Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, monkey pirates, and whatever else made me think last week. Please grab me on Twitter with any thoughts or feedback.

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In today’s post: decline in globalization will drive a heartland renaissance; Amazon demonstrates the problem with Big Retail; in a few months, there will be nothing to watch; health monitoring is the gateway to broader surveillance; monkeys building rafts; the inflexible food supply chain; 2 years of social distancing; when Berkshire is fearful, what should investors do?; and, lots more below...

Stuff about Innovation and Technology
Evening News Renaissance
With fewer people stuck in rush hour commutes, evening news from the top broadcast networks has seen a 42% increase to 31 million viewers according to Variety. It has been a generation since evening news enjoyed this level of popularity. In the age of media fragmentation, this is a notable shared experience.

Remote ICU Patient Monitoring
Partnering with Microsoft Azure, GE Medical announced Mural Virtual Care Solution, which allows five hospital staff to oversee up to a 100-bed, multi-site intensive care unit from a remote hub, helping to limit exposure to infective patients. 

Goat Cameos
Animal sanctuary Sweet Farm’s new service, Goat 2 Meeting, allows you to add a llama, goat, or other farm animal to your live video meetings. At $100 for a 10 minute cameo, the service is so popular there is currently a waitlist.🐐

Rolling Up Amazon 3rd-Party Sellers
Thrasio, a startup that acquires successful direct-to-consumer brands that leverage Amazon, has raised $110M in VC funding. The company is said to generate $35M in EBITDA on around $200M in sales with brands such as TrailBuddy hiking poles and Sky Mat anti-fatigue mats. 

Beam Me Some Power, Scotty!
A team of researchers are developing a drone that can wireless beam power – in the form of radio waves (i.e., WiFi) – to recharge hard-to-access IoT sensors. The sensors need to be plugged into a specialized antenna, which harvests and converts the signal to electricity. Their initial drone prototype has to be within about a meter of the sensor, but parameters should improve. They are also creating rectennae (rectifiers+antennae) to harvest intermittent WiFi signals for power.

Good DogBot
Google is teaching a robot dog named Laikago to walk by having a digital twin of the dogbot watch footage of real dogs. The robot dog gets virtual “good dogs” and “bad dogs” as a reward or punishment to reinforce the learning – I hope they consulted Cesar Millan! 

Surveillance State From Health Checks
Chinese company KC Wearables has an augmented-reality helmet that can check 200 temperatures per minute as people walk by. Along with facial and license-plate recognition, the device can read QR codes on phones to know if someone has been in contact with a sick person. This is the kind of hardware we could see in the West (e.g., as you enter a sporting event or other crowded area). Health monitoring feels like a gateway application that could allow people to quickly become more comfortable with a broader, global surveillance state. There is a lot of hardware in this helmet – 64Gb of eMMC memory, 4Gb DRAM, an Arm Cortex A53 octa-core 2.5Ghz processor – all running Android 8.1. The specs underscore China’s ongoing, heavy reliance on foreign companies for growth/maintenance of their surveillance state.

Disinfectant-Dispersing Drones
Drones made by XA Global in China can disinfect 600,000-700,000 square meters. A similar area would require 100 people and 5x as much disinfectant to sterilize in the same amount of time. Use cases include school playgrounds. The company also makes a 4-wheeled spraybot.

Heartland Revival?
Tesla wants to build its Cyber Truck in the central US, and Joplin Missouri is offering the company $1B in incentives. With the virus highlighting global vulnerabilities in the supply chain, we could see a lot of manufacturing find new homes in (or a return to) the central US. Australia is likewise looking to rebuild its manufacturing capabilities – the FT quoted the country’s head of their new manufacturing task force: “Australia drank the free-trade juice and decided that offshoring was OK. Well, that era is gone.” The head of the company featured in the Netflix documentary “American Factory” predicts a problem for China as companies relocate out of the country. But, domestically, a repatriation of manufacturing would require a huge buildout of the entire supply chain and knowhow, which America has, to some extent, lost over the years. And why stop at factories? Many service jobs outsourced to countries such as India or the Philippines could also return to the US as working from home is institutionalized. Remote working would also allow jobs to disperse from expensive, coastal cities to towns throughout the US, leading to a significant rural- and mid-America renaissance. For decades economists have preached about the benefits of comparative advantage and globalization, which in many ways, now appear to be fragile economic relics of the Industrial Age.

