SITALWeek #240
Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, non-isotropic inflation, 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: automation trend accelerates; privacy vs. health and freedom as contact tracing comes to smartphones; the grasshopper, the ant, and the stock market; mixed signals on China’s economy; how to look better on video from home; wireless virtual radio networks; restaurants churn and apparel orders are canceled; new Cannonball record; and, lots more below...
Stuff about Innovation and Technology
Coronaball Run
Back in SITALWeek #224, when I reported on the latest adrenaline-inducing Cannonball record, I learned that quite a few SITALWeek readers are enthusiastic about the race. Now, a new group has broken the previous, mind-blowing record by 45 minutes, crossing from the East to West Coast of the US in 26 hours and 38 minutes. There is some controversy that perhaps doing the race when roads were empty was, well, cheating just a bit.
Grocery Robots Joining Workforce
Grocery store chains are increasingly using robots in stores and warehouses to keep up with demand. Walmart will have robots in 1860 stores this year, mostly scanning and alerting employees to low-stock areas (robots to the toilet paper 🧻aisle, ASAP!). Automation is a good example of an existing trend that will be heavily accelerated by coronavirus, as the NYT reports.
Drones Enforce Social Distancing
The city of Elizabeth, NJ is one of the first in the US to use drones to tell crowds to disperse and go home. Such technology was widely deployed in China during its lockdown. Meanwhile, Google is seeing a surge in demand for its drone delivery trial in Virginia.
AI Pet Management
Camera-maker Furbo will now monitor your dogs’ in-home behavior, alert you to behavioral changes that might indicate a health issue, and offer analysis as to why they might be barking/misbehaving (here at SITALWeek headquarters, we could use some AI to keep tabs on free roaming reptiles!). To develop the new version of their dog camera, Furbo ran machine learning on short video clips from thousands of users. The NYT article also discussed a robotic laser toy, called Felik, to keep your pets occupied chasing the red dot around the house.
Gamers Decode Gut Microbiome
Borderlands maker Gearbox Software (in conjunction with their distributor, Take-Two’s 2K) is harnessing players to map the human gut microbiome in return for in-game rewards. The effort is part of Borderlands Science, a module inside Borderlands 3, in which gamers solve virtual puzzles that help decode bacterial DNA. Due to the nature of the task, using gamers should be faster than developing research-trained AI.
Tech, Becoming Tech, or Disrupted by Tech
Atlassian Co-Founder and Co-CEO Scott Farquhar last week said in a Protocol interview: “There's only three types of companies, right? Companies that are technology companies, companies becoming technology companies, and companies that are being disrupted by technology companies. And so every company in the world needs to go through this digital transformation to make sure that they can produce goods and services in a digital way.” The Australian collaboration software maker is seeing an uptick in product usage as employees need to function remotely as a team.
Privacy vs. Freedom
I’ve written several times in the past about the tradeoff between equality and freedom (e.g., see SITALWeek #214), but asking where we should be on the privacy-freedom continuum is a question of equal importance. In the US, ever since the terrorist attacks of 9/11 initiated a loss of civil liberties, there has been much debate and worry about loss of privacy. In 2013, Snowden revealed many invasions of privacy perpetrated by the government. While I am not aware of significant damage done as a result of our loss of privacy, I am very cognizant of the risk of future harm. Perhaps one of the reasons we haven’t seen extreme abuse of privacy is due to the transparency of the Information Age, where injustices seem to be spotlighted and addressed fairly quickly. I recognize I am probably being a bit of a Pollyanna on this topic.
How should we feel about giving up our health and location data to mitigate damage from current and future pandemics? Can we solve this crisis with technology and not risk serious abuse? I don’t know the answer, but it certainly merits pondering. The FT’s China correspondent has been grateful to have the tracking in Beijing recently despite the risks; but, we also know millions of people have been unjustly oppressed by the same tools. The Economist reported on Chinese factories using smartphone apps to track worker location and health (along with the rise of automation in Chinese plants post COVID19). The Atlantic discussed health tracking systems in China, South Korea, and Singapore, concluding that ‘testing and tracing’ works exceedingly well to control viral spread; but also that “the sheer amount of information made available by tracing apps will be tantalizing for power-hungry governments and data-hungry corporations”. In a Barron’s interview, Disney’s Executive Chairman Bob Iger hinted at temperature checks at their theme parks and discussed how China will likely implement the process for school children. A company like Amazon, who is reportedly building its own, internal COVID19 testing labs, could theoretically require employees to wear 24-hour health monitoring devices, and preemptively grant sick leave for anyone who is deemed unsafe to come into work. And, the Trump administration is now exploring a PATRIOT-Act-like tracking system.
