SITALWeek #306
Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, Darmok and Jalad, 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: solar storage and hydrogen creation; robot mysteries; dancing drones; the cost of upgrading infrastructure for climate change; the death of the password approaches; proteomics bounty; jumping spiders; humility; and lots more below...
Stuff about Innovation and Technology
Rain Dancing Drones
Dubai scientists are using drones to deliver electric shocks to clouds to induce rain to fall. Apparently, the electric shock causes water vapor to condense into larger, rain-prone droplets. With the water tables shrinking dramatically around the world, the race might be on to grab hold of wispy water vapor and instigate precipitation before it drifts to another country!
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Growth of emoji usage slowed quite a bit over the last year. Based on global Tweet data for the month of July, ~21% of tweets contain a symbolic figure (up from less than 10% seven years ago) but that’s only ~0.5% growth vs. last year. This plateau follows significant usage growth in 2019 and 2020. The data also show that we tend to go emoji crazy around year-end holidays and then start off each new year in an emoji lull. I look forward to the day we speak exclusively in emoji metaphors, like "Darmok and Jalad at Tenagra...Shaka, when the walls fell" in Star Trek: The Next Generation.
Storage to Solve Solar Deflation
Lavo is an Australian startup with a hydrogen storage device aimed at absorbing (or, rather, adsorbing!) excess power generated by solar. Because of the frequent mismatch between alternative energy production and usage, recurring overproduction (combined with more facilities coming online) has caused a drop in green power’s market value in some regions. In California, the wholesale price of solar has dropped 37% since 2014, compared to the cost of other sources of energy. The market for energy storage is expected to increase from 800 to 4,000 gigawatt-hours by 2030; however, I’d argue there could be a scenario where better storage options lead to even more demand than what's forecast. Lavo’s tech is based on an AU-developed metal hydride technology. Excess power first charges a lithium ion battery housed in the “HEOS” unit, and further spillover is then diverted to an electrolyzer, which splits water into oxygen and hydrogen. The oxygen is released to the atmosphere and the hydrogen is adsorbed on metal hydride and stored in solid form. The HEOS system can then reverse and power the grid directly through the lithium battery and/or desorb hydrogen for powering fuel cells, whose usage is expected to grow significantly in coming years. The trick with so many novel storage systems like this is to overcome the chicken-and-egg problem of getting enough demand to scale manufacturing at/below cost. In related news, Japanese researchers have greatly extended the life of photoelectrochemical water splitting systems from around a week to 100 days. Similar to HEOS, these systems allow direct solar to hydrogen conversion in a completely sustainable manner rather than relying on natural gas production as a source of hydrogen.
Looks Like We’ve Got Another Robot Mystery on Our Hands
A robot collision caused a fire and shutdown for the second time in Ocado warehouses in the UK. The online grocery company indicated three robots in their hive of 1,000 bots, which move crates of food around to help humans pack orders, collided. The resulting electrical fires are very difficult to put out and raise a lot of safety issues, especially as warehouses and factories in many industries automate. If I learned anything by watching every episode of Scooby Doo a zillion times, it’s that it's almost never the robot’s fault. For example, in ‘Foul Play in Funland’ a robot ran rampant in an amusement park, but it turns out (spoiler alert) that park co-owner Sarah Jenkins didn’t like the idea of kids and robots mingling, so she enacted an evil plot to sabotage the bot. Of course, there was also that time Artie the store clerk impersonated a robot to slander the department store’s new security bot. And, let’s not even mention the Robot Master in the Robot Ranch episode. Anyway, I’m just saying, it’s possible the robots are just innocent casualties here of some sinister plot. With news that Instacart is building out robot-powered grocery fulfillment centers, they might want to have the Mystery Gang on speed dial.
UnitedHealthcare's Hollow Fitness Pursuit
UnitedHealthcare (UHC) is paying for twelve months of a digital-only Peloton subscription (or four months of an all-access, hardware-based subscription) for employer-sponsored plans, roughly a $160 value. Hopefully, I won’t have chest pains on my UHC-sponsored Peloton because the insurance giant is going to start requiring members to accurately self-diagnose medical conditions before seeking emergency assistance or risk incurring massive hospital bills. While UHC said last month they are delaying their controversial ER claims denial policy, it’s astonishing they considered it to begin with and are still planning to go through with it. In other words, the supposed goodwill, preventative-care effort with Peloton is nothing more than a superficial PR stunt, and UHC is a negative sum business destroying far more value than they create. Putting aside the unsolvable problems of the US health insurance industry, it would be fantastic to see more collaboration between employers, healthcare providers, connected fitness makers, and wearables to drive better prevention and treatment of medical conditions.
Death of the Password
Okta recently released a report (PDF) on zero-trust security (a topic we’ve covered many times in the face of rising cyber threats around the world). Based on a survey of 600 global security leaders (of various sizes in various industries), 78% of companies are putting an increased priority on zero trust, with 90% working on a zero-trust initiative – more than double last year’s 41% of responders (and over 5x 2019’s 16%!). Further, 41% of the Forbes ‘Global 2000’ plan to implement more secure, passwordless access tools by the end of 2022. Most organizations are adopting a best-in-class approach by implementing and connecting various zero-trust tools from different software vendors. The biggest challenge is the availability of people to do implementations.