No Country for Middlemen 
The WSJ reports on the problem of food delivery companies, like GrubHub and UberEats, charging too much margin for the restaurants to be profitable. This isn’t new – in our paper from last fall, The Evolution of the Meal, we discussed the margin problems. We concluded that vertically-integrated cloud kitchens – with subscriptions and regular delivery routes – were the likely path forward. Today, that transition seems more probable than ever, and may well happen on an accelerated time scale. From our paper: “Vertically-integrated cloud kitchens, bundles, subsidies, schedules, and routing combine to drive the flywheel for Uber (or whoever else takes this strategy in the US or other countries – I could easily see Amazon leverage its massive Prime membership base, Whole Foods kitchens, and Amazon delivery service to offer a Prime Meal bundle) to generate a huge user base to densify their cloud kitchens. With one (or two) winners serving a given geographic location, the advantages of centralization, along with scheduling, could also greatly cut down on the number of drivers out on the street.”

Amazon’s Stress Cracks Show Vulnerability of Retail Centralization
Amazon posted their 2019 letter to shareholders this week. The letter was devoid of information except for the interesting stat that the AWS cloud was 3.6x more energy efficient than companies running their own servers. I’m old enough to remember when Bezos’ annual letters weren’t just elaborate PR statements crafted to distract folks from the company’s real problems. Amazon’s temporary shutdown of 3rd-party sellers utilizing FBA (Fulfillment by Amazon) put many sellers who relied on the service in a bind; meanwhile, prioritizing orders for essential items stranded 3rd-party-seller inventory in Amazon warehouses (limited shipments into FBA are said to restart this week). Amazon also discontinued Amazon Shipping (not to be confused with FBA) in several states. Additionally, last week came news of Amazon drastically cutting affiliate commissions to sites that refer customers, damaging publishers like the NYT and search engine DuckDuckGo. Amazon’s success is in large part owed to Bezos’ philosophy of decentralized decision making, so it’s rather paradoxical that Amazon has become a centralized point-of-failure during the pandemic, with WSJ’s Christopher Mims questioning: “Will We Forgive Amazon When This Is Over?” 

Amazon’s commerce identity crisis (are they a platform for other companies or just a retailer?) highlights the dangers of relying on one company to do everything, and their fumbling could provide an opportunity for other platform competitors, such as Square or Shopify, to gain market share. Shopify reported this week that they are currently seeing Black-Friday levels of traffic every day. More broadly, to the extent SMBs reopen and new ones are started from scratch, it seems likely they will be mostly virtual businesses with physical space for local order fulfillment and pick up only. I imagine it could be difficult for small businesses to afford to check customers’ temps as they walk in or test employees daily for illness (Amazon is said to be deploying thermal cameras that cost anywhere from $5,000-20,000). But, we also don’t yet know what retail-shopping protocols will be in the future – maybe health-monitoring wearables will be mandated, which would shift most of the burden from the store to the consumer. Given the limited resources and tight margins for SMBs as they contemplate (re)launching out of the economic standstill, they will undoubtedly be looking for the digital partner who provides the highest-NZS (non-zero sum, or win-win) solution, which, right now, does not appear to be Amazon.

Watching Amazon disadvantage its retail partners should probably also give pause to companies relying exclusively on AWS for their IT infrastructure. In times of network stress, would Amazon consider prioritizing their own databases over competitors or their own video streaming over Netflix traffic? I wrote more about the potential issues at Amazon in the “Bezos Reverence Power Law” in SITALWeek #214. 

Trough of Content Favors Live Streaming
Comcast launched Peacock last week; but, with all of the original TV and movie production stopped, it doesn’t have much new content. All of the streaming apps and traditional TV channels will be facing a huge gap in fresh content soon, perhaps with little hope of anything new this year, given the extended shut downs in California and diminishing hope for professional sporting events (though many, like the PGA, may forge ahead without spectators). These factors all seem to point to a continuing shift to live streaming and life streaming – whether we all like it or not, we’re spectators of the Truman Show.  Or, as Alex Danco smartly wrote, watching the virus and slow recovery itself unfold will be our entertainment.

