SITALWeek #264
Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, drones, 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: Autonomous drones; virtual commuting; progressive web apps versus app stores; Zillow becomes a real estate broker; Spotify’s censorship problem; NFL’s 2022 broadcast rights battle; Fidelity offering ANTs; the pre-dinosaur mass extinction; and lots more below...
Stuff about Innovation and Technology
Bioelectronic Breakthrough
Drawn-on-skin (DoS) electronics use special pens and stencils to create basic electronic circuits right on human skin. The sensors can monitor temperature, hydration, and the heart, and they may even be used to promote wound healing. Researchers from the University of Houston cover the technology in Nature Communications.
Wearable Oximeter Accuracy?
Wearables are increasingly measuring the amount of oxygen in your blood, but the jury is out on the usefulness and accuracy of the sensors. Clinically accurate pulse oximeters take readings from fingertips, which have more capillaries and thus more signal for the sensors to assess. Further, monitoring transmitted light through a fingertip is more accurate than reflected light off your wrist. I’ve been using the oxygen monitoring on my Fitbit Versa 2 for a while, but it currently only measures at night (to minimize motion interference), and it only gives variability of O2 rather than a specific number. Obviously sensors will keep getting better, and the amount of data collected should help make the algorithms even more accurate over time; but, in the near-term, they might cause more stress than health benefits from inaccurate results!
Sony’s Robotic Production Line
Sony’s PlayStation factory can output a new game console every 30 seconds with only four employees. Robotic technology from Mitsubishi and a lot of classic Sony engineering were used to create the impressively automated factory. This WSJ interview with the CEO of Sony is also a good read.
Amazon’s Autonomous Flying Security Drone
Back in SITALWeek #227, I wrote about Sunflower’s Bee drone that patrols your yard like a security sentry. The $10,000 price tag for the airborne watchdog (which unfortunately did not come with a squirt gun attachment for running off raccoons and other pests) seemed a little steep. My desire for a flying home-monitoring drone goes all the way back to my first mention of it in SITALWeek in March 2018. Now, Amazon has answered my call for a mere $249.99. Last week, the company’s Ring division announced the launch of the Always Home Cam security drone (amid a slew of other new hardware and services). The autonomous flying camera drone can autodock to charge after you send it patrolling your house. If you have a Ring Alarm, the drone will automatically fly to the source of a disturbance and send live video – of an open door or smoke alarm, for example (Amazon’s video ad featuring a robber fleeing from an approaching drone is pretty amusing). I am already compiling my feature request list, such as: 1) an AI that yells at the dog when he tries to get food off the counter; 2) a AI that tracks the pet lizards when they roam around the house; 3) the ability to do Zoom calls from the drone as I walk around the SITALWeek compound. As I joked on Twitter, maybe when Amazon had to cancel its Culture series video adaptation, Bezos just decided to actualize the books’ futuristic vision of drones for use in real life.
WFH Shaping Future of Work
Silicon Valley leaders continue to favor hybrid home/office-based work models, with most employees choosing a more flexible work structure. Alphabet’s Sundar Pichai said in a Time Magazine interview that the company continues to work toward providing employees with more options. Google also posted the updated results of its employee survey last week, which indicated that only 8% of employees want to return to the office full time (down from 10% in May) but 62% favor returning to the office some days (up from 53% in May). Likewise, Salesforce CEO Marc Benioff expressed resounding support for the new flexible way of working – which his company is enabling for its customers – on CNBC last week. Also, a survey of engineers indicated that 44% would be willing to take pay cuts if they could relocate out of the expensive West Coast (up from 32% in May), but responses varied widely between companies – e.g., 67% of Square engineers said they would work for less compared to only 6% of PayPal engineers.
