SITALWeek #247
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: indoor solar; lockdowns increase traffic speeds and slow down EV sales; TikTok’s algorithms; escalating US-China tensions are closing off resolution options; converting mutual funds to ETFs; Understanding Section 230; and lots more below...
Stuff about Innovation and Technology
Barista Bots
In South Korea, untact, the opposite of contact, is increasingly taking hold across society. A trend already underway before the pandemic, untact includes increased contactless payments, mobile app usage, digital entertainment, and Baris, the robot barista that both makes and delivers coffee to your table.
Taste Synthesizer
The Norimaki Synthesizer uses five simple compounds in an agar substrate and electrophoresis to simulate different tastes – from gummy candy to sushi – when touched to the tongue. Eventually, the lickable tech could be miniaturized to the size of a vaping device. When combined with VR/AR, the result could be a powerful mind trick. I never miss an opportunity to post this quote from 'The Matrix': “I know this steak doesn't exist. I know that when I put it in my mouth, the Matrix is telling my brain that it is juicy and delicious. After nine years, you know what I realize? Ignorance is bliss.”
Bug Bounty Hunters
HackerOne has paid out $100M in bounties to ethical hackers tracking down bugs in software for companies and governments. Half of this was paid in just the last year, and CEO Mårten Mickos predicts they could reach $1B in cumulative payouts within five years. As work becomes more distributed, system vulnerabilities will rise, and the company’s services are likely to be in even greater demand.
Harvesting Indoor Light to Power IoT
Flexible perovskite solar cells could potentially be used to harvest indoor photons three times more effectively than traditional polycrystalline silicon. That 20% efficiency is similar to what outdoor silicon solar cells achieve. Perovskites are a “hybrid of organic compounds, metals, and halides, with crystal structures mirroring those of the mineral calcium titanium oxide”.
Intercontinental Solar Power Pipeline
Atlassian co-founder Mike Cannon-Brookes is looking to export renewable energy from his native Australia via a 2300-mile, undersea cable to Singapore at a cost of $20B with a completion date later this decade.
Need for Speed
With adrenaline junkies taking advantage of the largely empty freeways, LA’s KTTV station now features the “Speeder of the Day”. California Highway Patrol issued 2,493 citations for speeding in excess of 100mph in the first month of lockdowns, up from 1,335 for the same period the prior year. Longtime readers know my fondness for reporting new records for the coast-to-coast Cannonball Run; but, it’s become rather tedious to keep score – with seven new records since lockdowns began – the latest under 26 hours. Drive safely.
Orphan Cars Put to Pasture, EV Sales Power Down
The LA Times shows oceans of cars parked in empty stadium lots. The cars are stacking up as they arrive by sea from Japan with no buyers, and as rental car companies struggle to find places to store their unused and unsellable vehicles. Meanwhile, gasoline car sales have rebounded in China, up 6% in April, but EV sales are down 27% in the post-pandemic recovery. Amidst the slowdown in EV demand, Tesla cut prices to spur sales, and miners are pulling back on new extractions of lithium, the key battery ingredient, which could result in future production bottlenecks when demand inevitably picks back up. I was recently looking at the profile of EVs in Norway – where the green vehicles represent 75% of new car sales – and most of the top selling models have around 200 miles of range or less. Gas cars have a 300-400 mile range because stopping for gas is inconvenient, but there is no reason to carry this anachronism over to EVs. An easy – perhaps only – way to get EVs to much higher penetrations sooner would be to break the focus on range, given that the vast majority of miles driven are for short trips. In the US, 95% of trips are under 31 miles, and a typical person drives a total of ~25 miles a day. EVs with a range under 150 miles would be cheaper and require far fewer natural resources to create. The EV market should be bifurcated to models under 200 miles and over 1000 miles in range; everything else is stuck in between. Rounding up EV news, here is Jay Leno driving the Cybertruck with Elon Musk through one of his tunnels under LA (video clip from Jay’s TV show).
Meat Processing Bots
Don’t read this while eating, or using a Norimaki Synthesizer: in the US, animal processing facilities were hampered by the pandemic; but, at Europe’s largest pig slaughterhouse in Denmark, we have a glimpse of the robotic automation to come for the meat packing – and many other – industries: “An infrared laser-emitting robot first measures each pig carcass. Next up, the so-called rectum loosener robot uses computer vision to identify the pig’s tail, cuts a 4-inch hole around it, and extracts whatever poop is inside. Then the feces-free carcass moves into a cabinet-like robot, where a large, circular blade splits the pig from sternum to ham. Next, each one moves onto a mechanized, autonomous organ remover, tendon slasher, and finally, the spine splitter. Ten minutes. Six robots. Minimal human supervision. By midnight, when the second (human) shift calls it quits, 18,000 pigs will have passed through this gauntlet of actuated steel and knives.” Hot dog anyone?