Surging Semis 
In a surprise move amid escalating semiconductor trade tensions with the US, China has approved Nvidia’s acquisition of Mellanox. With pending legislation that would ban any company from using US technology to make chips for Huawei, it’s quite surprising China would stand down from a lengthy delay in approving this deal. Perhaps it signals there has been some backroom negotiations that are going to allow TSM and others to keep making chips for Huawei? In the meantime, TSM is cranking out chips as fast as they can, including for Huawei, as the company reported a jump in Q1 sales up 45% y/y.

Semis Go In-House
Google is working with Samsung to develop their own leading-edge Arm processor to power Pixel smartphones; presumably, the chips will eventually power Chromebooks as well. The processor is another step for Google in using customized silicon to support Android and Pixel functionality, like Google Assistant (Google already makes a small processor to enhance the incredible image quality of photos taken on a Pixel). In-house silicon design is obviously a page out of Apple's playbook (who also closely partnered with Samsung in the first generation of the AX series in the iPhone), and it’s another example of the vertical integration happening at the large tech platforms. Apple finally appears to be close to moving their AX processors into MacBooks (seriously this time) as early as later this year. Amazon has also made headlines recently with the performance of their second generation of Graviton ARM-based processors for the data center (see SITALWeek #236). The large teams of chip design engineers, distributed across the big tech platforms, continue to drive healthy demand for design software from companies like Cadence and Synopsys. 

Google Downgrades Nest Uploads
As Google took action to downgrade upload speeds from Nest connected cameras this week, I can’t help but wonder if their ubiquitous data on the health of the Internet is finally indicating some signs of strain from all the video conferencing upstream data? The change easily allows users to reverse the downgrade, so it’s not mandatory, yet.

Miscellaneous Stuff
Prehistoric Monkeys Rafted to New World...Arrr...Ooh Ooh E E! 
An African monkey species known as the Lost Monkey of Ucayali (Ucayalipithecus perdita) appears to have crossed 1500-2000 kilometers of open ocean, likely using a vegetation raft, around 30 million years ago. Am I the only one imagining these monkeys with eye patches and peg legs? 🏴‍☠️🐵

Dune Coming...to a Small Screen Near You?
Vanity Fair’s exclusive look at the new Dune movie adaptation – starring Timothée Chalamet – is sure to excite fans of the novel. The first installment of the two-part movie is set to premier in December, but perhaps we will be watching it in our living rooms instead of on the big screen. 

Paradigm Shift Ahead for Higher Ed?
The NYT questions whether kids will go back to college (or enroll to begin with) as a result of the coronavirus. Several campuses are indicating they will postpone the fall semester or stick with distance learning. Many smaller colleges could struggle with declining admissions and endowments. The situation also spells trouble for the College Board, who administers the biased ACT and SAT standardized “tests” – with testing suspended, many colleges have decided to forego them. College is hard to replicate as a stepping stone for specialty disciplines, and it has an exceptional ability to foster ad hoc connections and research progress. But, for most kids, it’s a question of whether to attend college for the learning/social/personal growth experience or if online classes, community college, or simply entering the workforce are preferable alternatives. 

Treasure Trove of Vintage Vehicles
The recently-deceased inventor of the popular children’s party staple, the patented bounce-house castle, collected over 140 antique and rare cars and stashed them away in Kansas. The collection, largely a secret, will go up for auction this October. 

Virus Spotlights Dangers of Air Pollution
Air pollution has been linked to higher Covid-19 mortality rates. 

Inflexible Supply Chain a Major Stumbling Block
The food supply chain is proving to be highly inflexible as demand shifts from restaurants and commercial kitchens to eating at home. As we come into peak strawberry season, 24 million pounds of the berries could be trashed weekly in California. Lettuce growers are seeing 30% of their crop go unpurchased and are uncertain if they should replant. Similar stories of milk dumping, egg smashing, and a chicken wing surplus have been reported. It’s a similar story with toilet paper – hoarding is certainly limiting consumer supply; but, the bigger issue is that much of the supply is geared toward commercial (and now largely vacant) buildings. Failure to account for the necessary switch from commercial to consumer production was perhaps one of the biggest mistakes made in issuing the rapid shelter in place orders – the supply chain simply isn’t ready to handle shifting consumption patterns, let alone changes that need to be made in order to keep workers safe during harvesting, processing, and packaging.

