SITALWeek #227
Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, robot chefs, and whatever else made me think last week. Please grab me on Twitter with any thoughts or feedback.
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In today’s post: drones, AR, robots, flying cars, and more drones – the 2020s will finally bring us “The Jetsons” lifestyle; semi cycle bottoms; cloud shift to Microsoft from Amazon; looking for other Earths; democracy wins in Taiwan; flight shaming materially impacts behavior in Germany and Sweden; passive investing hits $1T in Europe as research shows index funds hurt competition in the economy; air pollution impact on cognitive function; and lots more below...
Stuff about Innovation and Technology
Drony Appleseed
A Canadian company called Flash Forest uses drones, aerial mapping, and ecological science to increase the tree planting rate by 10x at 1/5th the cost (vs. human planters). The pods fired off by the drones contain nutrients to support the seeds, and they have plans to plant one billion trees by 2028. Here’s a video from a similar company that shows a planting drone in action. (Scientists estimate we need one trillion new trees to offset a decade of carbon.)
Samsung 9000
Samsung showed off its growing robotic ambitions this week at CES. Ballie is a rolling, BB8-like robot with built-in AI and sensors. The video of this Ballie concept in action is endearing. And, if that wasn’t compelling enough, how about these robot kitchen arms from Samsung that will make you dinner? Bot Chef is a ‘cobot’ (collaborative robot) designed to work alongside humans. It feels gimmicky today, but, for someone who cooks every night, the idea of having an extra hand in the kitchen to flip a skillet, monitor a boil, or chop some broccoli is quite appealing (the video in that Engadget story is worth watching to see the arms’ culinary skills in action). Unfortunately, it’s unlikely that we see this type of aspirational robot chef hit the market anytime soon, as Fast Company reports on the implosion of robotic cooking startups in Silicon Valley.
Security Patrol Goes to the Bees
Back in a March 2018 SITALWeek, I wished for a home security drone that would autonomously patrol the yard to scare off raccoons, etc. I envisioned something that would use info from a motion sensor array to take off, fire a squirt gun at four-legged intruders, and then dock and recharge. If you had two, they could fly in rotation and you could have 24/7 surveillance. Well, my wish has been granted: Sunflower Labs announced a $10,000 system called The Bee drone that will patrol your property guided by ground-based motion sensors. The drone docks itself in a mini garage (named the Hive, naturally) to recharge (no word yet on squirt gun attachment).
Here Comes the Flying Cars
Hyundai announced it will make electrical vertical takeoff and landing (EVTOL) crafts for Uber. Hyundai joins seven other companies with which Uber has contracted for EVTOLs – including Joby, which we discussed recently. Uber asks partners to be able to meet volumes of tens of thousands of units by 2023. In 1940, Henry Ford said: "Mark my word: a combination airplane and motorcar is coming. You may smile, but it will come.” Eighty years later, it looks like the 2020s will finally be the decade of the flying car!
Out with the Phone, in with the AR
Zuckerberg said this week that this will be the decade we transition from phones to augmented reality (FB may be planning for a 2023 launch of their own AR glasses). “Augmented and virtual reality are about delivering a sense of presence...I think these will be the most human and social technology platforms anyone has built yet.” Related: here is a blog post explaining how Magic Leap used the game engine Unity to build their spatial Spotify app (which I really like on my ML1). Of note is the ease of development of non-game apps for AR using Unity.
Is our Jetson’s Future Almost Here?
Flying cars, robot companions, kitchen robots, drone security, tree planting drones, augmented reality? I, for one, am going to go long the arms providers to this technological boom by buying stock in Spacely Sprockets and Cogswell Cogs.
The Real World: Influencer Edition
Collab houses collect social media influencer A-listers so they can, um, better influence things. This trend started ~five years ago with YouTube stars; now there’s a host of properties catering to Instagram influencers and the latest stampede of TikTok-famous clout carriers. One such pad, as the NYT reports, is Hype House in LA, started by 17-year-old TikToker Lilhuddy, who has 8M followers. “You either have to be talented at something, or a weird funny mix, or extremely good looking...If you have all three, you’re a TikTok god.” More on the influencer economy here.
