SITALWeek #330
Welcome to Stuff I Thought About Last Week, a personal collection of topics on tech, innovation, science, the digital economic transition, the finance industry, torpedo fish, and whatever else made me think last week.
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In today’s post: the costly mismatch of alternative energy, storage, and fossil fuels; setting the aggression level on your robots; the stakes are rising as content companies compete for our divided attention; why most movies and shows are now dull and muffled; looking at bias in behavioral research; kids skipping college are helping the labor market; and much more below.
Stuff about Innovation and Technology
‘Terms of Service’ Bullet Points
Because no one reads terms of service before mindlessly clicking “agree”, lawmakers have introduced a bill aimed at making them short and easier to understand. The proposed legislation is, of course, called the TLDR Act. I would also propose a similar act that creates TLDR versions of Congressional acts themselves.
DRM and the Chip Shortage
Some printer ink/toner cartridges have semiconductors in them so that customers can’t buy cheaper alternatives and circumvent the razor/razorblade model that drives profits for printer purveyors. Canon has been telling customers how to work around these security measures as they ship cartridges without the chips required to authenticate them due to the semiconductor shortage. Imagine a world where printer companies spend their R&D making printers that actually work instead of security chips for consumables – it’s been 23 years since the movie Office Space hit theaters, and the grim satisfaction of the printer scene retains its relevance. There’s a broader implication here for devices that use chips for myriad reasons/applications, as ongoing semi supply issues are likely to cause stockpiling of the critical, yet inexpensive parts for years to come.
California Sours on Solar
Tesla and others are protesting a proposed new tax on home solar installations in California. The California Public Utilities Commission is looking to allow power companies to charge people with solar around $50-80 per month in fees. All new installs would need to pay the fees, and the changes would also walk back the 20-year agreements existing customers signed with utilities, reducing the term to only 15 years before customers have to start paying the new, inflated fees. The new rules would effectively penalize homeowners who install solar in California unless they plan to go entirely off grid (relying on batteries and solar for 100% of their needs), which isn’t feasible for most residents. The reality is that California has too much solar and not enough storage. We’ve covered this issue in the past, with wholesale solar rates down 37% in California since 2014. The solution shouldn’t be a draconian curbing of new solar panels, but incentivizing battery installation and usage. I wouldn’t write this off as just a California issue either. As alternative energy is increasingly implemented around the world, if it’s not accompanied by adequate storage, it will be (sometimes wildly) out of sync with demand. Exacerbating the storage problem, the fossil-fueled energy required to provide power when we actually need it is becoming more expensive (in part because of ESG hastening investment declines in traditional energy sources before the world is ready to wean off them).
Self-Driving Assertive
Tesla’s “full self-driving” beta software now has three personality choices to influence driving style: chill, average, and assertive. Assertive will perform rolling stops, follow more closely, change lanes more, and stay in the passing lane. What happens when four assertive Teslas pull up to the same intersection at the same time? I am dreaming of a world where the only option for robots, and humans, would be chill.
Going All In on Facial Recognition
US Federal agencies have signed $7M of contracts in just the last six months for various facial recognition tools with little to no oversight of how the tools can be used and what they can be used for.
Spiraling Content Meets Maxed-Out Attention
Last week, The Tonight Show Starring Jimmy Fallon did a comedy bit called “Tonight Show Polls” (where the answers are jokes), and one of the questions was: “What are you watching on Netflix?” The answer was: “10% Queer Eye, 10% Emily in Paris, and 80% My own reflection while I scroll through TikTok”. It’s funny because it’s true. I’ve been thinking lately about the ever-approaching zero-sum moment when we max out our consumption limit for the exploding menu of entertainment options. The pandemic pushed our nicotine-like phone addiction to even greater highs, to the point where I routinely see people on their phones in rather mind-boggling situations. Could we possibly spend more time watching all of the various screens around us? Until we have AR glasses that we look through every waking moment, it feels like we are getting to the point where growth in minutes spent staring at screens each day will slow. Thus, we are getting closer to that point where, in order to spend more time on social media, gaming, or streaming video, we’ll need to shift away from one to another. Multitasking has its limits.
As our attention to screens has grown, so too has the amount of money spent on streaming, gaming, and influencer/creator content that, like a siren smoking a cigarette, calls to us whenever we have a flicker of boredom. The Hollywood studios are projected to spend $115B in 2022 on video content, which becomes $140B when you add in sports broadcast rights. Disney’s spending is estimated to be up 32% y/y for 2022 and 65% from 2020. Netflix is anticipated to spend $17B this year, up 25% from last year and 57% from 2020. Video gaming is approaching a $200B/year industry, and, while I haven’t seen a good estimate of what fraction is spent on game production across mobile, desktop, and console, I would estimate a total somewhere in the $75B range. YouTube is likely paying out around $20B to content creators this year (see YouTube Rivals Studios). Then, there are payments to creators on Twitch and other social networks as well as a long tail of regional and specialty content around the world, which is easily in the tens of billions of dollars. I am sure someone with more data than me has a better guess, but I’d say that $250B in annual content costs is not a stretch by any means (and this even excludes much of the content spend in China).
Then there are the sources of revenue to pay for all this content, which include advertising, subscriptions, in-game spending, direct user support (Patreon, etc.), and subsidies from cell phone carriers. This sum of course far exceeds the amount spent on content. As we approach a potential zero-sum situation for time and attention (excluding emerging markets, which still have significant room for growth), the money spent on content keeps rising in an effort to compete for that attention. This completely contradicts my prior view that content spend could start to level off and focus on quality over quantity, a mirage that now seems far in the future as the war for attention escalates. I often say two things about myself: “I am almost always wrong,” and “I am not always right, but I am always early.” The latter phrase may still apply. In a future, lower growth scenario, content spending should level off either by design, or because there isn’t enough talent to feed the machine. What an incredible time to be an artist creating all of this amazing content. While the number of creators is said to be growing rapidly, and there are tons of talented people around the world, I can’t help but think there is a limit to the number of truly talented people, which at some point will limit the amount of quality content created. I’ve heard that Saturday Night Live creator Lorne Michaels jokes that there are only 900 truly funny people in the world. Maybe that’s true.