How far away is the West from a comprehensive health and contact tracking system? Currently, MIT is working on an open-source, Bluetooth-based contact tracking system for pandemics; but, Apple and Google appear to have beat them to the punch in an unprecedented collaboration to make a similar tracking system available to developers by mid May (the tech keeps track of close-proximity interactions with other smartphone users, and would send an alert if someone on the list indicated they were diagnosed with the virus). From a health tracking perspective, it seems that, within a few years, we could have a huge pool of data from wearable smart watches, rings, etc., which could be anonymized and combined with GPS/Bluetooth contact tracking to create a monitoring system capable of shutting down disease spread before it reaches pandemic proportions. Such a system could prevent you from accessing a public place, like a concert or bar, if it seems you might be getting sick. Or, it could let you know if you were in contact with someone who became sick – without letting you know who that person was, or relying on individuals to manually update their health status. Taking a step back, it's not just about pandemic events – we could greatly suppress seasonal flu and cold season (not to mention the potential for identifying underlying health problems before they become critical), which would prolong many lives and increase productivity while decreasing Kleenex sales. From a philosophical standpoint, I tend to favor freedom whenever possible; but, from a personal standpoint, I’d give up a great deal of my privacy to avoid even one case of the sniffles!🤧
Embiggening Big Tech
The big Internet platforms stand to get even bigger in the downturn as competitors of various sorts go beyond furloughs into permanent layoffs while the tech giants are hiring. Facebook has 10,000 open roles in engineering as Yelp, Eventbrite, and Groupon lay folks off in their SMB-focused businesses. As small businesses close around the world, Amazon is hiring hundreds of thousands of workers, and the current situation plays directly to their ecommerce, cloud, and entertainment strengths. The ability to accrete business away from small competitors in times like this is how the wet cement dries for monopolies in a downturn. Back in SITALWeek #236 and #238 (which feels like a lifetime ago!) I talked about how big tech was sidling back into governments’ and consumers’ good graces as they offered helping hands. The biggest gestures and donations have (so far) come largely from tech companies and tech-founder billionaires (I compiled a list, but it’s frankly too long to go through – highlights are Google’s $800M in donations, Dorsey’s $1B fund, and even TikTok’s $250M). But, talk of government giving tech a hall pass seems premature, as the DoJ is still ramping its investigation into Google’s Fitbit acquisition amid the EU’s worries about the deal’s data privacy implications. Also, EU regulators are raising more questions regarding Facebook’s marketplace.
Wireless Networks Go Virtual
NZS Capital’s Joe Furmanski discusses a big trend in wireless infrastructure: As 5G hype starts to give way to 5G fear, the new telecommunication standard is beginning to coalesce around an emerging trend: vRAN. While virtualized Radio Access Networks are not necessarily new, they do provide an elegant solution to many of the problems surrounding deployment of 5G, including cost, efficiency, and latency, with the added benefit of closing the gap to Huawei. Innovative companies like Altiostar, Mavenir, and Parallel Wireless are striking partnerships with major tech firms to provide ‘carrier grade’ solutions for the major wireless providers across the globe. What strikes us as particularly interesting is that vRAN is a ‘cloud first’ technology that will provide new and sizable markets for Microsoft and Google, as Forbes notes, as well as semiconductor companies like Nvidia.
Internet Holding Up Despite Major Usage Shifts:
Cloudflare has some cool data showing Internet traffic by city and category of use, as well as shifting patterns of hacker attacks.
Verizon’s CEO reports that gaming is up 100%; the current average of 800 million calls/day is 2x the Mother’s Day peak, and calls are 33% longer; VPN use is up 50%; web browsing is up 20%; roaming between cell towers is down 27%; so far, there’s been no network stress.
Nielsen reports a 45% increase in video game usage.
Google Meet (formerly known as Hangouts, which is now reserved just for the consumer version) has been adding two million new video conference users a day. Salesforce has doubled their Meet usage to 50,000 video calls a day as employees have gone remote. In related news, Google has a new AI feature for calls in its consumer Duo app that can smooth over packet losses by filling in missed audio segments up to 120 ms long.
