I really liked your comparison of Tesla’s vertical integration with Apple and their desire to control the user experience. My biggest concern would be that Tesla is Apple circa 1985 just after they created the Mac. Tesla has truly innovated, but now there are dozens of well-capitalized competitors who have a lot to lose if Tesla wins. Although there is some loss of control, I’m guessing that relying on specialized suppliers ultimately results in lower costs. What happens in 10 years when BMW is producing a car with the exact same capabilities as a Tesla but it costs 30% less? It makes me think of how PCs eventually beat out the mac (at least through the 90s) because they had a more open platform and were better able to leverage innovation from the market.
Great write-up. I think it’s important to note that the benefits of FedExG’s independent contractor model go beyond variable vs. fixed costs. UPS is paying its union employees for healthcare, taxes, and 401k while FedExG is completely off the hook for those benefits. Based on that difference alone, I would guess that the cost of a FedExG driver is at least 30-40% less than a UPS employee, even if the parcel load were even. I’m guessing that FedExG will face a lot of pressure to continue to distance themselves from their IC’s for them to maintain that label – as FedExG has less control of their drivers and can’t tell them how and when to deliver packages, will that eventually break the operating model? Is there a point where you would rather employ them than lose a certain level of control? Will be interesting to watch.