SITALWeek #246
Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, swarms, 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: WFH and the potential for a domestic migration; a computational defense system; AR tech support; shifting listening habits; Shopify’s intimidating pace of innovation; 20th century ideological tensions remain unresolved; whence the wheel; and, lots more below...
Stuff about Innovation and Technology
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Theme Park Insider reports on the confusion of where to stand: “At CityWalk, Universal has put down floor markings showing people where to stand when queuing. But at Disney Springs, Disney is using its floor markings to show people where not to stand.” Stand here, don’t stand there...one thing is for sure, it’s a great time to be in the tape and adhesive decal business! Both entertainment sections of the Florida parks reopened last week to limited capacity. Protocols would be important to figure out before the NBA season could kick off at ESPN’s Wide World of Sports complex in July. The NBA is in talks with Disney to work out the details that would see players housed – and all games played – onsite for the season. I still prefer Entertainment Island, but I hope this comes together as well. At the end of every game played the winning and losing team can honestly exclaim “I’m going to Disney World!”
Tech Job Growth
Glassdoor shows job openings stabilizing after dropping 29% to 4.4M since the beginning of March. The trends vary greatly by sector with Internet and Tech job openings up 100% y/y.
Taking Emotions in Stride
An algorithm called ProxEmo runs on a robot to determine your mood based on the way you are walking. This allows the robot to steer clear if you are having a terrible, horrible, no good, very bad day. Imagine when this is an app on your Apple augmented-reality glasses in a couple of years – combined with real-time facial expression data, you will know peoples’ moods better than they know themselves (well, then again, they’ll probably add a selfie mode). Won’t that be fun.
Virtual Court Continues
Collin County District Court in Texas will hold a summary jury trial by Zoom in an insurance dispute case. This type of trial is non-binding and helps determine if a case will go forward or try for mediation. There is a growing backlog of court cases piling up during lockdowns and no obvious way to get all the participants in a room, including defendants who may be in jail. Meanwhile, a drug offender received a death sentence via a Zoom court session in Singapore.
VIP Zooms
Just when I thought SaaS companies might finally show some opex leverage due to lower travel budgets, I read that Okta is pulling in celebrity chefs and athletes for Zoom calls with customers. It’s all about letting customers know you care even if you can’t come and meet them in person. Okta CEO Todd McKinnon has an interesting take on working from home: "Office spaces will significantly change and become more experiential in nature. I envision our offices functioning like Apple Stores do today: a larger number of smaller spaces in various locations around the world where you can experience our brand and product."
Far-Reaching Consequences of WFH
I’ve been working remotely from my team since August 2008. Working from home changes (WFH) work from “something your life revolves around” to “something that revolves around your life.” Several big tech companies announced intentions last week to create permanent WFH programs. Shopify was perhaps the most aggressive, taking a WFH-first policy with a goal of making all traditional offices supplemental. If the leading employers all take this approach, then, from a pure recruiting perspective, every employer will need some form of WFH. Tech companies might have the right cultural DNA of trust and freedom to allow for broad WFH, but most other companies could crumble without the cohesion (or, perhaps tension) of physical-office politics. WFH shifts value from charisma and politics (face time in the office) more toward merit. WFH also means the same job takes fewer hours without the distractions of the office, but sometimes those distractions are valuable. Not everyone has the space, environment, or family situation to work from home, which could make the practice yet another inequality increaser.
The consequences of WFH are far reaching for the commercial office space market and the network of services that support it – cleaning, maintenance, catering, security, public transportation, parking, etc. Could public transportation in most cities even survive such a trend? And where will people move? Zillow and Redfin intent data still suggest an urban-to-suburban and large-city-to-small-city migration. Is that real or just shelter-in-place dreaming? Could people leave cities for nearby 2nd-home destinations, and if so, are they prepared for those small communities that tend to lack fully-developed school systems, infrastructure, and Prime Now delivery? If office workers redistribute en masse, we could also see a new mixing of ideologies that reverses the long migration of liberals to the coasts, which could even impact the US’s antiquated Electoral College system. Part of me wants to believe WFH and domestic migration is probably a real trend, but I’ll believe it when I see it.
