SITALWeek #342
Welcome to Stuff I Thought About Last Week, a personal collection of topics on tech, innovation, science, the digital economic transition, the finance industry, talking fowl, and whatever else made me think last week.
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In today’s post: the importance of comedy as a weapon against tragedy; compounding innovation at Amazon; new collar workers; it's time to shut down Internet advertising data brokers; AI brings lost movies back to life; investors are as bearish as ever on growth; and, much more below...
Stuff about Innovation and Technology
Compounding Innovation
From Amazon’s latest annual letter, the first written by new CEO Andy Jassy: Amazon has spent over $100B in cumulative distribution and fulfillment capex; the average time to process and load an order onto a truck is down to two hours; over the last 24 months they doubled capacity that originally took decades to build (I wrote more about the difficult challenge of innovating on hard problems in Amazon and Tesla: Strangers in a Strange Land). Jassy also discussed the compounding advantage of iterative innovation (and other mechanisms) the company believes have been key to its success in delighting customers: "Albert Einstein is sometimes credited with describing compound interest as the eighth wonder of the world ('He who understands it, earns it. He who doesn’t, pays it'). We think of iterative innovation in much the same way. Iterative innovation creates magic for customers. Constantly inventing and improving products for customers has a compounding effect on the customer experience, and in turn on a business’s prospects. Time is your friend when you are compounding gains."
"New Collar" Workers
According to a world-wide survey of 80,000 workers, around 1/10th of people working low-skill, hourly jobs switched to higher-paid technology jobs. Companies such as Okta are no longer requiring college degrees, and many companies are willing to train new hires on the job in the tight labor market. The WSJ refers to this shifting labor trend as “new collar”.
Surveillance Capitalism’s No Joke
Last Week Tonight comedy news show host John Oliver used data brokers to target members of congress under the (largely comical) threat of exposing their online behavior. While the report was funny, it’s past time to end all targeting that uses anything but user-opted-in, first-party data (see Ad Dollars Chasing Consumers). The entire negative-sum 3rd-party data broker industry should be regulated out of existence.
AI Reviving Vintage Content
Just in time for Easter, David Lynch comments on the technology used to recently remaster rabbit-heavy Inland Empire: “time passes and now there’s this thing with AI, where the computer looks at it with a new kind of intelligence, and it can make a silk purse out of a sow’s ear. It is incredible. And it’s just the beginning, it’s just the beginning. So it doesn’t really matter in a strange way what you start with. In the future, the manipulation you can do will be incredible.” In another interview, Lynch said of the technology: “A short time ago we went back into ‘The Elephant Man’ for Blu-ray and it was absolutely amazing, what was hiding in those little 35mm frames that we never saw before that can be brought out now with Dolby Vision and other technologies. You have to be careful — you can bring out too much and ruin the mood. But if you’re careful, you can bring out things you never saw that make it that much more beautiful.” And, Lynch is now even open to revisiting the vault to try and fix his biggest personal career disappointment: Dune. Some restorations I appreciate (others, not so much), but this process of bringing films back from the dead is adding even more to the pile of abundant content. And, with the barriers coming down to create even more immersive content at a rapid pace with tools like Epic’s Unreal Engine (Epic recently raised an arsenal of cash from Sony and the family that controls Lego), where will I find the time to watch it all?
Miscellaneous Stuff
When Laughter Dies
Gilbert Gottfried passed away last week from a heart condition. Gilbert was my hero because he used comedy as a weapon against tragedy. Gottfried was known as a comedian’s comedian because, while still broadly appealing, he also elevated the craft of comedy to a level that brought admiration from the field’s greatest talents. Gottfried could improvise on a joke, like a jazz musician improvising on a song, for a very, very long time. His joke-telling style was the inspiration for the 2005 documentary The Aristocrats, a NSFW movie that lived underground for many years, but recently surfaced on streaming. One of the reasons it's particularly upsetting to lose comics like Gilbert, Bob Saget, and Louie Anderson is that, increasingly, we’re not allowed to be funny. We are now shunned (or attacked) for using humor as a weapon against the terrible tragedy of trying to make it through one more day as a human in the twenty-first century. Gilbert was one of the last comics who would unabashedly use comedy as a weapon against human tragedy. If you can joke about something unspeakable, then you've taken some amount of control back from that negative force. When jokes beget violence or “canceling” instead of comic relief, the depressing reality of tragedy takes the place of hope. (Note: I don’t think anyone should be canceled for things they say, but I also think humor should come from a place of love, as I wrote about in Laughter is the Best Medicine). Gilbert was one of the first people I remember being canceled way back in 2011. Gilbert made me laugh, and I will miss it dearly if society is too afraid to ever laugh again. Gilbert was the special kind of nut that is willing to stick to a character for decades without breaking. You can learn more about him in the 2017 documentary Gilbert, which is currently available on Peacock.