Startup Coverage Comes to LA
The rise of LA as the center of social media success might be a good story for the new dot.LA news and events company to cover. Congrats to Spencer Rascoff on the launch of this new publisher focused on covering the expanding LA startup scene. The site is poised to capitalize on all the talented journalists available in the wake of the news media turmoil.
Tesla: Dancing Away from the Competition
I was on CNBC this week to discuss Tesla: not only do the legacy car makers’ CEOs have to catch the autonomous moving target of Tesla in all facets of new technologies, now they also have to learn how to dance! This week, I also tweeted out a stream of thoughts on how we think about the unpredictability of cycles, both economic and technological.
Y2K20?
20 years ago, the world was on edge over the Y2K bug – would planes fall out of the sky? Would the global economy grind to a halt? Well, it turns out – 20 years later – a cheap fix used back then to update 80% of the programs is now actually bricking a lot of devices like parking meters, cash registers, and even a video game. The programmers and companies at the time thought the software would all be obsolete by the time 2020 came around...oops! The next problem will arise in 2038 when the clock used for Unix runs out of time. For all the talk of the short lifetime of tech, it’s remarkable how long many technologies stick with us.
Semi Industry Heating Up
As Lip-Bu Tan, CEO of design-software maker Cadence, recently explained to Semi Engineering: “Design teams are so busy right now that everyone is feeling stretched. There’s 5G, IIoT, AI, machine learning, and cloud data centers. Automotive is moving a little slower, but it’s still growing.” And Naveed Sherwani, CEO of RISC-V-startup SiFive, discussed the double duty as China tries to recreate their own semi industry: “Now, for every tape-out you may have two tape-outs, one for each market. So there will be a chip that adheres to U.S. standards, and another one for Chinese standards.” And speaking of heightened semi demand, AMD CEO Lisa Su said in an interview regarding their ramping of 7nm chips (which are eating Intel’s lunch): TSMC’s wafer supply is tight. Lastly, Microchip’s semi Nostradamus Steve Sanghi noted at the JP Morgan tech conf: “So all this points to multiple inflection points. And therefore, I called bottom for Microchip for this business cycle with the obvious caveat of really any negative developments on the U.S.-China trade front or any unexpected fallout from geopolitical events.”
Healthy Competition in the Cloud
Benchmark VC Chetan Puttagunta suggested he’s seeing startups select Microsoft Azure and Google Cloud about 2:1 over AWS on his Twitter. Many others chimed in supporting the idea of Microsoft taking cloud share from Amazon. I see six reasons behind the apparent share shift: 1) fear of Amazon competing with software companies using AWS; 2) fear of Amazon competing with customers of AWS in retail (Microsoft has a big push to help retailers), banking, etc.; 3) the rise of Kubernetes (originally a Google project) making it easier to be multi-cloud without lockin; 4) Microsoft becoming an obvious cloud choice for startups due to its deep enterprise roots (Goldman Sachs just published research to that effect); 5) Microsoft executing well and GitHub’s importance to programmers; 6) free credits to try before your buy and Microsoft’s deep history of sales support for customers. All that said, we still have over $1T of annual spend to migrate to the cloud, so there is plenty to go around, and competition is very healthy for customers.
Miscellaneous Stuff
Exit the Warrior
Neil Peart – the brains and brawn songwriter and drummer of Rush – passed away this week from brain cancer. If you haven't read it, I recommend his 2002 biography Ghost Rider (and, he has a couple follow-up books that are on my reading list).
Penn Meets Tim
I really enjoyed the conversation between Penn Jillette and Tim Ferriss on Tim’s podcast this week, and not just because both of them have an excess of unnecessary consonants in their names. Penn is known as a magician, but he should be more well known as a philosopher (he’s played a big role in my philosophy of life). Back in Oct. 2014, I was a guest on Penn’s Sunday School podcast talking optimistically about the future of tech; if you listen to it, keep in mind my motto on predicting the future: “I may not always be right, but I am always early” 🤷. (Here’s a link for that episode 141; note: it’s a 50Mb MP3 file hosted on Google drive, no login required.)