Fostering Creativity in a Virtual World
Google’s Sundar Pichai made these comments on working from home in a Verge interview last week:
“Productivity is down in certain parts, and what is not clear to me is — in the first two months, most of the people are already on projects in which they kind of know what they need to do. But the next phase, which will kick in is, let’s say you’re designing next year’s products, and you’re in a brainstorming phase, and things are more unstructured. How does that collaboration actually work? That’s a bit hard to understand and do. So we are trying to understand what works well and what doesn’t.”
Creativity tends to thrive on ad hoc connections and, thus, will suffer if we don’t find new ways of remote working that are more conducive to creative collaboration.
Powering the Grid with EVs
In the next few years, there will be millions of EVs in garages that could operate as grid-wide supplemental energy or home backup power. There was some excitement this week that Tesla might have added bidirectional charging to some of its models, which would enable vehicle-to-grid power transfer, effectively serving as a Powerwall-like battery backup for your house. However, for now, an engineer has discredited the theory for current Tesla models.
Podcasts Trend Toward Exclusive and Video
Spotify’s reportedly $100M+ deal to sign podcast-king Joe Rogan to a multi-year exclusive is a welcome sign that the company is further embracing original content and, more importantly, video content. As I mentioned in SITALWeek #242 and #245, I believe video streaming will increasingly take share from audio-only entertainment, and it’s a significant weakness for the top audio-streaming app, Spotify. Twitch, YouTube, Instagram, Fortnite, etc. are increasingly sources of longer-form live or recorded content, which will slowly take share from music-only streaming. Rolling Stone reports on how Twitch is opening up new revenue streams for artists; and, if we take a step back, we can see a broader acceleration of how creators (musicians, podcasters, etc.) can connect with fans and make money. These new avenues of connection and monetization will incent artists of all types to tour less and rely less on streaming while fans get more intimate experiences.
Less time in our cars and at the gym has us at home in front of screens more often these days, where it makes sense to have video along with audio. Eventually, ambient audio will turn to ambient video with augmented reality. All of Rogan’s videos will depart YouTube for an exclusive home on Spotify for an unspecified number of years (I’d guess three+ years, assuming Spotify is paying him a premium over his advertising revenues from podcasts and YouTube video views). I don’t believe Spotify has the best podcast interface, and I wouldn’t even put it in the top 10, so I will be frustrated to use it for exclusive content until they improve it. Spotify will face many conflicting interests between podcasters, advertisers, and listeners in trying to optimize the experience for exclusive content and drive profitable revenue growth. I believe the ongoing diversification of ambient audio/video content sources will help streaming music platforms as they negotiate with labels, and it will push more and more musicians to embrace these new platforms to connect more directly with their fans (and generate revenue in the process). This Rogan deal has echoes of Howard Stern leaving terrestrial radio in 2006 for Sirius XM satellite radio for $100M a year (so, likely 3-5x the Rogan deal at the time). That Sirius XM deal is reportedly still worth $80M a year to Howard, and it’s up for renewal at the end of 2020.
Spotify also acquired Bill Simmons’ podcasting and media business, The Ringer, earlier this year. Commenting in a Vulture interview last week, Simmons said: “As we were deciding whether to do the deal, I was reading different books and stuff, especially about Disney. In the ’80s, people thought they knew what Disney was, right? They had parks, animation, made some movies, made some other things. Then Michael Eisner gets in there and within ten years turns them into a completely different, much bigger company. And then Bob Iger goes even three steps beyond that. Now they’re the biggest media company we have. Do I think that could happen at Spotify? Yeah, maybe. It depends. At some point, are they going to think, “We’re killing it in audio. Should we start doing more?” You never know.”