Together Mode, Virtual Commutes, and Mindfulness
In related news, Microsoft has launched a suite of new features for Teams. At NZS Capital, we recently tried out the new Teams Together Mode, which moves everyone’s images closer together on a shared background, thus creating a less fatiguing video experience (each meeting participant can choose whether or not to be in Together Mode without impacting the others, but you do need at least five people total to turn it on). Microsoft is also launching the ability to have a virtual commute in Teams, along with Headspace mindfulness and meditation breaks. Since the work-from-home trend started, according to Microsoft data, everyone is working much longer hours, and, importantly, having short interludes before and after work seems to enhance productivity. It makes sense that a commute (whether real or virtual) would be beneficial in offering your brain a chance to reflect and reset. Moreover, missing those crucial resets is likely at the root of our collective experience of 2020 time dilation. As philosopher-magician Penn Jillette said recently, the entire world has been stuck in one long day since March, with little ability to find those important resets. Families are effectively in one long conversation (or in some cases argument!) with no good way to get enough headspace.
Luna Launches outside of App Store
Amazon announced the forthcoming release of its anticipated cloud-gaming service, Luna, which competes with Google’s Stadia and Microsoft’s xCloud. Luna runs on Microsoft software using Nvidia GPUs, making it easier for game developers to port over to it. The service is bypassing the Apple app store restrictive requirements and fees by going the progressive web app (PWA) route, which means it’s browser based rather than being a stand-alone app. Amazon’s Luna team was apparently able to get the Apple Safari team to make some changes to the mobile browser to make the PWA work (at this point it wouldn't surprise me if Apple will try to nab a 30% cut of everything that happens in a web browser as well!). Meanwhile, Microsoft said they will continue efforts to persuade Apple to enable Xbox Game Pass on iOS devices, but they apparently still remain firmly outside the Apple family circle of trust. Like Apple, Google is digging in their heels on the 30% app store fee, according to Bloomberg. This neutral-to-negative-sum behavior from Apple and Google is illogical – it clearly costs far less than 10% to run an app store, and there is increasingly the alternative to use PWAs in browsers and just bypass apps altogether. It’s like they are demanding developers abandon the app store for the web browser, which will ultimately cause Apple and Google to forgo a lot of lucrative app store ad revenue and make it much easier for users to switch platforms.
Apple’s App Store Stats
Apple’s app-store web page lists some stats that would seem to imply it’s quite cheap to run an app store, which would suggest that collecting a 30% monopoly tariff, while disallowing any competing offerings, is not maximizing potential non-zero sumness. Epic’s Tim Sweeny pointed out on Twitter that Apple’s numbers imply only 12 minutes of review per app – but that’s probably an unfair analysis. Surely, a lot of review is done with automated systems, leaving more time/expense for in-depth, manual review. Still, it seems like having only 500 total reviewers is a de-minimis expense relative to the revenues generated by Apple’s exorbitant app store toll. Put another way, it appears it would only cost a few hundred million dollars a year to launch and run a competing global app store, but the current restrictions on iOS don’t allow it. Android does technically allow 3rd-party app downloads but heavily persuades users against them. Amazon shut down its effort to run a competing Android app store, Amazon Underground, in 2017.
Microsoft Accretes Gaming Content
In other gaming news, Microsoft is buying the game publisher ZeniMax Media for $7.5B as it continues to create the “Netflix of Gaming” for the Xbox Game Pass. Contrastingly, however, when Netflix started producing original content, they were increasing competition, but Microsoft is largely decreasing it by consolidating existing publishers. Microsoft’s strategy is a lower-value proposition overall for the gaming industry – but underscores how hard it is to make compelling games compared to decent movies/TV shows. In even more gaming news, a co-founder of Blizzard has put together a roster of former employees to start Dreamhaven Studios following discontent back in 2018 over Activision’s profit-before-quality focus. I am not sure which development engine Dreamhaven will use, but if Unity and Unreal game engines continue to improve, we may see more talent retreat from big publishers, further fragmenting the industry.