Big Game to Farming: Ag Revolution Explained
Agriculture takes more time than hunting and gathering, and it’s an inferior nutrition source with military disadvantages (lost skills and less mobility). So why did we go all-in on ag 10,000 years ago and thus create “civilization” around 6500 years ago? Turns out, we apparently got so good at killing big game prey (herding with fire, forcing off cliffs, etc.) that we plain ran out of them and had no choice but to grab a hoe and start cultivating. Big animals have longer gestation and growth periods, so we overwhelmed their ability to reproduce and keep up. This article explains that we could have pursued farming far earlier than 10,000 years ago, but we didn’t need to.
Searching for Earth 2.0
The new James Webb Space Telescope launching in 2021 will be able to detect Earth-like oxygen concentrations and other atmospheric elements around planets within 16 light years of our solar system. You can read more about the JWST’s ability to look 13.5B years back in time, and the cool tech in it made by Ball Aerospace here.
Please Don’t “Make it So”
Growing up with Star Trek TNG, I am eagerly awaiting the new CBS All Access show “Star Trek: Picard," but I don’t think I’m emotionally prepared to see the Federation as Patrick Stewart describes in this Vanity Fair interview: “‘In a way, the world of “Next Generation” had been too perfect and too protected,’ he says. ‘It was the Enterprise. It was a safe world of respect and communication and care and, sometimes, fun.’ In “Picard,” the Federation — a union of planets bonded by shared democratic values — has taken an isolationist turn. The new show, Stewart says, ‘was me responding to the world of Brexit and Trump and feeling, “Why hasn’t the Federation changed? Why hasn’t Starfleet changed?” Maybe they’re not as reliable and trustworthy as we all thought.”’
Indoor Air Quality has Startling Cognitive Impact
A number of schools in California installed air filters in classrooms due to a nearby long-term gas leak issue, and the result was that test scores went up a lot! It turned out the gas leak was not reaching the schools, so the air filters were simply cleaning the normal indoor air pollution. The improvement in scores was nearly equivalent to when you reduce class sizes by ⅓ (a ~0.22 standard deviation improvement). And, the filters were only in place for part of the school year.
Flygskam (Flight Shaming) Leads to 12% Drop in German Flights, 9% in Sweden
JetBlue will be the 2nd airline to offset domestic carbon emissions (although it appears they aren’t accounting for the magnified impact of high-altitude emissions). Two weeks ago, Bloomberg discussed the 12% drop in domestic flights in Germany as a result of Greta Thunberg’s flight-shaming campaign (international flights remained steady and European-Germany flights dropped a couple percent). And last week, the BBC reported on a 9% drop in domestic flights in Sweden (where flight shaming originated as flygskam) and a 4% drop in all Swedish airport traffic for 2019. Should investors’ base case for air traffic be a 10% drop along with the fat tail event of a complete, climate-driven grounding of non-essential travel? The behavior shift should accelerate R&D in planes with increased fuel efficiency and alternative fuel sources. There would be far-reaching economic consequences of environmental taxes on flights and/or a continued shift away from flying, particularly for the tourism industry (but, maybe great for RV sales!). We’re making a concerted effort at NZS Capital to push Zoom video meetings as much as we can. As an avid fan of Magic Leap and AR (just like Zuckerberg!), I believe the shift from phones to AR will finally lead to a big impact in business travel and virtual “in person” meetings become nearly as good as the real thing.
Stuff about Geopolitics, Economics, and the Finance Industry
Women Dominating Information-Age Workforce
Women outnumber men in the US paid workforce for only the second time, and, given that “women are dominating sectors that are growing the fastest” (WP), this shift may be the beginning of an enduring trend. Now, if only women would take the helm of companies like Boeing and Google, maybe we could start to make some real progress.
PE Takes a Breather
Following a decade of growth, private equity fundraising dipped 5% in 2019 to $595B. The industry continues to concentrate, with the number of funds raised down 400 from 2018 (and down 1100 from 2017) to 1316 in 2019, according to the WSJ.
