SITALWeek #412
Welcome to Stuff I Thought About Last Week, a personal collection of topics on tech, innovation, science, the digital economic transition, the finance industry, and whatever else made me think last week.
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In today’s post: Twinkies' past and Pringles' future; Walmart sees grocery impact from GLP-1s; nuclear hydrogen generation and nuclear-powered data centers; data software enabling price collusion; smart audio glasses; extra spirals and counterfeit people.
Stuff about Innovation and Technology
Diet Drugs Dampening Snack Spend
A little over twenty years ago, I covered Interstate Bakeries Corporation (IBC), which owned and produced various brands like Hostess (purveyor of such goodies as Twinkies and CupCakes) and Wonder Bread. In 2004, IBC filed for bankruptcy. How could the maker of such deliciously iconic American fare go under? While all bankruptcies are complex, chief among the cited reasons for IBC’s collapse was the low-carb diet craze, at the time symbolized by the Atkins Diet, which emphasized protein and fat over sugar and carbs (thus rendering Snoballs, HoHos, and Zingers pastries non grata). My time-addled recollection is that we exited the position in mid-2002 while the going was still good, and the company began a slow decline in late 2002 that resulted in bankruptcy. There was a risk factor in the IBC annual report back then that read: “The Company’s success depends in part on its ability to anticipate the tastes and dietary habits of consumers and to offer products that appeal to their preferences. Consumer preferences change, and the Company’s failure to anticipate, identify or react to these changes could result in reduced demand for its products, which could in turn cause its financial and operating results to suffer.” How true. IBC subsequently reformed, went bankrupt again in 2012, and, after reconstituting yet again and going public in 2015 (under the ticker TWNK), has posted annualized returns of 16.9% compared to only 11.7% for the S&P 500. All of that outperformance has taken place in the last few months as a result of a proposed acquisition by the J.M. Smucker Company. In an echo of the Atkins-era snack food victims, the CEO of Kellogg’s spinout Kellanova (maker of Pringles, Cheez-its, Rice Krispies Treats, etc.) told Bloomberg that he is keeping a close eye on developments with the GLP-1 weight loss drugs and is prepared to “mitigate”, if necessary, the company’s snack food strategy. This sounds like the brewing war between the food industry and the health industry that I identified back in #393: “I expect the snacking and fast food industries will ramp up marketing, caloric density, and the preposterousness of tempting fare, like fried chicken sandwiches on donut buns or pretzel chimney cakes, in their ongoing bid to trick our brain into prompting us to inhale excess calories. It will indeed be a war waged between sugar, salt, fat, and GLP-1s.”
Meanwhile, the CEO of Walmart’s US operations recently told Bloomberg that customers taking GLP-1 weight-loss drugs appear to be spending slightly less on groceries. This trend, of course, is not unexpected given that people on a GLP-1 regimen consume fewer calories. However, I am surprised to see a widespread impact reported by the nation’s top retailer so early in adoption, given that GLP-1s have yet to obtain general insurance coverage. Back in January, when I wrote The Impact of Eating Less on Food Supply Chains and Healthcare, I imagined a world where more GLP-1 usage unwinds several elements of the economy. We’re used to economic growth and positive compounding, and rarely do we come across the potential for a large portion of GDP to compound in the negative direction. Healthcare is almost 20% of US GDP, so if, say, one-third of that were to disappear over the next decade, it would create a ~0.6%/yr headwind, ceteris paribus. And, as we’ve learned over the last couple of years, GLP-1s don’t just reduce food cravings, they potentially impact a broad swath of addictive activities, from gambling to drinking to doomscrolling on your iPhone. There are significant downstream impacts to consider from broad GLP-1 adoption as well. For example, think of all the food-related ads you see throughout the day. If we need less corn syrup, we might need fewer tractors. It would be intriguing if medical advances could take us back to a period when more people were healthy (like what existed before the modern advertising industry took hold). However, the biggest antagonist to sustainable GLP-1 usage is the human aversion to apathy. This is a topic I discussed in #399, and it’s worth factoring in when considering the potential range of outcomes. Manipulation of food intake and desires of complex adaptive organisms living within a complex adaptive system is bound to have unexpected outcomes – it’s certainly intriguing to let your imagination run wild. As for Walmart, they are more than making up for the slight declines in food consumption by selling the expensive GLP-1 weight-loss drugs through their pharmacies.
Pink Hydrogen and Clouds
A few stories on nuclear energy caught my eye last week. I was familiar with green hydrogen, which is generated by water-splitting electrolyzers powered by renewable energy, and gray hydrogen, which relies on fossil fuels like natural gas, but I was less familiar with “pink” hydrogen. The latter is produced using nuclear energy to power electrolyzers. The basic idea is that nuclear plants run 24/7 and can store energy (e.g., by pumping water up to a reservoir) whenever demand lessens. Using excess nuclear energy to make hydrogen (instead of mechanically storing it) might make sense according to Jigar Shah, the director of the Loan Programs Office of the U.S. Department of Energy. (It turns out there is also “turquoise” hydrogen, which derives from splitting methane into hydrogen and solid carbon.) Another area where nuclear energy is making headlines is powering cloud data centers. As I discussed two weeks ago, in AI’s Energy Roller Coaster, AI is causing energy usage to jump at major cloud providers. Microsoft is reportedly looking at small modular reactors (SMRs), a technology that both Bill Gates and Sam Altman (head of Microsoft’s partner OpenAI) have been investing in for years, to power data centers. And, The Information reports that cloud computing companies have considered buying land next to nuclear power plants for building data centers. Meanwhile, Standard Power is developing two SMR-powered data center sites in Ohio and Pennsylvania.