Understanding Section 230
Imagine I created a product with enormous potential for widespread harm to people and the planet. This product was wildly popular, but it threatened the ongoing existence of our species. However, I decided to take zero personal responsibility for how the product was used because it would generate hundreds of billions of dollars in profits over its lifetime, much of which would accrue to me personally. I eschewed responsibility for defining and enforcing proper usage of my product, declaring that it was the government’s responsibility, not mine. Then, if the government were to step in and detail how the product should/should not be used and asked me, as the product owner, to enforce these new rules, it would cost me a ton of money, but I could afford it because I would be making so much cash flow off the product itself. Even better, it would then be so expensive to enforce that, if someone wanted to compete with me, the new regulatory cost of entry would be insurmountably high, likely in the range of $10B’s/year. Then, I would have a government-granted monopoly that would print money forever. Sound familiar? This is indeed the state of the Internet platforms that rely on user-generated content, notably Facebook, Instagram, Twitter, and YouTube in the West, though the circumstances also apply to the applications (such as facial recognition algorithms) that run on the cloud services such as Amazon Web Services, Google Cloud, and Microsoft Azure. If I had created such a product and made no attempt to mitigate its toxic miasma, I would consider myself a coward who traded money for responsibility.
I wrote about Section 230 and the question of social-media governance last summer in SITALWeek #199 and #205, and it’s now back in the spotlight after Twitter annotated several of Trump’s tweets about mail-in ballot elections as misleading (and subsequently annotated a Tweet from Trump because it was inciting violence). Trump responded by once again proposing to effectively repeal Section 230 status for Internet platforms. That would mean platforms would become publishers – responsible for everything any user posts. The platforms want the government to declare what is ok and not ok to post, that way they can avoid becoming publishers. As with the hypothetical scenario above, government oversight would greatly increase their costs to monitor everything posted; but, it would also create classic regulatory capture and raise the barriers against any new competitors.
There is no reason to politicize this question – either companies are responsible for their products, or they aren’t. If they aren’t then government guidelines and regulation should step in. I personally think it’s fine for social networks to say “ABC is allowed, but XYZ is not,” but that would make them publishers under Section 230, so they would be liable for every single thing posted by any user. I’d prefer to avoid the government declaring what is ok and not ok to post because, if they do, it’s not only a questionable free-speech infringement, but it grants greater monopoly status to the incumbent platforms and stifles innovation and progress. What we’re trying to solve for is this: if it’s theoretically possible for a company to police how its products are used (or reasonably anticipate malicious use/outcomes), they should be held responsible if their products do harm, and governments shouldn’t be involved in policing free speech. This is a really complex issue – companies don’t always know ahead of time what could cause harm. That’s why in some cases they want a list of acceptable content from the government. But, the logic runs in circles without getting us anywhere. If I were CEO of Facebook, Twitter, or YouTube, I see three options: 1) zero oversight, a complete free for all with the only exception being an action that causes physical harm – this would not make me a publisher; therefore, I would have Section 230 protection; 2) declare my philosophical view of the world and enforce it, giving people the option to either participate or move to another platform – this would make me a publisher, responsible for everything anyone posts; or 3) censor based on a list of acceptable content from the government – this would make us China. It’s not clear the current Internet leaders are capable of having a coherent philosophical view to express, nor are they capable of acting like responsible stewards (and, I haven't seen a lot of responsibility in the government lately). Perhaps the most obvious solution is that society doesn't need the current iteration of anonymous, uncurated, broadcast social networks to begin with. Communication is important, but everyone communicating to everyone without any personal responsibility isn't a viable model – humans simply aren't built to process it.
Instagram to Give Creators a Cut
Instagram will begin to allow creators on IGTV to earn money directly from the social video app. Currently, YouTube shares around 50% of ad revenues with content creators; but, on Instagram “influencers” strike off-platform sponsorship deals directly. Instagram and YouTube take zero risk on the content made by creators, unlike a Hollywood studio, which takes significant risk funding new content. Therefore, I personally think the platforms should be paying out 70-80% of revenues (which allows for a small margin after hosting and moderation costs) to users that generate content on the platforms. It would be great to see competition for content put more money in creators’ pockets, without which there would be no YouTube or Instagram.
Chickens vs. Sheep
Rebelling against the dance memes that have gained huge, sheep-like followings on TikTok, the cult of the Step Chickens, along with the Weenies, Murder Hornets, Griswolds, Babbages, Duck Sanctuary, the Flamingos, and the Jeffs are rising up to fill identity-seeking voids. Make sense? Well, read this NYT article, and it will make even less sense*. Bloomberg reports that ByteDance had $17B in revenues and $3B in profits in 2019, largely from their China-based apps. Recently, Disney’s long-time strategy lead Kevin Mayer left to be COO of China’s ByteDance (TikTok’s parent company, or, should I say, Rooster?). As one person commented to me recently, that’s like going from the Happiest Place on Earth to the Internet equivalent of a white van with the windows painted over. In the FT, an anonymous “senior Disney executive” said: “At an operational level, ByteDance has the most advanced AI, it’s way more evolved than companies like Amazon, and Kevin sees great opportunities in that.” The Step Chickens agree. Perhaps it was that great AI that allowed TikTok celeb Charli D’Amelio to amass 58 million fans with no clue as to how or why, according to the WP.
