SITALWeek #295
Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, happy little trees, and whatever else made me think last week. Please grab me on Twitter with any thoughts or feedback.
Click HERE to SIGN UP for SITALWeek’s Sunday EMAIL
In today’s post: blue collar robots; the unevenness of office returns may force a talent exodus to tech; Amazon locks up AWS technology deals for all of the major streaming apps; Bob Ross; lipid nanoparticles and unstable mRNA; regenerating limbs; getting ready for aliens; births drop as Millennials move into houses; and lots more below...
Stuff about Innovation and Technology
WeldBots Enter Labor Force
Path Robotics is an Ohio-based maker of welding robots. Welding poses unique computer vision challenges due to the reflectivity of the metal and the complex geometry of the assemblages. The system analyzes and autonomously determines the best weld path for optimal outcomes. The US is expected to be short 400,000 human welders by 2024, according to the American Welding Society, and repatriation of manufacturing could further exacerbate that shortage. Smart welding is one of a growing list of robotics and AI implementations designed to curb rising labor shortages of skilled workers (see also the record low birth rate in the US in the last section of this week’s newsletter...we’re going to need more robots in the future).
Freewheeling Robo-Groot
Disney Imagineering’s new autonomous humanoid robot dressed up as Groot is basically a more adorable version of the Boston Dynamics humanoid robots. Robo-Groot and other characters are being developed as autonomous bots to walk around parks and interact with guests. Disney had to design custom actuators and extra degrees of freedom (compared to other bipedal robots in the marketplace) to recreate realistic character movements and emotions, and software engineers teamed up with animators to design character style and movement.
Mandating Office Return Risks Brain Drain
Over 60% of Google employees have returned to offices in locations where they were able to go back to work. Google is also softening its last statements on hybrid work, and now appears to be taking a more flexible approach. The company expects most Googlers to spend three days a week in the office (days will be selected so that teams are in at the same time to collaborate). Overall, the company expects 60% of people in the office part time, 20% moving to different offices of their choice (with compensation adjustments matched to location), and 20% working from home. And, all office-based Googlers will be able to apply to work one month remotely per year. I am encouraged by this flexible approach, and I hope it means Google is learning to be just as productive as they were when everyone was in the office together. Meanwhile, Jamie Dimon would like to let you know he is sick of Zoom and, if you work for JP Morgan Chase, you should plan on getting your butt back in your office chair very soon, presumably so that Jamie can tell you face-to-face how much he hates Zoom. According to Dimon, remote work “does not work for younger people”.🧐 (A recent survey from GitLab suggests that ⅓ of people would quit if remote work was taken away as an option and that remote work comes with increased productivity and decreased bureaucracy.) Wall Street has been bleeding top talent to tech startups and big tech platforms since the 2009 financial crisis, and this inflexibility from banks like JP Morgan and Goldman Sachs is likely to accelerate that brain drain. Every smart kid that Dimon forces to endure a long commute and sit in a fluorescent-lit cubicle who knows their own worth will leave to fuel the wave of fintech startups preparing to turn these legacy, 1800s-era banking artifacts into forgotten, Industrial-Age relics.
Amazon Runs the Table on Video Streaming
Amazon has craftily signed up ViacomCBS, Disney, NBC Universal, and Fox to wide ranging technology deals for AWS. And, WarnerMedia was said to have extended their AWS use agreement as part of negotiations to get HBO Max onto Amazon’s Fire TV devices, according to The Information. (Netflix has always run on AWS.) As the studios shift their business from linear to direct-to-consumer streaming apps, will Amazon, Roku, Apple, Google and/or other distributors end up holding too much power? So far, the studios are getting the direct customer relationships and the data they want, but we can also expect to see more jockeying in the future. I’ve suggested in the past that these deals are all backward – instead of Netflix paying Roku a bounty for subscribers (or ad-supported apps ceding ad slots to Roku), connected TV hardware like Roku should be paying the studios for the privilege of having their apps on the platform. My point being, Roku is pretty useless without any of the big-five studio apps, so the leverage is still with the content owners. Amazon also appears to have a significant advantage over Roku because they can strike better distribution deals in return for AWS contracts, but these types of tit-for-tat deals in the past have raised antitrust scrutiny.
Shopify and Google: Platforms, not Marketplaces
I enjoyed this interview with Harley Finkelstein from Shopify on The Verge decoder podcast. After detailing some company history, he discussed their logistics effort as well as the creative ways small businesses work around the walls that the big platforms like Apple keep putting in their way. Shopify’s business philosophy resonates with how we operate at NZS and is a good example of the adaptability needed to drive the analog-to-digital economic shift: “we’re constantly getting really comfortable with being uncomfortable, that has created an environment for those of us that work at Shopify, whereby we have strong opinions, but they’re weakly held. So, I may come in with this assumption that I know exactly how this experiment’s going to go. And I may say so with conviction, because I think I’ve seen it before, but if you’ve got a better idea or you can challenge me with either data or evidence, I’m going to change my mind fairly quickly. And that’s worked out really well.” Finkelstein also touches on resilience/optionality and their long-term mindset: “in some cases, that we will do something that maybe in the short run is not great for Shopify, but in the long run is great for the merchant. Or in the short run, it’s also great for the merchant, in the long run may eventually be good for Shopify. We can take these long-term bets, because we’re playing this ridiculously long game of a 100-year company.” Related, the head of Google commerce and payments, Bill Ready, was on the Modern Retail podcast recently talking about Google’s new efforts to link shoppers to merchants in search and video.