Censorship’s Slippery Slope
In a May 2018 SITALWeek, I talked about Spotify’s hateful-conduct rules, which, new at the time, aimed to eliminate songs from their playlists by artists who had done something illegal. Back then, I mentioned the dangerous slippery slope that this type of regulation poses, as well as reasons for separating art from the artist. To paraphrase what I wrote back then: I obviously don’t support immoral deeds, especially acts of cruelty or harm. However, if we filtered out all contributions to art, science, religion, etc. by people who didn't always do the right thing, we would deprive our civilization of much of its illuminating history and culture. I’d echo this sentiment as Spotify is back in the news with employees threatening to strike over things Joe Rogan said on his exclusive Spotify podcast (one of which Rogan admitted was a mistake and apologized for). The employee outrage comes after Spotify already caved and censored several of Rogan’s older episodes. As I’ve said before, companies should have a clear policy about what is and isn’t allowed on their platforms, and censored content should be clearly identified and censorship explained. Today, not a single major media company that deals in user-generated content has this type of policy. And, that’s by design – if they did create such rules, they would likely lose their Section 230 immunity and be responsible for everything published on their platforms (see #205 and #199 for more on Section 230 and the platform vs. publisher problem).
RISC-V: The Go-To Architecture
RISC-V’s chief, Calista Redmond, talked to Protocol about the accelerating activity for the open-source processor architecture, and its goals to support Android. Redmond: “There are more design companies focused on RISC-V designs now than any other architecture. Part of that was this surge in entrepreneurs that are embarking on this. So you're going to see very rapidly, in the next couple of years, some of those really come to prominence and to gain traction with volumes.”
Zillow Moves into Brokerage Market
Zillow has started a licensed real estate broker called Zillow Homes. The new unit aims to sell houses that Zillow acquires through its iBuying division, Zillow Offers (or Zoffers as I think it should be called). This move will also allow Zillow to get direct data feeds from the 640 disparate MLS listing exchanges around the US, which has, at times, proven challenging for the company. While seemingly innocuous, this is somewhat of a religious shift for Zillow, who has long pledged to support licensed real estate agents. Previously, Zoffer homes were offered up to licensed agents at outside firms to sell. Unlike Redfin, Zillow has not historically been a licensed real estate broker, instead relying on generating leads for brokers who pay Zillow to advertise on its popular real estate portal. I suspect Zillow’s revenue from agents is concentrated on much higher-priced houses than the typical iBuyer transaction at the moment, so there probably isn’t much risk of alienating external brokers; however, this move could be a sign of things to come. As I’ve written in the past, Redfin – a licensed broker, real estate portal, and iBuyer – seems to have the best full menu offering for people looking to buy and sell homes. And, I’m intrigued to learn more about Opendoor as they look to become public via Chamath Palihapitiya and Adam Bain’s SPAC. As long-time readers know, we think about predictions in terms of their breadth (likely to happen) or narrowness (many ways the world can play out). I think it’s a fairly broad assumption, that a meaningful part of the US housing market below $1M will become lower-friction transactions. Further, those transactions will come with more variable “commission” (e.g., from 1% to 10% compared to the long-time average of 5-6%). Also, I think it’s a fairly broad assumption that the company at the center of the transaction will be able to monetize it in a profitable way – either directly or through ancillary sources (mortgage, title, lead gen, etc.). But now the predictions become hazier and more narrow: how many home marketplaces will there be? How will transactions be funded? What will consumer preferences be? Will winners be geographically centered (e.g., Opendoor wins Phoenix, Zillow wins Denver, and Redfin wins Portland)? As always, we will look for the highest non-zero (win-win) solution along with the most adaptable company. I suspect there won’t be more than a couple of winners, but Opendoor, Zillow, Redfin, and/or other challengers, alone or in combination, have a chance at creating a winner-takes-most real estate platform.