TSMC's Positive-Sum Playbook
On their recent earnings call, TSMC was asked why they aren't more aggressive in raising prices given their long-standing technological leadership position. Their CEO’s answer is a textbook example of what we look for in non-zero-sum (NZS) businesses – companies that partner to create more value than they take: “First, we do have a very high market share on the leading-edge technology node. But our pricing strategy is strategic, and we don't take an optimistic approach. And it's far away from you say that we try to [have] bargaining power. In fact, we work with our customers closely and we want to help them to be successful while we get a proper return. That's all I can answer for you for our pricing. And looking ahead, we continue our practice, try our best to hear our customers, to grow and we want to get the proper return. So that's why we are firming up our wafer pricing. And we are confident that we can get our gross margin about 50% or above in the long term.”
Miscellaneous Stuff
Arachnids Distinguish Animal from Mineral
Jumping spiders are able to differentiate between animate and inanimate objects, the first reported demonstration of such behavior from an invertebrate. (I imagine the ability to perceive “biological motion” could be quite widespread in animal phyla besides our own, the trick is developing assessment tests). As a household with multiple pet jumping spiders, I can vouch for their precocious perception, and we even think they can distinguish between people, seeming to know who tends to feed them more often.
AlphaFold Delivers
Researchers at DeepMind’s AlphaFold have unveiled predicted structures for 350,000 proteins, with a goal of 100M in the coming months. The structures have been deposited into a publicly accessible database. The data include structures from the proteomes of 20-some model organisms, including Homo sapiens. Indeed, AlphaFold has provided a structure for 44% of human proteins. On a “per residue” basis (each protein being composed of a string of amino acid residues), 98.5% of the human proteome is covered by the dataset, with 58% of residues having a “confident” prediction and an exceptional 36% of residues having a “highly confident” prediction. For comparison, in the Protein Data Bank (PDB), the global central repository for protein structure information, only 17% of human protein residues have experimentally determined structural data. So, for the human proteome alone, AlphaFold has essentially doubled the structural data available to researchers – and done so in a matter of years rather than the decades it has taken to seed the PDB repository with hard-earned, experimentally determined results. Importantly, AlphaFold’s dataset includes structural predictions for membrane-embedded and transmembrane proteins, which are among the most intractable classes of proteins for experimental structural determination – but include some of the most important and attractive drug targets. This treasure trove of structural insights provided by AlphaFold will no doubt prove an incredible boon for myriad research programs, including drug discovery.
Rear-View Forecasting and Inadequate Infrastructure Suffer Perfect Storms
Most stormwater drainage systems were built to handle 10-year rainstorms. However, with the increasing frequency of so-called 100- and 1,000-year storms (which seem to be the new annual/10-year storms!), the current flood management systems of some municipalities are woefully insufficient. Detroit, which was recently hit by a 1,000-year rainstorm that dumped 3.7” of rain in an hour (and suffered a near-repeat three weeks later), would need to spend $17B to overhaul its drainage network. The cost of pumps/pipes is nonlinear, so doubling the capacity costs more than double the price. The problem of flood mitigation is compounded in coastal cities, where pump outlets might become submerged with rising sea levels. And, it’s not just water that will require a ton of money – power grids need to be updated for global warming as well. PG&E is planning on spending $15-30B to bury 10,000 miles of lethal, fire-sparking power lines in drought-stricken California. That figure represents just the most at-risk 10% of the company’s total power lines, and the project is likely to take a decade or more. The tangibly imminent cost of dealing with increasingly extreme climate will be in the trillions of dollars.
Stuff about Geopolitics, Economics, and the Finance Industry
Fintech and DeFi in Spotlight
Fintech and blockchain/DeFi startups raised a record $30.8B and $4.4B, respectively, in Q2. For fintech, that’s a 30% increase from Q1 2021, and, for blockchain businesses, that’s a 50% increase from Q1 2021 and 9x from Q2 2020. These are the businesses attempting to disrupt the regulatory capture of big financial institutions that Jamie Dimon refers to as “shadow banking”; (although, Dimon did recently change his tune on Bitcoin – instead of a “fraud” that’s “worse than tulip bulbs”, it’s now apparently an attractive digital commodity that he’s enabling his wealthy clients to invest in through JP Morgan).
Humility in Decision Making
Humility is the most important trait we try to cultivate at NZS Capital. It's an important mindset for successful investing, as well as navigating all of life’s decisions. I talked more about this concept in my paper Time Travel to Make Better Decisions a few weeks ago. As we contemplate possible future states of the world, the best science we've come across for thoughtful decision making is the lens of complex adaptive systems. Coming to terms with our existence within a vastly interconnected network – that’s subject to entropy and chaotic perturbations – necessitates a healthy dose of humility. This type of thinking is at the heart of our Complexity Investing framework (the paper discusses the tension between humility and confidence on page 36). For this complex lesson on life, we owe a debt of gratitude to the humble cast of characters at the Santa Fe Institute in New Mexico. There is no better way to be humbled than to try to grasp the vastness and complexity of the Universe, our fragile existence on our pale blue dot, and how small changes can create huge ripple effects into the future. The only thing we know for sure is that we don't know anything for sure.
Another lesson we’ve learned from complex adaptive systems is that thinking biologically, e.g., with an eye to adaptability and evolution, is, more often than not, a better framework for analyzing the world around us. This provocative quote from Magic Leap founder Rony Abovitz beautifully captures the evolving biomimetic disruption of capitalism: “Every major company today (2021) is a liability to itself and in a doom loop. Tiny, hyper-agile, modular company-like things will swarm them out of existence.” 🐜🐝
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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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