It’s not zero sum for revenue yet because most of these excellent entertainment choices are underpriced for the value they provide to users. (Note: shortly after I wrote this section, Netflix announced yet another price hike, and I expect many of the streaming services to follow suit.) The cost of a Netflix standard plan has risen at a compound rate of 16% per year since 2013. Advertising can continue to grow as long as it’s producing measurable results. But, even here I can’t help but wonder if we will reach a point where one entertainment platform will take ad share from another. TikTok aims to triple revenue to $12B this year – can that $8B all be incremental? There are still old forms of entertainment and media that stand to lose share of both attention and revenue; but, it does feel like it gets a bit harder, on the margin, to gain viewers going forward as our attention budgets max out. As that happens over the next decade, we will also probably approach an asymptote for advertising and subscription revenues as well, but there is perhaps still a long way to go before we get there.
Miscellaneous Stuff
Cinematic Miasma
Color correction is a strategy used in film editing to smooth over variations in scenes filmed in different locations/conditions. You can also tint a scene to be warmer, colder, duller, etc. Increasingly, these techniques are used to signal emotional shifts and guide the audience’s responses. Now, every movie and show has a digital imaging technician (DIT) focused on tones and moods created by color. Vox reports that everything is getting more colorless and sludgy in appearance, so it’s not just your imagination that practically everything you watch now is beyond depressing and completely unappetizing. One HBO Max show that is bucking the trend (that I quite enjoyed) is Station Eleven, which, despite being yet another post-apocalyptic drama, is filled with bright colors. Between desaturated visuals and muffled audio that requires subtitles, you can see why people are just picking up their phones to watch TikTok. It would be nice to see that $115B being spent on video content go toward some brighter light bulbs and vibrant colors.
Exporting Water
An article in MIT Technology Review repositions export of goods in terms of the groundwater used to create them. A cup of coffee requires 140 liters of water to grow and process the beans, while a pair of cotton pants and a shirt can take 10,000-22,000 liters. Because it can take hundreds of thousands of years for groundwater sources to replenish, the authors argue that it’s more aptly viewed as a finite resource. Based on their accounting, the US is the largest exporter of water on the planet. For example, farmers used 100B gallons of water to grow alfalfa to ship to China.
Electrotherapy
STAT has a review of the current status of the growing applications for electrical stimulation of the brain. Apparently, the practice has been around for thousands of years going back to ancient Egypt and Greece when a type of electrical ray called a torpedo fish was used to treat headaches and gout. A recent renaissance, backed by more science than holding a fish to your head, is leading to promising potential treatment for various neurological diseases and may have far reaching impacts in psychology and pain management. Deep brain stimulation devices, of the sort Neuralink and others are working on, may also help gather more data that could lead to more applications for the electrical treatments.
Stuff about Geopolitics, Economics, and the Finance Industry
Aging Out
Japan had a record-low crop of kids who turned 20 last year. Overall, the country has one of the most severely aging populations among developed regions. Japan’s overall population peaked in 2008 at 128M and now stands at 126.6M. The FT reports: “The fall-off in 20-year-olds has reduced the country’s ‘new adult’ cohort to just 0.96 per cent and cast a shadow over Monday’s ‘Coming of Age Day’. The national holiday is marked by ceremonies to welcome the 20-year-olds to the joys and responsibilities of adulthood.” The FT also reports that the natural population of the UK is set to start declining in 2025.
High School to Minimum Wage
Undergrad college enrollment in the US has dropped from 16.6M in 2015 to 14.4M in 2021. After 2020’s 3% decline, there was hope some kids would return to school after taking a gap year, but, alas, 2021 is down another 3%. This trend is fueled by both demographics (declining birth rates in the early 2000s) and an immigration drop off, but there is clearly also a structural shift taking place, especially as wages rise and jobs are available. We’ve covered this trend and the lack of hope it might portent back in Giving Up on the Old College Try. The good news for the economy is fewer workplace vacancies as kids trade books for paying jobs. If we see a reversal of hope and more kids opting for four-year degrees, it would greatly exacerbate the already challenging entry-level workforce situation in the US.
Bias in Behavioral Research
Economist Jason Collins writes about the ongoing replication problems in behavioral science research. In this instance, the debunked concept is that getting someone to sign a form at the top, rather than the bottom, causes them to be more honest in their answers. And, despite retraction of the original paper, the bias persists. Unfortunately, this replication failure is hardly an isolated event. Collins writes: “To put it another way, the default position should not be to take all published results in the behavioural science literature as ‘the record’. Instead, we should be treating many of these published results as exploratory or as untested hypotheses. Start from a position near ‘unlikely to be true’, and update to a stronger belief in the presence of replications or other supporting evidence.” I would add that it’s important to be especially cautious of the popular science authors that take a behavioral science paper and turn it into a long bias-filled book. Collins commentary is a good reminder that, even when we have good intentions, we often can’t get around our own bias in formulating hypotheses and experiments, something that is becoming more and more important to recognize as human-designed algorithms take more control of the world (see also: Algorithmic Threat to Illusion of Free Will). My personal bias is choosing to write about bias whenever I see someone else point it out.
✌️-Brad
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