NFL Rights Bidding War
Fox is rumored to be bidding $2B to maintain its NFL Sunday games rights, up from the $1.1B it’s been paying since 2014. All the NFL rights packages are coming up now through 2022, ostensibly so the league can create more bidding wars amongst broadcasters. With the increasing shift to digital and away from traditional bundles, along with the rapidly fragmenting content market toward live/life streaming, video games, etc., these packages will likely need significant digital distribution rights going forward. Fox has a partnership with AWS for streaming tech, which should give them the ability to offer games digitally; however, Fox does not have a strong base of digital subscribers, and might need to rely on Amazon Prime Video or some other media company. Disney obviously is making a big push into digital with ESPN+, Hulu, and Disney+, and they have a lot to lose, as ESPN has suffered the worst of the NFL ratings declines so far this season. Meanwhile, from the perspective of NFL teams’ owners, these rights seem to center on preserving as large an audience as possible, while also making sure the games are available when, where, and how consumers want. And, there’s even more vectors to consider – sports gambling is on the rise, potentially making rights more valuable; and, the vast array of regional games on NFL Sunday Ticket (currently available only on DirecTV) will be up for grabs in 2022, as the floundering satellite company (owned by AT&T) seems to be in no position to maintain those rights. A lead bid for interactive content broadcast rights by Amazon/Fox or Disney seems plausible. But don’t forget ViacomCBS, which has 27M digital subscribers across its apps, who will clearly be a participant. 🍿🏈
Miscellaneous Stuff
Catastrophic Eruptions Enabled Age of Dinos
The Carnian Pluvial Episode (CPE) is a newly discovered mass extinction event caused by huge volcanic eruptions 233 million years ago. The subsequent global warming – from the increased carbon dioxide, methane, and water vapor launched into the atmosphere – decimated the previously dominant species of tetrapods and cleared the way for the rise of the dino. Of course, we know how that ended 66 million years ago. ☄️💥
Muddled Mackey
I've been impressed by the cognitive dissonance of Whole Foods’ founder and CEO John Mackey ever since I first covered the stock nearly 20 years ago, and this NYT profile reminded me of it once again. Mackey’s stores, now owned by Amazon, are designed such that you can’t turn 90 degrees without being tempted by an often sweet (and high-profit-margin) junk food that preys upon your biological addiction to sugar. Yet, he continues to blame poor decision making for the obesity phenomena: “The whole world is getting fat, it’s just that Americans are at the leading edge of that.” Controversially, he also implies that poverty has less to do with bad food choices than being educated about what to not eat.
Stuff about Geopolitics, Economics, and the Finance Industry
Mut-ANT Transition
I’ve written about non-transparent active ETFs (ANTs) for well over a year now, and I’ve complained about their slow progress, especially in terms of current 1940-Act mutual funds shifting over to offering ANT versions (or even recapitalizing current holders into an ANT structure). Fidelity may be changing all that – if their announcement last week of offering an ANT version of their flagship Magellan Fund kicks off a broader transition. ANTs offer better tax advantages and other flexibilities you can’t get in 1940-Act funds, but they also cause the fund shop to lose a direct relationship with the retail investor/RIA. Many 1940-Act shops are stuck in a bit of a Catch-22: firms should switch customers to ANTs due to the beneficial structure, but they risk losing direct contact with investors and the intermediary broker channel if they do so; so, bigger platforms like Fidelity (who already have a broader financial relationship with customers) may continue to take share in the transition.
Climbing US-China Tensions
The US just placed sanctions on SMIC, the leading semiconductor fab in China, which, depending on how they are interpreted, are likely to put further pressure on US-China relations. The WaPo reports on “vast new detention centers” that China is building for Muslims in Xinjiang. And, the WSJ reports on the rising difficulty for supply-chain auditors to assess factories in that region on behalf of multinational corporations, who increasingly report on and improve the conditions of their suppliers' workers. In other China news, a piece in the country’s state-owned Global Times had this to say about recent relations between the US and Taiwan:
“Taiwan is an inalienable part of China. The PLA's relevant exercises are necessary to maintain China's sovereignty and cross-Straits security. We love peace, but we are increasingly aware that peace is dependent on military strength, and the firm will to use them when necessary.
The collusion between the US and the DPP authority is threatening the safety and welfare of all Taiwan people, as well as regional security.
It has pushed the island to an impasse. The Tsai authority should either stop playing with fire before it is too late, or prepare for dire consequences.”
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