In the next 24 months, FedEx will either be acquired or lose an additional 40%+ in value. The likely acquirer is Walmart. The gangster move: a merger with Shopify.

In July 2017 we predicted, “If Bezos tomorrow said, ‘We see overnight delivery as a huge opportunity,’ the $150 billion of market cap of DHL, FedEx, and UPS would begin leaking to Amazon.”

This has happened. Since the launch of Amazon’s delivery service in February 2018, FedEx has lost $25 billion (39%) in value, despite the S&P’s 24% gain. Amazon has added $240 billion (33%). In less than two years, Amazon captured nearly one-fifth of the market for e-commerce deliveries in the U.S.

Since 2014, U.S. e-commerce has increased 84%, creating a massive opportunity for the delivery industry. But instead, there has been a transfer of wealth from FedEx, UPS, and the U.S. government to Amazon. Amazon enters high-friction, low-margin businesses as a means of differentiating low-friction, high-margin businesses (AWS and AMG).

How We Got Here — Featurizing 

Network effects, cheap capital, idolatry of innovators, and a feckless DOJ/FTC have resulted in a monopoly era where a wildly profitable business (phones, digital marketing, loyalty programs, cloud, Yoda dolls) can generate such staggering value (“antimatter”) that entire industries become loss leaders (“features”) to differentiate and protect the antimatter. Netscape, the fastest-growing software firm in history, went from antimatter to feature when Microsoft began bundling Internet Explorer with Office.

I served on the board of a visual commerce SaaS firm (Olapic) until we sold for $130 million in 2016. There was a great deal of discussion on whether to sell. I urged the founders, naturally optimistic about the firm’s prospects, to sell. The difference between $1 million and $10 million in wealth is meaningful (go big), but the difference between 0 and $1 million is profound (sell). Every entrepreneur should bank enough money to provide economic security for their family … at any opportunity. For every CNBC story on Spiegel and Zuck turning down offers and going on to capture billions, there are dozens of founders who should have sold.

Pro tip: your VCs will encourage you to “be in it to win it,” and to keep going, as they are already rich. Assume you are not Mark Zuckerberg.

Speaking of Zuck, I think he’d be happier if he’d sold to Microsoft (I don’t know him, so this is pure speculation). A powerful algorithm for happiness is to be wealthy but anonymous. Perhaps as a coping mechanism for realizing the significant damage he levies on the world, Zuck has developed the attributes of a sociopath. At some point, he’ll likely be criminally charged. Instead, he could have worked in Seattle for 27 months, retired to Hawaii, invested in rockets, owned a football team, and produced Cats for the big screen.

With any software start-up, there is a non-zero probability that you wake up the next day and find that a better-resourced firm (Microsoft, Oracle, Salesforce, Adobe) has deployed 200 engineers to copy your product, bundle it with their stack for free, or near free, and … welcome to zero. I believe this is happening to Slack, but more slowly than Netscape, as Microsoft’s General Counsel has likely coached Satya to charge a nominal fee for Teams and let Slack bleed out, instead of putting a bullet in its head and stirring the DOJ from a 3-Ambien slumber.

FedEx is in the midst of being featurized by Amazon, who can make investments across their vertical stack that FedEx can’t match, as Amazon has antimatter (Prime, AWS, AMG). The Memphis firm’s most recent earnings were a sh*t-show with top- and bottom-line misses, drivel about a slowdown in air freight, and (my favorite) an unfavorable calendar — a Kabuki dance attempting to distract investors from the fact they’re being featurized by Amazon.

FedEx shareholders have woken up in an M. Night Shyamalan nightmare. Instead of seeing dead people, investors are haunted by Mercedes-Benz Sprinter vans with an arrow the shape of a smile on their side. Everywhere. They might as well be German Panzer tanks fighting a white-and-purple cavalry of FedEx trucks. There will be a lot of macho battle cries from FedEx, some heroism, and an increasing stench of death. (Can’t help it, I love WWII war metaphors.)

The Monopoly Algorithm: Innovation, Obfuscation, Exploitation

Innovation

To be fair, Amazon is a better-run company than FedEx,