(No time? Scroll to the bottom for an even more succinct answer to each question)

The History of Financial Interest (110 words)

Amazon's Massive Spend on Video (296 words)

Netflix's Puzzling Decision to Auto-Cancel Memberships (426 words)

How did ancient humans invent a concept as abstract as financial interest?

The answer likely lies in linguistic clues left by past civilizations. The Ancient Greek word for interest, tokos, refers to the offspring of cattle. The Latin word, pecus, or flock is the root word for pecuniary. The Sumerian word, mash, is a term for calves. The Egyptian word for interest, ms, means "to give birth".

Taken together these terms suggest that the origin of the concept comes from the natural population growth that animals experience. You can almost imagine an ancient Sumerian realizing that he should be getting back more than the 5 cattle he lent out last year since those 5 cattle now number 5 cattle and 2 calves.

Source: *Money Changes Everything: How Finance Made Civilization Possible* by William Goetzmann

Why does Amazon spend $5 billion a year on Prime Video?

For Amazon it all comes down to customer acquisition and increasing the pool of Prime subscribers. Bezos himself said, "When we win a Golden Globe, it helps us sell more shoes". In fact, in leaked documents cited by this Reuters story (worth the read) "Amazon calculated [The Man in the High Castle] drew new Prime members at an average cost of $63 per subscriber". And this is great for Amazon since the average Amazon customer spends about $600 a year on the site (and the average Prime member spends $1400).

Prime video doesn't exist because Amazon thinks it can compete and take market share from Netflix. Instead Prime Video is primarily a route to lowering CAC (Customer Acquisition Cost). This is made more explicit by a metric that Amazon designed called "cost per first stream" which is a factor in program renewal decisions. Essentially they've taken the cost of a production and marketing for their shows and divided it by the number of people who stream that program first after signing up for the service to determine how many prime memberships the show has driven. More informally, "Amazon looked at who was watching a given show and saw how much that person was using Prime for other perks, mainly free shipping. If a Prime subscriber watched a show a lot and wasn’t taking advantage of Prime’s other benefits, the show got credit for that customer’s subscription dollars".


Interestingly if you look at their affiliate commission tables you'll find that driving a new Prime Video trial is worth 2/3 as much as an equivalent trial for Prime Music which seems to suggest that the stickiness of Prime Video is poor compared to Prime Music (which is a topic we'll return to in the next question surrounding Netflix).


Why did Netflix decide to auto-cancel members who haven't been using their service?

On May 21st Netflix posted the following article on their blog which got quite a bit of media attention. In it Netflix stated that they will auto-cancel memberships of those who do not respond to an email that will be sent out after 1 and 2 years of inactivity (defined as not having used the service in that time period).