SITALWeek #423
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.
Click HERE to SIGN UP for SITALWeek’s Sunday Email.
In today’s post: are EVs a bad deal? If you haven't tried boxing in VR, I highly recommend it and, you don't need to spend $3,500 to do it; a Disney Imagineer creates a floor for the holodeck and VR; I journey to the weird world of talismans and 1980's kids programming and contrast it with today's algorithmic cookie cutter content; the JWST is causing us to rethink cosmological theories; immigration is roaring back in the US, and that's a good indicator for the economy.
Stuff about Innovation and Technology
EV Chill
Car rental firm Hertz made headlines recently when it declared it was shedding 20,000 Teslas after disappointing results following their 2021 purchase contract (which was for a planned 100,000 vehicles). While some of Hertz’s issues won’t apply to the average consumer, it is worth looking at the problems and costs they’ve experienced. Many of Hertz’s EVs were purchased for use by Uber drivers; however, the high utilization/mileage of rideshare vehicles caused elevated wear and tear as well as an increase in minor collisions, which are more expensive to repair for a Tesla than the average rental car. EVs also have higher purchase prices and higher depreciation (losing 49% of their value after five years vs. 39% for gasoline cars). The higher costs to purchase and repair also inflate insurance rates. The incremental 10% depreciation on a ~$40,000 car would likely require Hertz to expense an extra $800/year. I suspect the increased depreciation is due to a belief that battery packs lose value faster than gasoline engines, but I think that fear is largely overblown, making used EVs a relative bargain. For a typical consumer, these higher costs are in part offset by lower maintenance; but, for a high utilization owner like Hertz, the costs appear to exceed the benefits. When Hertz moved some Teslas from the rideshare to the consumer rental fleet, many consumers didn’t want the extra hassle of dealing with charging on a vacation or business trip. As a result, Hertz is now de-emphasizing EVs. Uber, for their part, is still focused on their carbon footprint and electrifying the cars their drivers use for ridesharing with $2,000 purchase incentives and a partnership with Tesla to map out better Supercharger locations.
The recent cold weather also made headlines and headaches for EV drivers, with many finding that their vehicles wouldn't even charge in subzero weather. Part of that is simply an element of preparedness; just like it makes sense to have gas or emergency provisions, EV owners should charge up ahead of storms (and/or make sure they have a battery warmer). However, all of these problems underpin the leveling off of growth in EVs in the US, which has some unique driving demands (e.g., more rural mileage, scarcity of chargers, etc.) relative to other areas of the world. I have long held that the far superior path to greening up our mileage is to mandate that every car have a small hybrid battery pack that would go 20-30 miles. Such a requirement would likely result in well over 50% of miles driven being powered by electricity vs. gasoline. PHEVs (plug-in hybrid electric vehicles) also extend the longevity of the car given the relatively low miles that get driven on the gas engines. We’ve had a PHEV vehicle for almost six years, and over 60% of its ~60,000 miles have been battery powered, despite having a range of only 30 miles. If we shifted focus from long-range to short-range capabilities, we should be able to power more than half the accrued miles with electricity with only modest battery capacity additions (~1/10th that of long-range EVs). Once we’ve tackled the majority of miles driven with short-range batteries, hopefully technological advances and cost declines would then allow for a complete shift to electric, assuming that's still the leading tech in the future. An interesting concept is the 2025 Ramcharger truck, which features a relatively small 92KWh battery pack (~100-mile range) with a 130KW gas-powered generator. Thus, rather than needing separate gas and electric drivetrains, the truck’s single electric motor is powered on the fly by the generator once its range is expended.
VR Boxing Match
One of my favorite recent experiences is the Supernatural boxing/fitness app on the Meta Quest 3. I’ve been a bit too skeptical about full VR headsets (and I still stand by my view that AR glasses will win out over passthrough VR goggles in time); so, I forced myself to use the Quest 3 daily for several weeks. I ended up liking the workout apps the most. Now that I’ve said something nice about the $500 Meta goggles, I think I can express a bit of skepticism, bordering on cynicism, over Apple’s $3500 Vision Pro. The Quest already has a healthy app developer ecosystem, whereas many of the top-ten apps on iOS are so far choosing to shun Apple’s VR hardware (perhaps in retaliation for Apple charging app developers exorbitant tariffs for decades!). This feels less like an iPhone vs Blackberry moment (when nearly everyone failed to see the astronomical value in a platform shift to multi-touch screens), and more like a McLaren vs a Toyota Camry, i.e., both are going to get you to the same place in roughly the same amount of time, but one offers far more value. In other words, a fancier and more expensive set of goggles may have little impact on your VR experience. While it’s early days for VR, my experiment with the Quest has greatly increased my optimism around the potential for VR and AR (and I was already quite optimistic about mixed reality). I also agree with Zuckerberg that the big leap in AR/VR is going to be powered by AI-created virtual worlds. The next thing I want to purchase to go along with my Quest is this very cool HoloTile floor created by a Disney Imagineer.