New Dining Landscape in US
In the US, 30,000 (3%) of restaurants have already permanently closed as a result of COVID19, and a survey indicates that 11% of restaurant owners plan to close their establishments permanently by the end of month, according to the National Restaurant Association. Ultimately, perhaps 200,000 (20%) may not reopen, according to a UBS report cited by Business Insider. I would note that research suggests the average restaurant survives five years, so 20% closing/year is probably typical, but we are likely to see the closures compressed into a smaller window, and/or exceed estimates.
Uber Rides, Uber Eats, Uber Employment, Uber Everything?
Uber is helping its workers find other jobs, with the rideshare’s driver app now listing jobs from other on-demand and retail employers. One of the core competencies of Lyft and Uber is their ability to hire and onboard a large number of contract employees. The size of their driver networks are also a key advantage – it’s kept new entrants from competing in ride hailing, and now provides a large labor pool for filling vacancies in other industries. Uber previously unveiled their aspirations of becoming a gig-economy recruiter with a temp labor app last fall. And, on the consumer side, Uber also expressed interest in becoming a broader app with banking ambitions. Are Lyft and Uber ultimately a marketplace for labor-for-hire across a multitude of employers, a marketplace for rides and meal delivery, or both? It’s not yet clear if this is a case of identity crisis, or a smart way for Uber to build Optionality around their core business.
US Housing Market Hanging Tough
US home listing/buying continues to trend down only ~30-40%, which seems impressive given what is happening with the economy. Redfin reported a 33% drop in home buying, with new listings down 44%. One third of home tours are now video-based, and 12% of offers are being made after video tours. With low rates and low inventory, it remains a competitive market favoring sellers. Meanwhile, Zillow reported a slightly better drop of only 27% in new listings.
Miscellaneous Stuff
Good (lack of) Vibrations
With everyone working from home, there is less traffic and movement, which is causing the Earth to vibrate less and seismic measurements to be more accurate. The vibration levels of a typical day are now roughly equivalent to those observed on Christmas, when most people are home.
Video Equipment Makeover
Many of us are now more frequently on video conferences and/or TV appearances from home. Here is a great video from our friend and PR-guru Dex McLuskey at Context Content on what gear you need to look and sound better from home.
Cotton Prices Down with Retail Closures
Cotton prices hit a 10-year low as the effects of billions of dollars of canceled orders ripple through the global cotton growing regions. One of the largest apparel retailers, Gap Inc., has already canceled all summer and fall orders. Given the seasonal nature of clothes, when stores open back up, what will they be stocking? If the work-from-home trend persists, perhaps they should consider upticking manufacture of Levi’s and sweatpants.
Human-Bat Social Distancing Needed
When it comes to viral transmission, bats are basically tiny, flying humans. Their 30-year lifespan, social living environments, and relative insusceptibility to symptoms make them an ongoing, primary vector of human diseases, according to the WSJ. It seems logical that we need to let bats be (they are shockingly beneficial for insect control) and stop the bat-human (and bat-exotics-human) interactions that, in particular, seem to take place in China.
💩 News
An article in Nature Biomedical Engineering is titled “A mountable toilet system for personalized health monitoring via the analysis of excreta.” According to the article: “Each user of the toilet is identified through their fingerprint and the distinctive features of their anoderm, and the data are securely stored and analysed in an encrypted cloud server.” In related 💩 news, the publishers of Nature recently apologized for saying the coronavirus started in China. While it is of critical importance to not fuel racism, it’s also important to not obfuscate the truth.
Pseudoscientific Storytelling
Economist Jason Collins cautions on the perils of using flawed, behavioral-economics concepts to assess risk during a pandemic.
Ancient String
The oldest known string has been found in a cave in France. Dating back 50,000 years, it was made by Neanderthals from conifer bark fibers. Given the timing, modern humans may have learned how to make string from Neanderthals. Previously, the oldest string found dated to 19,000 years ago in Israel.
Universe Expanding Non-Isotropically
The Chandra X-Ray Observatory has new data suggesting an uneven pace of inflation for the Universe. Previously, we assumed things were expanding in every direction at a similar, accelerating rate (see SITALWeek #232 on the Hubble constant); but, the expansion might not be as uniform as we once thought, perhaps due to unequal action of dark energy.