Boosting Online Impulse Buying
In total, 25-40% of Hershey’s candy bar sales online are impulse buys by people who didn’t intend to purchase them when they started placing an order. Impulse buys are very important in the physical retail world, but risk disappearing as consumers shift to buying groceries online. There is an opportunity to dangle virtual candy bars in front of people, but there is no immediate gratification. Offsetting the trend, when people do make unplanned purchases of things like candy online, it tends to be for larger packages. Bic lighter sales were down 5% due to the pandemic despite cigarette sales being flat. In order to stick their merchandise front and center in an ecommerce purchase, these consumer goods companies are likely going to have to buy an ad or pay for product placement to get strategic visibility. This factor would favor ecommerce platforms like Amazon that already have a very robust and data-driven ad platform filled with tons of data on its customers’ purchasing habits.
Miscellaneous Stuff
Joy of Painting, not Product
Bob Ross is perhaps the most prolific painter of all time, having created ~30,000 nature-inspired paintings over the long course of his artistic and television personality career. Ross, who was a hard driving drill sergeant for 20 years before switching to painting, built (accompanied by pet squirrel sidekick, Peapod) a multi-million dollar brand that still mints money today, 25 years after his passing. As reported by The Hustle, you would be hard pressed to find any Ross originals for sale today because most of them are hanging innocuously in homes of people who long ago bought them for a pittance or are just sitting stacked up at the headquarters of Bob Ross, Inc.: “Ultimately, the real reason there aren’t more Bob Ross paintings up for sale is that the artist never wanted them to be a commodity. For Ross, the value was in the process, not the finished product.”
Finicky mRNA
Following up on last week’s “Making mRNA” piece, here’s a C&EN article on the lipid nanoparticles (LNPs) used to protectively encapsulate the fragile mRNA for delivery to cells. The LNPs used in the Pfizer and Moderna Covid vaccines are comprised of different types of lipids (e.g., chosen to confer stability, cell recognition, and optimal biodegradability), including, importantly, ionizable lipids that are neutral at physiological pH but become positively charged in an acidic environment. Following vaccine injection, the LNPs are recognized by our cell-surface receptors and “engulfed” by cells, with a portion of the cell membrane budding off to form an encapsulating bubble (an endosome) around the LNP. The endosomes naturally become acidic, causing the ionizable lipids to adopt a positive charge. In the body, positively charged lipids can be extremely toxic due to their ability to disrupt cell membranes. In this case, however, the now charged lipids can (it’s believed) alter the LNP structure and disrupt the integrity of the endosome, allowing the mRNA payload to spill out into the cell so that cellular machinery can start cranking out viral proteins. Once their jailbreak task is complete, the ionizable lipids return to neutral and are biodegraded. This neat trick for getting mRNA (as well as DNA and other types of RNA) into cells was decades in the making and still has lots of room for optimization. Indeed, the particular LNP delivery method used for the Covid vaccines was actually designed for targeting the liver rather than provoking an immune response with intramuscular administration. Hopefully, further optimization will lead to more stable, lower-dose drugs/vaccines that could potentially target specific types of cells.
Related, CureVac has been in the news recently for their fridge-stable mRNA Covid vaccine formulation, which is currently in late-stage clinical trials. Without the need for deep-freeze transport/long-term storage, CureVac’s Covid vaccine could more easily reach less developed regions around the globe. According to the article, CureVac is using a more stable form of mRNA for their vaccine (as well as LNP-mediated delivery). Because mRNA is single stranded (rather than a double-stranded “ladder”), it can twist, kink, and form superstructures whose stability is influenced by the specific mRNA nucleotide sequence. Use of engineered nucleotides can also confer stability. Interestingly, CureVac also has at its disposal a proprietary peptide (small protein fragment) that can stabilize mRNA. (Thanks to SITALWeek's editor and in-house PhD Chemist for the mRNA explanations this week, and also happy mother's day!)
Bioelectric Signaling Key to Limb Regeneration?
