxing, is expanding to 200+ markets around the globe, The Wall Street Journal reported.

DAZN is bobbing while others weave

John Skipper, the company’s chairman and an ex-ESPN president, says his outfit (pronounced “da zone,” which, uh… if you say so, Skip!) wants to go big internationally before its biggest competitors.

  • The company has about 8m paid subscribers, compared to ~7.6m for ESPN+, the Worldwide Leader’s subscription streaming service.
  • DAZN is already available in 8 countries outside the US.

So why place such a big bet overseas?

Because broadcast deals are da zone where dreams are made…

… and they’re spoken for inside the US. The domestic rights to broadcast major sports leagues are already owned by the big networks.

DAZN is landing a few jabs in its overseas fight: In December, it TKO’d long-reigning champ Sky for the right to broadcast Champions League soccer in Germany.

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Snippets

✍️ “Historically women have been told to leave personal issues out of the office, but how is that even possible when our careers are so personal?” Mandy Ginsberg opened up about why she stepped down as CEO of the Match Group.

✅ Which big tech company do consumers trust with their info the most? Which one would people be most disappointed to see disappear? Dig into The Verge’s 2020 tech survey for answers.

📱Apple will pay up to $500m to settle a lawsuit accusing the company of secretly slowing down older iPhones.

⛳️ Fore! Gambling insights come to pro golf.

 
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Nick “Stairmaster” DeSantis

STAFF WRITER/EDITOR

Lou Segusi

Alignment Inspector

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