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: soil-based power networks; AlphaFold 3; an AI avatar explosion; the evolution of standup; ubiquitous YouTube; healthcare and housing are stifling discretionary spending compared to 30 years ago; how to overcome befuddlement; and, much more below.

Stuff about Innovation and Technology
Soil Power
Researchers at Tennessee Technical University are able to power sensors throughout a field by transmitting power through the soil, or “TTS” as they call it. A solar-powered transmitter broadcasts current underground, which charges nearby sensors. The sensors, in turn, can communicate back data, such as soil moisture levels. The system overcomes the difficulty of powering remote devices in terrain that is constantly being tilled and replanted. So far, researchers have demonstrated proof-of-concept with a 2-acre plot, and they hope to scale up to 30 acres. Alternatively, farmers could use genetically engineered plants that emit a fluorescent signal when they are in distress. The calls for help can be detected by sensors attached to drones/tractors so farmers can treat the problem (e.g., fungal infection, nitrogen deficiency, moisture issues, etc.) before it affects the entire crop. This tech, being developed by InnerPlant, is in field trials with soybeans. I live near a lot of agtech test areas, and I recently saw an octocopter drone autonomously zipping through a field of strawberries spraying some sort of liquid (likely weed killer or fertilizer) in a precision manner at fairly high speeds. Agtech overall has been slow to have a major impact (beyond the obvious genetic modification of seeds that has been going on for decades). It’s difficult to guess what might cause an inflection point that would increase the uptake in tech broadly for the sector. 
 
Biotech Boom?
The head of Google’s DeepMind, Demis Hassabis, told Bloomberg that he sees the company’s efforts in biotech becoming a $100B business. The comments come on the heels of the launch of AlphaFold 3, which can now model proteins, DNA, and RNA – and predict how they will interact with various small molecules. AlphaFold 3 differs from prior versions in that it used generative AI training methodology. DeepMind’s biotech company, Isomorphic Labs, which works with major pharma companies to develop new drugs, posted this overview of AlphaFold 3. 
 
rAIsing the Dead
AI avatars of deceased relatives are gaining popularity in China, according to MIT Technology Review: “In Chinese homes, it’s common to put up a portrait of a deceased relative for a few years after the death. Zhang Zewei, founder of a Shanghai-based company called Super Brain, says he and his team wanted to revamp that tradition with an ‘AI photo frame’. They create avatars of deceased loved ones that are pre-loaded onto an Android tablet, which looks like a photo frame when standing up. Clients can choose a moving image that speaks words drawn from an offline database or from an LLM.” The avatars currently cost around $1,000, but a phone-based version is in the works that could cost closer to $140, according to Zhang’s company. The rise of open-source LLMs, a competitive market for AI avatars, and a growing record of people’s personalities from social posts, emails, texts, etc. could make such avatars of the deceased readily available for the masses. I tend to dislike the overuse of the famous line from The Tempest:, “O brave new world that has such [dead] people in it”, but it does seem appropriate here. In another surreal example of AI avatars, the founder of dating app Bumble, Whitney Wolfe Herd, recently suggested your AI representative can go on dates with other people’s AI reps to see how you hit it off before engaging in real life. Meanwhile, the WSJ reports on the growing number of professional fashion models hanging up their outfits and fully licensing their AI avatars. I think we will be surprised by the ease with which people will be willing to clone themselves for a wide variety of use cases. I wonder how long before we’ll be able to make AI clones of our pets?

Miscellaneous Stuff
CoMEdy
Live standup comedy has nearly doubled its US ticket sales, going from $475M in 2019 to just over $900M in 2023. Bloomberg attributes much of the surge in popularity to Netflix prioritizing the art form (as does Seinfeld in this podcast clip, which is part of a longer conversation that contains a lot of commentary on the evolution of standup). Netflix may have taken US standup global, but they, of course, didn’t invent the televised standup comedy special. Indeed, the origins can be traced back to Robert Klein’s HBO series that began in 1975. But, perhaps the ubiquity of Netflix, the pandemic’s streaming surge, and the endless drone of comedy podcasts have all combined to elevate our collective awareness of comedians. Long-time readers will know that I’m a big standup fan, but I have to admit I am not as much in love with the art in its current form. Standup comedy has become more personal and less observational. Before Lenny Bruce and George Carlin, a lot of standup was the equivalent of knock-knock jokes and one-liners. Slowly, it became a more introspective medium. That trend has gone extreme over the last few years, and, now, perhaps because of cancel culture, comedians seem overwhelmingly fixated on joking exclusively about their own lives. While there are of course many exceptions, a lot of the most popular “standup” today is in the form of self-roasting or something that feels more like a one-person show. I find myself tuning out/turning off these personal narratives masquerading as standup comedy, but I appreciate that all art changes with the times. So it goes. For me, what’s missing is the editing – just give me the funny, as Seinfeld says, I don’t need the self-loathing and personal drama. 
 