*I am an old Gen X’er, and I do not understand these newfangled social network apps at all.
Video Production Reimagined
This essay explores the evolving movie and TV production possibilities, including 8K video backdrops of real locations replacing green screens, smaller sound stages, more virtual everything – leveraging tech like Unreal Engine 5.0 – and more. An 8K video backdrop could come in handy on Zoom calls.
Miscellaneous Stuff
Optical Atomic Clocks
I love atomic clocks – we have half a dozen devices in our house that receive the signal from the NIST (National Institute of Standards and Technology) in Boulder, Colorado. Currently, the signal is based on the microwave resonance frequency of cesium atoms. New atomic clocks, however, are based on ytterbium and strontium, which vibrate in the optical spectrum of the EM field. The trick is to convert this optical signal into something modern electronics can use, which NIST has done with a high-speed photodiode. The precise timing provided by atomic clocks is critical for a wide range of applications including GPS, globally-synchronized databases at the big cloud computing platforms, distributed telescope arrays, and telling me when it’s time to get out of the spa.
The New “Stay Ahead of China” Act
The US National Science Foundation (NSF) is poised to see its budget go from $8B/yr to $36B+/yr over the next few years, amounting to an additional $100B over five years in total. The welcome bipartisan legislature titled “The Endless Frontiers Act” aims to fund innovation and new technologies.
Stuff about Geopolitics, Economics, and the Finance Industry
Chinese-Made Transformer Seized
The US has seized a giant electric grid transformer weighing 500,000 pounds made by a Chinese company and diverted it to Sandia National Laboratories for analysis, according to the WSJ. The device was headed for a Colorado-based electricity producer also owned by the Federal government. No one is commenting on the reason, but the speculation is national security concerns. It’s easy to leap to the conclusion here that this is yet another datapoint supporting the likely repatriation of manufacturing to the US. Certainly, the electric grid is important, but lots of things with national security involvement are completely made in China, like iPhones.
Pharma Repatriation neither Easy nor Cheap
Drug makers are concerned about proposed legislation that would require manufacturing and ingredient sourcing to return to the US from China and other countries. There are 200 FDA-registered factories in China alone, and it would take years and billions of dollars to build a new facility in the US. The move could favor branded drug makers over generic substitutes (which operate at a much lower margin, thus relying on cheap, overseas facilities) and raise the cost of medications dramatically.
Crumbling Globalization Threatens Conflict
If you missed Trump’s nine-minute anti-China speech on Friday, I recommend watching it (YouTube). Martin Wolf wrote an important editorial in the FT earlier in the week that I also recommend:
“Rising friction between China and the US, and the weakening of globalisation, have been apparent since the global financial crisis. But Covid-19 has accelerated these trends. The pandemic is turning countries inward. The demand for self-sufficiency is rising. This is particularly true in products relevant to health. But other supply chains are also being broken. The economic collapses, stratospheric unemployment and pandemic-constrained recoveries make some leaders, especially populists and nationalists, happy to blame foreigners. The perception of US incompetence weakens its credibility and emboldens autocratic China. As the US withdraws from international organisations and treaties, and China pursues its own path, the fabric of co-operation tears. Even armed conflict is possible.”
I discussed the broader trends of US-China tensions in SITALWeek #245:
“There have been great benefits from globalization, but also hidden costs. The opportunity now is to reimagine the production of all goods and services with a digital, Information-Age lens. It’s going to be a very exciting period of innovation and growth around the world. And yet, decoupling and less interdependence will only feed rising tensions and competition between China and the rest of the world. The escalating cultural/technological clash points to many scenarios that can only be resolved in a destructive conflict. While we may not be facing the cold-war-era mutually assured destruction of nuclear weapons, we are facing an equally devastating mutually assured destruction from a hate, fear, and misinformation fueled technological cold war. Therefore, it is best to forge ongoing, collaborative partnerships globally while also seeking increased self-reliance. Non-zero sum (NZS) in game theory is the outcome where all parties in an exchange are better off doing the transaction than doing nothing at all; NZS will remain an important concept for success going forward in international relations; but, odds are, we will see some zero- or negative-sum games played too in the coming years.”
Samsung Fab Excludes US Technology
EE Times reports that Samsung is exploring whether they can build a new semi fab with no US equipment by exclusively leveraging tools from Japan and Europe. It’s another maneuver in the opening volleys of World War III that we find ourselves in. The global economy runs on semis, and without leading-edge chip production, society and innovation will slip decades back in time.
Economic Tracking Data
Brent Beshore and the Permanent Equity team put together an impressive list of economic activity trackers, many of which are real-time across a number of economic sectors.
Out with Old (Mutual Funds), in with New (Active ETFs)
Mutual funds are high-cost, antiquated vehicles with tax disadvantages and typically higher fees than their active ETF counterparts. It is possible to convert a mutual fund into an ETF, and, recently, a couple of small funds have applied to do just that. All mutual fund shops should follow suit, as there is no practical reason for the legacy mutual fund structure to persist.
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Disclaimers:
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 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. Often I try to make jokes, and they aren’t very funny – sorry.
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