Shopify Innovating the Future for Small Businesses
As the world economy goes digital at an accelerated rate due to the pandemic, the race is on to provide a small-business operating system. There is a lollapalooza of forces accelerating ecommerce – everywhere you look, a previously-analog transaction is fast becoming digital. Shopify is leading that race as they iterate faster than anyone with new features and new services for small businesses in the virtual and physical worlds. Facebook took another swing at ecommerce last week, including a partnership that will allow Shopify merchants to sell on Facebook, and eventually Instagram, seamlessly. It's my understanding that a lot of people use Facebook products (although, I've never been able to determine why), and this seems likely to be another successful new tax on commerce à la Google Search. Last week, Shopify announced a slew of new products including a small-business banking solution, which gets merchants money right away from sales, along with a debit card and rewards. They also launched an installment payment option for checkout. There are a lot of companies that probably never considered Shopify a competitor who might want to pay attention, but it may be too late. Shopify has grown as a more-or-less open platform, allowing other companies to offer services and solutions to Shopify merchants. As the company continues to take on a lot of this functionality themselves, they will face the classic platform dilemma that other tech companies have faced in the past: is Shopify still a platform, or will they do it all on their own to the detriment of partners? VentureBeat recaps the slew of announcements here.
Amazon lost eight points of ecommerce market share, falling from 42% to 34% by mid-April, as Walmart, Target, and other rivals well outpaced the orange giant, according to the NYT. It's been over two months since Amazon first fell down on its Prime promise, and they've yet to address the shortcomings or offer refunds against the $119 annual membership fee, which now only guarantees that you will get your items a week after you can get them from Walmart. In our house, Amazon has probably lost 90% share (including to merchants that use Shopify), and in some cases we've found better, permanent alternatives.
Tech Support Aided by Augmented Reality
ASM Lithography, the linchpin to all advanced semiconductor manufacturing, has been using Microsoft HoloLens augmented reality to keep its onsite machines running around the globe without technicians traveling to customer locations. Downtime on one of the company’s machines can cost a customer millions of dollars a day. This is an example of what will be a much broader trend of employing AR for various enterprise use cases.
Computational Strategy for National Defense
On Nvidia’s earnings call last week, CEO Jen-Hsun Huang addressed “the importance of creating a computational defense system. The defense systems of most nations today are based on radar. And yet in the future, our defense systems are going to detect things that are unseeable. It's going to be infectious disease. And I think every nation and government and scientific lab is now gearing up to think about what does it take to create a national defense system for each country that is based on computational methods? ...You need to find a way to have an accelerated computational defense system that allows you to find insight, detect early warning ASAP. And then, of course, the computational system has to go through the entire range from mitigation to containment to living within the monitoring.”
Miscellaneous Stuff
Potters’ Axlent Invention
The wheel is impressive, but it was the axle that really got humans moving. Remarkably, the axle was invented only 6,000 years ago, and our current evidence suggests that the first person to figure it out was a potter, and the first application was a toy – a figurine on wheels with a small clay axle. These engineering insights appear to have happened independently in the Old World of Mesopotamia and the New World of South America – in both cases involving a potter and a toy – thousands of years apart, and before we have any evidence of communication between the two regions. It seems to be a classic case of engineering a model before going full scale, with full-sized wagons appearing in the archaeological record around 5,400 years ago.
Coronavirus Induces Lopsided Immune Response
Stat reports on some recent studies (some published, some “preprint” – yet to be peer-reviewed) of immune pathways activated by SARS-CoV-2 infection. When your body detects a virus, two main defensive pathways are triggered: 1) interferons are released to warn other cells that a virus is afoot, so your body can start to suppress viral replication, and 2) chemokines are released to recruit the professional, virus-fighting immune cells to the site of infection. Viruses, in turn, have evolved varied ways of compromising both immune responses. SARS-CoV-2, however, is unique in that it appears to strongly suppress the first response but leave the second intact. As such, the theory goes, viral replication continues largely unabated, so the infected cells keep ‘crying for help’, releasing more and more chemokines, leading to over-recruitment of immune cells and progressively worse inflammation and tissue damage – from your own immune response – on top of the havoc already wreaked by the virus. These insights suggest that interferon therapy may help control the virus (or prevent it from initially taking hold, if given preemptively), and that curbing the overactive inflammatory response (e.g., with specific pro-inflammatory inhibitors) may help limit damage. Moreover, these data help explain the extreme vulnerability of elderly, diabetic, and otherwise compromised individuals – their interferon-mediated, immunoprotective pathway is likely to be in an already weakened state before SARS-CoV-2 strikes, leaving viral replication completely unchecked and exacerbating the imbalance of the two-pronged immune response. (Thanks to SITALWeek’s excellent Editor, and PhD Chemist, for this explanation!)
