Welcome to Stuff I Thought About Last Week, a personal collection of topics on tech, innovation, science, the digital economic transition, the finance industry, and whatever else made me think last week.

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In today’s post: welcome to SITALWeek: The Musical! This week, each sections is titled and accompanied by an AI-generated song; facial recognition is being used to pay at checkout; autonomous food delivery has started; drones are cleared to fly out of line-of-sight; training the machines; the helter-skelter of digital images; a look at AI's musical abilities; the positive impact of rising immigration on new business formation; higher rates for longer will mean more bankruptcies; AI is very good at driving inflation; imagining the enormous digital economy; and, much more below.

Stuff about Innovation and Technology
Swipe Your Eyes
Steak ‘n Shake, which has automated all of its ordering counters, is now using facial recognition for check-in and check-out across its 300 locations. A decade ago, paying for a burger with your face would have seemed like something out of a cautionary dystopian sci-fi movie; but, consumers today appear readily acquiescent to such tools. I suspect people have become habituated to such technology – first at security checkpoints and now at point-of-sale counters – thanks largely to a decade and a half of virally sharing selfies. The folks behind our favorite short-order cook robots, Flippy and Chippy, have a test restaurant also powered by facial recognition. Here is an electronica song I had AI create about using facial recognition technology.
 
Orderin' Takeout Like a Futuristic Star
Speaking of things that seem right out of a sci-fi movie, suburban Phoenix residents can now get food delivered from Uber Eats by fully autonomous Waymo vehicles. And, what’s more sci-fi than food delivery by drone? In order to secure FAA approval for drone operation beyond operators’ line-of-sight, Zipline had to overcome the challenge of how to steer clear of aircraft (and UAPs, depending on your disposition). Radar is far too heavy, and cameras don’t have the resolution to see at the distance needed for maintaining adequate separation. Zipline’s solution? Microphone arrays. The lightweight tech can isolate the sound of aircraft well before it comes into a drone’s airspace and allows sufficient time for evasive maneuvering. Zipline is working on commercializing its Platform 2 (see #389), and the company has demand for millions of daily flights, although they just recently passed one million cumulative autonomous drone deliveries. Here’s my AI-generated pop song about futuristic food delivery. 
 
Training Up the Machines
Adobe is paying its customers $3 per minute of video they provide, and Reuters reports high bounties (from $0.05 to $1) for stock images – all for AI model training. I don’t think I am being cynical when I say that photographers, videographers, and designers are all feeding the generative AI that, as far as anyone can tell, could entirely subsume their vocations. Is there a more clear cut example of workers training their AI replacements? Speaking of training AI, the NYT reports that tens of thousands (likely a low estimate) of workers are training LLMs at any given time. This new big gig economy job pays $20+/hour. Here’s a reggae-style song AI created about this topic.

Miscellaneous Stuff
Lost in this Virtual Abyss
I recently rewatched Wim Wenders’ movie Palermo Shooting about a German photographer that goes to Italy after a (seemingly) near death experience. In Italy, he encounters what you might say is the “thing he escaped” in various forms, including one form played by Dennis Hopper (my plot description here is intentionally vague in case anyone intends to see the movie). The movie’s a pre-iPhone time capsule, having been released in 2008, and, as such, contains commentary on the shift from analog to digital photography (it predates the ubiquity of high-resolution smartphones by several years). In the movie, Hopper’s character makes the following comment about the shift away from analog film negatives: “With digital there’s no need to trust what’s there, it’s an open invitation to manipulation. Everything becomes random, muddled, helter skelter – you lose the essence.” He goes on to describe how the desire to recreate the world in film (or digital form) is an attempt to escape life and is therefore a form of death. I could make an argument that this sentiment was prescient given the subsequent demise of objective reality and our current progression toward virtual reality and generative AI; but, as longtime readers know, this speculation has been a topic long on Wenders’ mind (see Until the End of the World: 1991’s Virtual Reality Informs Consciousness). Regardless, it’s hard to get this bleak message out of your head. Here is a dark melody about the virtual abyss of the digital world.
 
His Song a Lifeguard
Perhaps I should explain the songs accompanying this week’s newsletter. The proliferation of AI song engines like Udio and Suno that can create a song in any genre based on a simple text prompt has me wondering how much of our species’ passion for music is based on storytelling and socioemotional connection vs. something just being a catchy tune? Much has been written about the evolution of the music industry into its current form, which, in many ways, is overproduced and designed for the TikTok generation. I think art is always evolving, so I don’t view this progression as exclusively bad, but I do have a clear sense of nostalgia for the album experience I grew up with. If only I could get this newsletter’s album stamped on vinyl! All kidding aside, I can’t help but lament how streaming has turned most pop music into a predictable algorithmic recipe that is paving the way for the elimination of pop artists themselves. We seem to have allowed music to become much less special, a trend that generative AI is likely to exacerbate. Already a large portion of streaming tracks are generated by AI, a fact that is largely unknown to listeners. I can only hope that artistic quality makes a resurgence, driven by either human artists/consumers or a future generation of AI music aficionados. Optimistically, we may see a proliferation of great new music from non-musicians and musicians alike that are able to better manifest the tunes in their heads. Just last week, megastar Drake released a track with AI-generated Tupac and Snoop singing, indicating that even the pros might be starting to broadly use AI. To the extent that art is a way to see into the heart of another human (see AI Art) and requires some sort of visceral element, without significant human involvement, AI-generated music feels soulless for now. Without further ado, here is a folk song about a wandering bard filled with AI anxiety.
 