Apparently, children below the age range of seven to eleven are able to regrow severed fingertips. Developmental biologist Michael Levin believes that, by understanding the bioelectric code used by cells, we might be able to program them to regenerate lost limbs or other structures. Ion channels in cells open and close in response to outside voltage, which can create different behaviors (and constitutes one of the main mechanisms of intercellular communication). However, Levin’s view of bioelectric signaling goes beyond the conventional model that puts genes and proteins in the driver’s seat. For example, by studying electrical patterns in the faces of developing frog embryos using voltage-sensitive dye, a researcher in Levin’s lab was able to recreate those signals to initiate eye growth on other parts of the frog, eventually leading to optic nerves connecting the novel eyes to the brain. The New Yorker reporter who wrote the story on Levin said: “None of the developmental biologists I spoke with expressed any doubt that we would someday be able to regrow human limbs. They disagreed only about how long it would take us to get there, and about how, exactly, regrowth would work.” There seems no doubt that bioelectrical signaling plays a key role in patterning morphogenic development, but the question remains as to whether it actually encodes the blueprints or is just an intermediary means of communication.
From “Swamp Gas” to “Unidentified”
The New Yorker has a long read about the Pentagon's increasingly serious interest in evidence of Alien visitation and UFOs (or at least an increased willingness to acknowledge that “unidentifiable” phenomena do exist). Back in January 2020, I talked about aliens in SITALWeek: “Every week, several paragraphs are cut from SITALWeek to spare you readers from suffering an even longer email, but sometimes I wish I had rescued something from the chopping block. Back on Sept. 19th, 2019 I cut the following: ‘The Navy confirms that punk rockers Blink-182 did in fact release footage of UFOs last year. They probably weren't alien technology, but who knows?’ Well this week, in response to a FOIA request, we got an intriguing update on that UFO phenomenon from the Office of Naval Intelligence: yes, they did have ‘SECRET’ and ‘TOP SECRET’ documents and video pertaining to the UFO encounter in question but ‘...sharing the information with the public “would cause exceptionally grave damage to the National Security of the United States”’.” Ever since the post-WWII heyday of UFO sightings was quashed with a stern “don’t ask, don’t tell” policy, there’s been a campaign to slowly normalize the idea that alien technology is a possibility, which, for some reason, has been getting louder and louder in recent years.
Stuff about Geopolitics, Economics, and the Finance Industry
Mutual Funds Fold
The number of mutual funds in the US fell to its lowest level since 2013. A net closure of 376 funds brought the total down to around 9,000, according to the FT. Meanwhile, 131 net new ETFs were opened as investors increasingly prefer that vehicle over the mutual fund dinosaurs.
Fast and Furious Inside Rounds
The Information reports that inside rounds – when a startup raises money from only VCs already backing them – reached a record high of $30B in 2020, a seven-fold increase from a decade ago. Already in 2021, insider rounds total $21B (data through April 22nd). There is always a little outside skepticism when a company prices a round without any new investors offering pricing feedback, as there is strong motivation for investors to markup their own assets (not that anyone in Silicon Valley would ever do that). Of course, whenever only a handful of private investors are involved in pricing a private company with a wide range of outcomes, it’s not exactly a market-driven outcome with any level of accuracy even when it’s not an inside round. The number of times I’ve read about companies doing multiple raises in short succession recently at much higher valuations is staggering. It turns out that inside deals only price about 2.2x higher than past deals (vs. 2x for rounds that include new investors); however, since they are being priced with increased frequency, that ~10% difference compounds quickly.
Impending Sneaker Wave Baby Boom?
The long decline in US birth rates continued with a 4% drop in 2020, reaching the lowest level since 1979. The US, like many other developed countries and China, has a birth rate below the population replacement rate of 2.1 births per woman (currently at 1.6 in the US). Surveys indicate that around one third of baby seekers decided to delay due to economic uncertainty and pandemic health risks. Historically immigration has helped offset periods of low births in the US, but that trend has slowed in recent years. Despite the dearth of babies, sales of pregnancy tests have been booming since June 2020 with 13% growth (about 6x the historical growth rate). The bolus of Millennials born in the late 1980s and early 1990s, many of whom are moving out of cities into the burbs, may be at root. But, as John Burns Real Estate Consulting points out, this group of youngsters is so far much less likely to be married and have kids at age 30 compared to prior groups.
✌
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.
I may include links to third-party websites as a convenience, and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by NZS Capital, LLC. If you choose to visit the linked sites, you do so at your own risk, and you will be subject to such sites' terms of use and privacy policies, over which NZS Capital, LLC has no control. In no event will NZS Capital, LLC be responsible for any information or content within the linked sites or your use of the linked sites.
Nothing in this newsletter should be construed as investment advice. The information contained herein is only as current as of the date indicated and may be superseded by subsequent market events or for other reasons. There is no guarantee that the information supplied is accurate, complete, or timely. Past performance is not a guarantee of future results.
Investing involves risk, including the possible loss of principal and fluctuation of value. Nothing contained in this newsletter is an offer to sell or solicit any investment services or securities. Initial Public Offerings (IPOs) are highly speculative investments and may be subject to lower liquidity and greater volatility. Special risks associated with IPOs include limited operating history, unseasoned trading, high turnover and non-repeatable performance.