YouniversalTube
Howard Stern did an excellent interview with Biden a couple weeks ago, and Sirius recently put it up on YouTube for non-subscribers. Stern remains one of the best living interviewers, and I always enjoy his long-form conversations. In a sea of a zillion podcasters, very few of them get the basics right about what makes a good interview: do your research, disarm the guest, and keep the focus on them, not you. I think this is even more important for maintaining relevance as podcasts go video, as YouTube (14B videos!) is fast becoming a hub for this evolved version of the medium. The NYT reported on this video podcast transition. It seems increasingly inevitable that YouTube will be the ultimate hub for videos of all types, including Hollywood content. According to Nielsen 150M people a month are watching over one billion hours of YouTube a day on television sets in the US, which puts YouTube at 9% of total viewing head of Netflix's 8% share in the living room. I think traditional media is beginning to realize which way the wind is blowing, and we can expect to see more and more content from the streaming apps co-located on YouTube. YouTube remains a great non-zero-sum model for creators and consumers, and the Hollywood Reporter has a story on just how big productions are getting for the video app. See also my piece titled Ambient YouTube for more.

Stuff About Demographics, the Economy, and Investing
“The Smartest People in the Room”
Congrats to Ben and David on an excellent WSJ profile of their deep-diving, business-focused Acquired podcast. At NZS we of course have our two favorite episodes (here and here)  ;-)
 
It’s Not the Avocado Toast
In the US, the peak bolus of Millennial births started in 1989 and went on for a few years. BI has an interesting look at how folks aged 25-34 spent money in 1989 compared to how that cohort of Millennials is spending money today. Using BLS data (inflation adjusted to 2022 dollars) some interesting trends emerge on this three-decade time horizon. Overall, annual spending is up 8% to around $68K. What stands out most is how spending in many categories – such as apparel, entertainment, and even food – has dropped vs. 1989, thanks likely to technology, productivity, and globalization. A few categories have been the clear spending gainers, most notably health care and housing. Housing alone accounted for 66% of the net increase in spending, and adding in healthcare gets you to 95% of the net increase. Meanwhile, alcohol and tobacco spending declined dramatically. Surprisingly, despite recent inflation in food prices, overall food spend declined – largely driven by drops in dairy and meat pricing/consumption. What emerges is a clear picture of how the megatrends of globalization and productivity drove down spending, only to be more than offset by the hyperinflationary choke points of healthcare and apartment rentals/homeownership.
 
Market Paradox
I was reading this WSJ article about how the complex impact of GLP-1s is “befuddling” investors: just when you think some company is a victim of GLP-1 usage, you get proven wrong because they sign a partnership or find some other path to survival. This led me to contemplate one of the biggest paradoxes of the stock market. For most publicly traded companies, there are far more ways to live than die, more ways to grow than shrink, more ways to survive/adapt than stagnate. Even failing companies are often saved through M&A. Indeed, vanishingly few companies actually go away permanently; rather, they live on as some appendage of another company or slowly lose their market value. However, if you are an investor in those same companies, there are far more ways to lose than win versus a broad index. Therein lies the paradox: how could the positive trajectory of most publicly traded companies (manifest in a broad stock index) not make it easy to invest? Last week, Buffett made a comment related to this same subject that befuddled me. In indicating that Greg Abel, the head of the Berkshire energy businesses, should take over the books of public companies that Berkshire owns, Buffett said: “I would leave the capital allocation to Greg. He understands businesses extremely well, and if you understand businesses you understand common stocks.” Would that it were so simple. Buffet's own performance, as well as that of Berkshire's investment team, have lagged the S&P 500 over the last ten years. According to the FT, Buffet's stock picks rose 10.2% per year while the Berkshire investment team rose only 7.8% per year compared to a 12% return for the S&P 500 over the period. Compounding that underperformance over the last decade results in a wide lag in value creation. Berkshire Hathaway stock has even underperformed the S&P 500 for the last decade. The solution to this performance paradox is the key to being a successful long-term investor. Unfortunately, I don’t have a pithy answer or silver bullet; however, I do tend to think the solution lies far less in the choice of individual stocks and far more in how you own them, which comes down to portfolio construction and team processes – it’s critical to have frameworks and systems in place that let you learn from mistakes and continually improve decision making. (We’ve tried to address some common pitfalls and mental traps working against investors in our original paper and subsequent follow ups). Of relevance to this conundrum is an op-ed from Tyler Cowen that looks at how wrong economists’ predictions, from a book published in 1980, turned out to be. One salient takeaway is that we never really know which thing we should worry about, but we always worry too much in the face of the resilient systems of capitalism and democracy. I suspect humans’ innate pessimism and cynicism tend to adversely impact investment decision making despite evidence that optimism always wins long term. If we can overcome bias in the investment decision making process, there are more ways to win than lose. 

✌️-Brad

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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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