Potential Moral Hazard of Passive Investing
Vanguard, BlackRock, and State Street own 22% of all S&P 500 companies, up from 13.5% 12 years ago, and they have even more ownership of smaller market cap companies. We’ve highlighted this trend before (active-ESG investor Al Gore saying that passive investing is “[financing] the destruction of human civilization”). Bloomberg discussed the moral hazard of passive investing this week, highlighting research that “high levels of common ownership can lead to higher prices and lower levels of investment, innovation, and output.” An example: “A 2018 study found that, when the same institutional investors are the largest shareholders in branded drug companies and generic drugmakers, the generic companies are less likely to offer cheaper versions of the brand-name drug.” The power law in passive investing has been a natural trend that will likely continue until unintended consequences break the entire market.
European Passives Cross $1T
The passive investing disruption that has dominated the US for over a decade is hitting critical mass in Europe. The FT reports that assets in ETFs in Europe have passed $1T for the first time. The pace of ETF investing doubled from $57B in 2018 to $125B in 2019, and total investment is up from $500B just four years ago. Notably, regulations are in part responsible for the shift: “The UK, the Netherlands and Switzerland have all banned financial advisers from taking commissions for recommending actively managed funds, creating a more level playing field."
Like US Homeowners, Renters are Gathering Moss
I previously discussed how US homeowners are staying put an average of 13 years, more than double the six-year average from two decades ago. It turns out, as reported by Axios, renters are staying put longer as well. Extrapolating from their data, it looks like renters are moving every ~five years vs. every ~three years in 2005-2006; in aggregate, homeowners and renters are staying put for a ~decade. I continue to believe that the iBuyer phenomenon will reverse the 70-year decline in US household mobility, but it remains to be seen.
West Keeps Trumping China’s Semi Ambitions
The US government apparently successfully lobbied to block Dutch semi equipment company ASM Lithography from shipping an EUV order to the Chinese chip foundry SMIC – highlighting the West’s position of power over China for trade negotiations, intellectual property rights, and human rights violations. Without EUV, China has zero chance of creating their own semi industry, leaving their entire surveillance economy beholden to US/European tech.
China's Future: Global Supremacy or Struggle?
VC Fred Wilson has some appropriately optimistic predictions for the 2020. I agree, with the exception of his 3rd prediction – Fred believes China will be a superpower and exhibit adaptability. Taking an objective, Bayesian approach to analyzing the situation over the last year, the amount of adaptation required for China to overcome its significant challenges is daunting, if not insurmountable, without existential policy overhaul. It’s a very wide range of outcomes, and the safe assumption is to act as though Fred is right – and I would certainly much rather see the business/equality circumstances improve dramatically in China and a continuing healthy East-West competition. I captured part of my view last week in “How I Stopped Worrying About China”. There is an overwhelming amount of evidence that China needs significant – potentially destabilizing – change to become an innovation leader. As I said in SITALWeek #214: “Throughout human history, there has been a spectrum of freedom and equality: if you have 100% freedom, you tend to end up with extreme inequalities; if you have 100% equality, you tend to end up with very little freedom. Capitalism has tended toward freedom, thus causing ever-rising inequality, while Communism strives for equality by suppressing freedom. There is some threading of the needle of equality and freedom that we still need to do as a global society, but for now the path isn’t yet clear. I’d suggest the ultimate tact to take for companies and investors struggling to make sense of the China situation is to support rising freedom over the long term.” The resounding win for freedom and democracy in yesterday's Taiwan presidential election feels like a direct reaction to the problems China is facing today both in Hong Kong and on the mainland.
✌-Brad
Disclaimers:
The content of this newsletter is my personal opinion as of the date published and are subject to change without notice and may not reflect the opinion of NZS Capital, LLC (“NZS”). This newsletter is simply an informal gathering of topics I’ve recently read and thought about. It generally covers topics related to the digitization of the global economy, technology and innovation, macro and geopolitics, as well as scientific progress, especially in the fields of cosmology and the brain. I will frequently state things in the newsletter that contradict my own views in order to be provocative. I often I try to make jokes, and they aren’t very funny – sorry.
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