Stuff about Geopolitics, Economics, and the Finance Industry
Mixed Signals from Reopened Chinese Markets
Satellite data from SpaceKnow show no signs of economic recovery in China, according to Barron’s. The Nikkei reports that business is slow to return to shops, with Walmart Shanghai traffic down >50%. Meanwhile, car sales at some Wuhan dealers are back to pre-crisis levels, according to Bloomberg. But, live-stream ecommerce is poised to more than double, from $61B in 2019, as people shop from home. The WSJ reports that travel is resuming cautiously.
Manufacturing’s Exodus from China
Taiwanese companies are moving manufacturing out of China to places like Vietnam. iPhone assembler Wistron aims to move 50% of its capacity from China by next year, according to Bloomberg. In related news, Taiwanese-headquartered Foxconn is using their controversial Wisconsin plant to make ventilators in conjunction with Medtronic.
Q1 Money Left Large Active Management for ETFs
Active managers posted mixed performance during the market volatility, per Barron’s. Meanwhile, passive-king Vanguard took in $48B in Q1, ahead of Blackrock at #2 with $10B inflows, and ETF-provider ProShares at #3 with $7B. Most large, active managers experienced outflows.
The Ant and the Grasshopper
Most everyone knows the fable of the Ant and the Grasshopper: the ant toils all summer and is ready to withstand the winter while the grasshopper goofs off and is unprepared. In the traditional story, the ant rebukes the grasshopper. But, if you are like me, you might primarily remember Disney’s politicized 1934 version of the fable that was, in part, a response to FDR’s New Deal. In that version, the grasshopper is granted room and board in return for playing his fiddle.
As the government backstopped nearly all types of debt last week, including so-called ‘fallen angels’ (companies that lost their investment-grade status), and we await the broad fiscal stimulus, the question of moral hazard comes up. I, like many others, believe we should do everything possible to keep individuals safe and financially-bridged to the other side. What interests me is where this leaves us for the next inevitable crisis. Some have argued that the 2008 financial crisis was a result of risk-seeking behavior that ensued after the government bailed out Long-Term Capital Management (the hedge fund that apparently had no understanding of real-world risk or complex adaptive systems, despite having Nobel prize winners Myron Scholes and Robert Merton on its board!). We could also speculate that, today, we need such a large bailout because the widespread 2008 bailouts implicitly sanctioned a continuation of irresponsible behavior. The extent of the bailouts today would imply that nearly any level of risk will find a safety net when another crisis comes knocking in the future. The ultimate consequences of the widespread corporate bailouts announced in response to coronavirus are unknown.
The market corrected violently down as coronavirus spread globally, and it has, with nearly the same ferocity, gained some of that lost ground back. The downdraft was related to economic uncertainty, while the updraft seemed to be built on two factors: 1) the global safety net offsetting the drop shock to the economy, and, in particular, the bail out risky behavior; and 2) zero and potentially negative rates, which make it philosophically – and mathematically – expensive to sit on cash relative to higher-risk assets. Indeed, the message seems to be that there is little risk in equities or debt if the safety net can be as big as it needs to be.
The offset to the stimulus would be the fear of future inflation. Yet, as the world transitions from a capital- and asset-intensive system to one based more on information and technology, rising productivity and deflationary pressures have been enough for money to hold its value, at least so far, in the 21st century. That could obviously change, and, at some point, governments might need to vacuum capital back out of the economy with higher rates and decreased spending. Given the lingering impacts of the virus, we may find it’s necessary to support a significant portion of the population long term with some form of universal basic income. As Disney’s grasshopper sang: Does the world owe us a living? Or, as he realized at the end, do we owe the world a living?
It seems likely that decades of disruption and change caused by the shift to the Information Age will now be compressed into ~five years, so we will likely need a bridge to bring everyone across together. One of the reasons that the world seems so strange now is a result of an odd dualism: there is a great sense of urgency, yet time seems to be standing still (how many years were there in March 2020?). The great pause in economic activity gives us time to be thoughtful about the future. I think the best course of action would be to help the companies that were already bringing positive change to the economy (i.e., ones with high non-zero sum – helping the most people while extracting the lowest tariffs), while hastening the death of the businesses that were already losing relevance and were structurally challenged by the shift to the Information Age to begin with. Indeed, many companies have spent the last couple of decades starving innovation and financially engineering returns while mortgaging their futures, and, in some cases, heavily damaging the environment in the name of shareholder returns – these aren’t the best candidates for society to save. Rewarding companies for going carbon neutral, or even carbon negative, would be another good initiative as stimulus is doled out. If we can boost the innovators while financially bridging individuals, we can accelerate the transition to a digital economy and bring everyone across the divide.
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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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