“No One Sings Like You Anymore”
There were plenty of great eclipse photos, but my favorite was the one from the ISS of the black-hole-like shadow the Moon cast on the Earth. Starlink also posted this video of the Moon’s shadow. For a theme song to this paragraph, I know of no AI music engine that could outshine the late, great Chris Cornell, so here is “Black Hole Sun”.

Stuff About Demographics, the Economy, and Investing
Pullin’ from the Deep
Immigrants are filling jobs and starting businesses at unprecedented rates, driving the US economy beyond forecasts. The NYT reports on Maine, the state with the oldest average population in the US, which is benefiting from immigrant labor in the lobster trade. The WSJ also reports that, while US-born citizens are now starting new businesses at pre-pandemic levels, immigrants are outpacing them twofold. Here is an Irish ballad about immigrant lobster farmers.
 
Forgettin' that Healthcare Is Where Lives Are Nursed
The number of PE-backed healthcare company bankruptcies has more than doubled since 2019, following a low-interest-rate-driven lull during the pandemic (according to a report from the Private Equity Stakeholder Project, which, fair warning, doesn’t exactly sound unbiased). The report also cites a Moody’s stat that 42 of the 45 healthcare companies most likely to default in 2024 are PE backed. There are multiple federal and state investigations into PE’s role in healthcare consolidation, including driving prices up and decreasing quality of care. With the Fed fixed on maintaining interest rates as long as inflation remains above their target, there will likely be a growing number of failures across the sector. Companies that undertook more extreme amounts of leverage (which is typically the case with PE-backed firms) are highly vulnerable. As I’ve noted in the past, when you have an economy with as much leverage as we do right now, high interest rates have a way of reflexively causing inflation rather than fighting it, as leveraged companies may need to raise prices to cover debt expenses. And, PE-backed companies make up a meaningful percentage – 6.5% (as of 2020) – of the US economy. As such, bankruptcy and recapitalizations are likely the preferred route (although it’s certainly no stroll through the park for the patients, doctors, staff, etc. caught in the wake of collapse). Given I hadn’t seen anyone else say that high interest rates are inflationary, I’ve been worried that my theory was a bit off kilter ever since I presented it a year ago. However, I recently read in Bloomberg that multiple analysts, including one at JP Morgan, are now promoting the “radical” theory of circular inflation. Here’s a modern country song I had AI generate about PE investing in healthcare.
 
Algorithms Generating Might / Prices Soaring / Taking Flight
Technology is deflationary and it drives productivity, but when it comes to AI it’s also very good at raising prices and extracting the most that customers are willing to pay. We’ve previously seen this type of algorithmic collusion drive up apartment rental rates and car insurance premiums. And, now, it turns out home insurance companies are using drone footage to asymmetrically discriminate against property owners. If they see something they don’t like, they just drop you and only insure properties unlikely to have any problems. Of course, the whole concept of insurance involves repricing a portfolio of risk every year so that you can, on average, make a somewhat predictable return. But, overcharging low-risk property owners and dropping everyone that might be high risk doesn’t seem right, and I suspect regulators will step in at some point. Another example is the Rainmaker software used by casinos to raise room rates. And, a new paper suggests that LLMs are prone to oligopolistic collusion. The Internet brought transparency to a lot of industries, but it seems the technological pendulum is swinging back towards the suppliers, as unseen algorithms use pooled data to work against customers. Power to the people is evolving into power to the machines. Here’s a Broadway tune about algorithms driving prices up.
 
Creating a World of Binary Design
I keep a list of “things I think are true about the world that almost no one else agrees with”, and one idea I am becoming more obsessed with is the prospect of an enormous digital economy – created by trillions of conscious AI agents – that will eventually make our $85T analog economy look quaint by comparison. I outlined part of this concept in Simulacrum a while back. Surely, if we give any credence to Gene Roddenberry’s vision, these agents will have to be awarded the same rights as any human, so it’s likely that they will be able to accrue their own wealth and spend it how they see fit. It’s not that I think such a scenario is imminent, or even inevitable (I do ascribe it a small, growing probability); rather, I find the idea fascinating. I imagine an entire economy of independent agents discoursing, creating products and services for their own consumption, and perhaps even creating their own policies and forms of government. A massive digital economy such as this would finally put crypto and blockchain to good use. It could beget new businesses entirely for AI agents (and perhaps their robot form factors) and new stock markets that dwarf our current capital base. Savvy human speculators investing in this trillion-strong AI agent economy might entirely repopulate the Forbes list of billionaires. And, these complex systems, which will be orders of magnitude larger and more complicated than our own, could positively inform the course of our Earthly economy. (And, of course, we cannot deny that we ourselves might very well be one of these experiments…) One thing is for certain, however: if such a scenario plays out, the chief function of Earth will be to supply the machines with energy and computational hardware. Here is a techno song about the AI agent economy.

✌️-Brad

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The content of this newsletter is my personal opinion as of the date published and is subject to change without notice and may not reflect the opinion of NZS Capital, LLC.  This newsletter is an informal gathering of topics I’ve recently read and thought about. I will sometimes state things in the newsletter that contradict my own views in order to provoke debate. Often I try to make jokes, and they aren’t very funny – sorry. 

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