Say What? Remedy
Biotech startup Frequency Therapeutics stimulates the re-growth of inner ear hairs – crucial to hearing and differentiating sounds – by injecting small molecules that reprogram dormant progenitor cells. “In Frequency’s first clinical study, the company saw statistically significant improvements in speech perception in some participants after a single injection, with some responses lasting nearly two years.” Drugs targeting progenitor cells may have broader applications, including re-myelination of neurons to treat MS.
Analemma
Last week, I learned that if you take a picture of the sun from the same point of view at the same time every day, it paints an infinity sign in the sky, known as the analemma. The primary driver is the elliptical orbit of the Earth around the Sun. This 2015 video does a nice job explaining the shape.
Stuff about Geopolitics, Economics, and the Finance Industry
Darkness Before the Dawn
Fund managers set a new record for bearishness regarding global growth prospects in the latest Bank of America poll. Current sentiment is more pessimistic than it was in October 2008, when the market crashed shortly after the Lehman collapse. The market bounced along the bottom for a few months before beginning its longest bull streak starting in June of 2009. Of course, not all stocks recovered in the aftermath of the financial crisis, with some continuing to plummet. If you’re worried about the future, my advice is: you shouldn't worry about things that you can’t predict; instead, develop a framework that has the best chance of success with the fewest number of predictions. For us, that means balancing Resilience and Optionality while focusing on adaptable companies maximizing non-zero-sum outcomes (see also Redefining Margin of Safety).
“Structural Stupidity”
Professor Jonathan Haidt’s essay in The Atlantic Why the Past 10 Years of American Life Have Been Uniquely Stupid adopts the lens of non-zero outcomes (citing Wright’s excellent book Nonzero: The Logic of Human Destiny) to show the negative impact of social networks (as a side note, we have not owned Meta at NZS Capital because we view the overall business as negative sum). Everyone now knows social networks are negative sum, eliciting our worst behavior to garner the most likes and shares, so we don’t necessarily need yet another take on that, but I did appreciate several points in the article. Haidt notes that “Social scientists have identified at least three major forces that collectively bind together successful democracies: social capital (extensive social networks with high levels of trust), strong institutions, and shared stories. Social media has weakened all three.” Another problem he points out is the performative nature of social media (something I too have lamented as we head toward a world where everyone’s a creator and no one is left to consume). Everyone is more concerned with performing rather than making real, honest connections, insidiously undermining trust at every level. Another interesting observation concerns the speed of outrage on social media: “It was just this kind of twitchy and explosive spread of anger that James Madison had tried to protect us from as he was drafting the U.S. Constitution. The Framers of the Constitution were excellent social psychologists. They knew that democracy had an Achilles’ heel because it depended on the collective judgment of the people, and democratic communities are subject to ‘the turbulency and weakness of unruly passions.’ The key to designing a sustainable republic, therefore, was to build in mechanisms to slow things down, cool passions, require compromise, and give leaders some insulation from the mania of the moment while still holding them accountable to the people periodically, on Election Day.” The thrust of Haidt’s argument is the ongoing erosion of trust is fracturing society at every level. I continue to believe the biggest challenge we face as a civilization is inspiring leaders that are willing to stand above the noise of performative behavior and truly lead us in the right direction of non-zero-sum cooperation and shared prosperity. As I look across politics, religion, and business, I don’t see such leaders today with large followings, but as we know from history, they can show up at any time to inspire us.
✌️-Brad
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 an informal gathering of topics I’ve recently read and thought about. I will sometimes state things in the newsletter that contradict my own views in order to provoke debate. Often I try to make jokes, and they aren’t very funny – sorry.
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