Plotting Poultry Pricing
The Justice Department is suing Agri Stats, a provider of pricing data to meat producers. The accusation, which may not bear out, is that nonpublic data about competitors’ supply (like the number of chicks hatched) were used by companies to raise prices without risking market share losses. I suspect that silent price collusion from data sharing, masked by “neutral” third-party software providers, is a far wider issue in the economy, and made worse by the decades of consolidation we’ve seen across industries. It’s great for corporate margins, but it’s a win-lose for the economy long term. As we’ve seen in other instances, this type of data usage could spiral out of control and will become more impactful when data are directly feeding AI models that are making decisions with less human oversight.
AI Shades
Last week, I wrote about the power of giving ChatGPT a sense of sight and hearing and it’s potential to disrupt the cell phone market:
The phone market is wide open for disruption as we move from multitouch to a chat-based AI interface. Google is well positioned with its LLM efforts, but Apple could be vulnerable. The phone itself needs to become more aware 24/7 with vision and audio, and it will need to interface with AR glasses and provide more onboard processing. I highlighted this potential disruption in Discovery Engines back in April, and, last week, news broke that OpenAI’s Sam Altman and former iPhone designer Jony Ive are potentially working on an “iPhone of artificial intelligence”. Status quo will be hard to disrupt; but, for the first time in well over a decade, there is a major UI transition opening a path for disruption.
While we are waiting for a new LLM-based smartphone, there appears to be a new platform that will bridge the gap between today’s phones and tomorrow’s AR glasses. Smart audio glasses are soon to be powered by AI, allowing an LLM to see what you see and have a conversation with you. Meta unveiled a new version of their smart Ray-Ban sunglasses at their user conference a couple of weeks ago, and other startups are working on the devices, which will likely sell in the range of $300 and be tethered to your iPhone or Android devices.
Miscellaneous Stuff
Stability in the Young Universe
The James Webb Space Telescope has found many more Milky-Way-like spiral galaxies far earlier in the history of the known universe than we expected. The theory is that spiral galaxies (which resemble massive, warped disks) would likely have been blown apart or distorted by one or more of their many neighboring galaxies in the dense, early universe. That such large, structured galaxies were (relatively) numerous early on (only 1-5 billion years after the Big Bang vs. the predicted 6 billion) calls into question some key assumptions about galactic evolution. It’s thought that our own Milky Way formed out of a collision of galaxies around ten billion years ago, which then took another few billion years to reshape into its current form. Within the Milky Way, our solar system formed around 4.5 billion years ago (when the universe was ~9.3 billion years old). With ten times more spirals than expected in the nascent universe, it raises the question of whether conditions for life (i.e., a lack of cataclysmic violence and stable, element-rich planets) were also present much earlier than anticipated. Could it be that as early as 10 billion years ago the conditions were right for life to begin that four-billion-year trek from primordial ooze to iPhone user?
Digital Synanthropes
Philosopher Daniel Dennett discussed AI in a recent interview about his new memoir. Dennett is primarily focused on the loss of trust resulting from AI chatbots and the way in which evolution will factor into LLM progression:
AI systems, like all software, are replicable with high fidelity and unbelievably fast mutations. If you have high fidelity replication and mutations, then you have evolution, and evolution can get out of hand, as it has in the past many times.
Darwin wonderfully pointed out that the key to domestication is control of reproduction. There are species that hang around human houses and farms that are synanthropic. They evolved to live well with human beings, but we don’t control their replication. Bedbugs, rats, mice, pigeons—those are synanthropic, but not domesticated.
Feral species are ones that were domesticated and then go feral. They don’t have our interests at heart at all, and they can be extremely destructive—think of feral pigs in various parts of the world.
Feral synanthropic software has arrived—today, not next week, not in 10 years. It’s here now. And if we don’t act swiftly and take some fairly dramatic steps to curtail it, we’re toast.
We will have created the viruses—the mind viruses, the large-scale memes—that will destroy civilization by destroying trust and by destroying testimony and evidence. We won’t know what to trust.
Writing in more detail about the survival of the fittest “counterfeit people” earlier this year in the Atlantic, Dennett noted:
Counterfeit people, by distracting and confusing us and by exploiting our most irresistible fears and anxieties, will lead us into temptation and, from there, into acquiescing to our own subjugation. The counterfeit people will talk us into adopting policies and convictions that will make us vulnerable to still more manipulation. Or we will simply turn off our attention and become passive and ignorant pawns. This is a terrifying prospect...
Counterfeit people are already beginning to manipulate us into midwiving their progeny. They will learn from one another, and those that are the smartest, the fittest, will not just survive; they will multiply. The population explosion of brooms in The Sorcerer’s Apprentice has begun, and we had better hope there is a non-magical way of shutting it down.
✌️-Brad
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