Pollution Reprieve Depressingly Temporary
Mt. Everest was visible from Kathmandu for the first time in decades as lockdowns lift pollution. Nepali Times shared photos on Twitter. Pollution levels fell globally by 17% in April y/y; but, tragically, they are already back to pre-virus levels in China, as the FT reports.
Stewart’s Sonnets
I have been thoroughly enjoying Patrick Stewart amusing himself with his daily readings of Shakespeare’s sonnets during the lockdown. Here is Sonnet 62, and here is Sonnet 57 – with a special guest performer from the Enterprise NCC-1701-D.
Stuff about Geopolitics, Economics, and the Finance Industry
China Not Backing Down
China bypassed the Hong Kong legislature to effectively take control and eliminate the “one country two systems” setup that allowed Hong Kong to remain independent, according to the WP. It’s a chilling omen and a manifestation of fear and desperation in Beijing. Meanwhile in China, Bloomberg reports the government “will invest an estimated $1.4 trillion over six years to 2025, calling on urban governments and private tech giants like Huawei Technologies Co. to lay fifth generation wireless networks, install cameras and sensors, and develop AI software that will underpin autonomous driving to automated factories and mass surveillance.” Most of this $1.4T depends on access to advanced semiconductor technology from western companies. The WP also reported on Taiwan’s hardening views of China as Xi’s power grab and behavior makes the Taiwanese increasingly uncomfortable.
Meanwhile, the US is looking to require Chinese companies listed on US exchanges to certify they are not government controlled and conform to US accounting standards and disclosures. Chinese listings in the US rely on the sketchy variable interest entity (VIE) structure, which means that when you buy a share in the US you don’t really directly own the profit interests of the operating business in China. These new requirements would likely cause most Chinese ADRs to leave the US exchanges (owners would probably get an option to exchange shares for a Hong Kong listing (but how feasible is that for global investors given China’s moves to dissolve the two-system rule of Hong Kong?). It’s a complex situation, and valuations could even rise once the uncertainty is lifted; regardless, the current legislation has highlighted the fact that these US-listed Chinese companies are not independent, and investors do not own claim to them when they buy shares, no matter where those shares are listed.
The range of outcomes continues to widen dramatically for Western investors in China for a variety of reasons. Allied forces are beginning to align against China, with the UK, France, and Australia increasingly in sync with US views. The ideological disagreements of the 20th century weren't resolved, they were merely put on hold, and will now be resolved in the unpredictable and frenetically paced post-truth, social networking age. In case you missed it, I wrote some more detailed thoughts on deglobalization and the complicated chess game involving the US, China, and Taiwan last week – unfortunately tensions continue to escalate, and attempting to reverse inequality is probably our best option to keep global peace.
Zero Rates Have Investors Stymied
As the market recovers, and many stocks are forging new all-time highs, so too are balances in money market funds as investors appear bearish on stocks overall. Right or wrong, it's not hard to understand what is driving the stock market today: as I wrote in SITALWeek #243 a couple of weeks ago, the move up in the markets is largely understandable in the context of low rates and large fiscal stimulus despite the economic uncertainty. Paradoxically, record levels of cash are now sitting idle, earning zero return, while the market rises, driven by those same, zero-returns-causing low rates (gross returns are probably negative after money market management expenses, but firms will likely waive those to keep returns at a healthy 0.00%).
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