Baker argues customer acquisition cost is replacing rent as the primary cost for many businesses.
“CAC is the new rent. Customer acquisition cost, online ad spend. It's not just replacing other forms of ad spend. For a lot of businesses, it is replacing rent. Storefronts.”
Baker explains Hock Tan's model is opposite of Dell's: find drained profit pools with no competition, enter, and raise prices.
“Hock's model has always been to find a profit pool that has been drained and there's no competition left, enter that and jack prices up.”
Baker suggests memory companies should copy NVIDIA's credit wrapper model despite business instability risks.
“I would be going to the buyers of GPUs, Traniums, and whoever and say, I'll participate in the NVIDIA credit wrapper. Now their business is just inherently less stable and predictable,”