Miscellaneous Stuff
Long Lost Original Content
I read with some intrigue this article from a BI reporter that used ChatGPT to track down an old TV show from their childhood with only vague imagery of a “surreal scene where a massive toddler watched the miniature cast run around.” Who among us hasn’t tried to figure out “what was that movie where the kid put peanut butter on his head and his hair wouldn’t stop growing?” I had my own mystery show from the 1980s. It revolved around a bizarre post-apocalyptic world with spacey music, dark imagery, and the Dewey Decimal System. While the weirdness of the show and the haunting theme song are what stuck with me, I also had a vague memory that it was intended to teach elementary school children how to use the library. It’s been years since my last unsuccessful attempt to identify the show, so I too set out on an LLM-assisted quest. I worked with Bard (which I still much prefer to ChatGPT for these types of queries) and quickly discovered the 13-episode Tomes and Talismans series, which was created in 1986 by the Mississippi Public Broadcasting network. In 2020, the MPB posted the episodes online, and, in December of last year, they made them permanently available to viewers. While I remember very little of the plots/characters, the theme song was a positive match and confirmed that Bard had identified the correct show (I have yet to track down the composer). Here is a description of the show from MPB: “Atmospheric pollution and overpopulation were serious concerns on Earth by the end of the 21st century. Human movement was severely limited. The Wiper colonization of 2103 could not be stopped. This primitive species from the Dark Star solar system found Earth perfect for their favorite pastime: the disruption of all communication and data technology. The spread of Wipers and pollution increased the need for the scientific search for solutions. In 2117, the world-wide government voted for the gradual evacuation of all Earthlings to the White Crystal solar system. This report was completed in 2123 during our final days on Earth. We leave it for those who may return here in a storage vault for human learning...the last Earth library.” Frankly, that synopsis does not even begin to describe the strangeness of the series. MPB has created a page with lots of T&T content, and the episodes are also all on YouTube. If there is one takeaway from all of this, it’s that 1980s children’s programming was so wild and original that it haunts many of us decades later. It’s hard to imagine the algorithms that dictate whether pink pigs, baby sharks, or floating toilet heads are offered up as entertainment fodder could fish out, from today’s infinite sea of ephemeral content, anything as memorable as Tomes and Talismans, disincentivizing artists from creating anything with more than five minutes of staying power. It’s with some irony that I note the series was resurrected in late 2020 in no small part due to a post on YouTube from a vlogger that reminded many Gen X’ers of the series’ existence.
Cosmic Megastructures
The scientific method was a phenomenal advance, allowing us to come up with an idea, test it, and either reaffirm or change our mind based on the evidence. Observational results from space are giving us an opportunity to come up with new theories to test as old ones are disproven. The JWST has surfaced data – such as spotting more mature galaxies far earlier in the history of the Universe than expected – that upend several cosmological theories about the origin and evolution of the Universe. Further, data from the Sloan Digital Sky Survey recently revealed an unexpectedly large ring structure spanning 1.3B light years. Current theories would not have predicted the existence of such a structure, which encompasses over 1% of the known Universe. The so-called Big Ring is in the same neighborhood as the even larger Giant Arc (3.3B light years across) discovered in 2021. PhD student Alexia Lopez, who led the discoveries/analysis, commented: “These oddities keep getting swept under the rug, but the more we find, we’re going to have to come face-to-face with the fact that maybe our standard model needs rethinking. As a minimum it’s incomplete. As a maximum we need a completely new theorem of cosmology.”
Stuff About Demographics, the Economy, and Investing
Immigration Offset
According to Chinese official stats, there were 850,000 fewer births than deaths last year, suggesting that the population of the world’s second largest country is now in structural decline. The NYT covers failed attempts by other countries to boost birth rates by offering financial incentives and benefits like extended parental leave. In general, it appears such efforts, at best, pull in some births that people had already planned, resulting in a boom/bust cycle of births. As the world’s population ages and the elderly come to outnumber the youth, we are likely to experience demographically driven economic changes in the near future. I contemplated some of these in Jobless Economic Growth? a few weeks ago. Another topic worth thinking about is the wealth runoff of aging savers. Many boomer-aged folks are shifting to living off their retirement savings, possibly causing a steady selling of assets for income. And, we also know discretionary spending peaks when people are in their mid-50s and then starts to decline (this peak also tends to be for families, whereas people are now having fewer kids to spend money on). This combination of factors could create a demographic and spending headwind that countries should be vying to offset. As I’ve argued for several years, immigration remains GDP-growth’s best friend for developed nations, and policies that promote immigration should be a primary focus for any country looking to survive. Research from JBREC highlights the return of US immigration to pre-COVID levels, which is setting up the country for one of the better economic outlooks on a relative basis compared to other developed nations.
✌️-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.
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.