Stuff about Geopolitics, Economics, and the Finance Industry
When the Greedy are Fearful
For as long as I can remember, Warren Buffett has advised long-term investors to be fearful when others are greedy – and greedy when others are fearful. As the market hit new highs over the last decade, Berkshire, acting on their first directive, continued to stockpile cash instead of fully deploying it. Now, given the current environment, I would have expected Berkshire – the insurance giant and industrial/consumer conglomerate – to be more greedy. If you glance at the stock market, you see virtually no fear; but, if you look below the surface, there seems to be nothing but fear across the economy. The massive government stimulus and uncertainty has meant no one is calling Warren and Charlie Munger and asking for a white knight. But, at the same time, based on this interview with Charlie by Jason Zweig in the WSJ, it seems that Berkshire is just as fearful as the herd – abandoning its long-time stance to be emotionally contrarian. Munger indicates in the interview that the thing to do at a time like this is sit on cash and wait. 
“We just want to get through the typhoon, and we’d rather come out of it with a whole lot of liquidity. We’re not playing, ‘Oh goody, goody, everything’s going to hell, let’s plunge 100% of the reserves [into buying businesses].’ He added, ‘Warren wants to keep Berkshire safe for people who have 90% of their net worth invested in it. We’re always going to be on the safe side. That doesn’t mean we couldn’t do something pretty aggressive or seize some opportunity. But basically we will be fairly conservative. And we’ll emerge on the other side very strong.’”
As long-term investors – who are optimistic regarding the continuation of the human race and planet Earth – what are we to make of this? I, for one, am still greedy. Sure, things are uncertain, and the big bounce in the market is really only explainable by the penalty on cash (owing to low and negative real interest rates rather than economic fundamentals), which certainly bothers me (how could it not?!). But, if I transport myself to the year 2025 or 2030, I see a new, digital operating system for the modern, Information-Age economy that will be accelerated by this pandemic. I see adaptable companies taking advantage of the downturn to create more value (non-zero sum, or NZS) for their customers and the world. I see technology, innovation, and ingenuity solving problems and making the world better, on average, over the long term. We’ve been improving our lot, as a species, for a couple hundred thousand years now, and, barring a truly cataclysmic event, we will keep improving. I do wonder how much of Munger’s perspective is colored by the fact that Berkshire, outside of its insurance business, is largely a collection of 1900s, Industrial-Age businesses who, instead of creating the future, are relying on legacy moats – now vulnerabilities – to prop up their businesses. I also wonder how much their fear is colored by their insurance business itself, given everything going on. I’m of course being a bit unfair as Berkshire has some real gems in its portfolio of businesses, and Warren and Charlie are still the greatest of all time. I’m pulling for Berkshire to survive this pandemic (according to this photo, Warren seems to be doing fine in his BYD mask!) and once again get greedy.

Get Cozy with Social Distancing
A Harvard study published in Science last week suggested social distancing of various forms through 2022 is probably necessary in order to build herd immunity and deal with the seasonality of Covid-19. A particularly dire scenario would be a rise in Covid-19 concurrent with a bad seasonal flu next winter. The degree to which consumer/business behavior experiences lasting changes seems to hinge on whether we can return to normalcy this year. Comments from California this week on a slow reopening, which would likely prohibit any large gatherings this year and see students alternating time at school this fall, along with comments from Germany on significant, extended limitations, paint a grim picture for the analog economy. In Wuhan, people are free to go to restaurants again, but they aren’t. If we have staggered shelter in place and protection measures for the next 24 months, I imagine we will see significant, lasting change to the way things are done. The list of accelerating trends we discussed at the end of SITALWeek #239 would be more likely to happen with this type of delayed recovery scenario. The staggered, long reopening is increasingly the base-case scenario, but there remains potential for tail events on either side of the curve: 1) an antiviral, like (potentially) Gilead’s Remdesivir, or, on the opposite end, 2) a devastating mutation(s) that increases the contagiousness and/or severity of the virus season to season. 

The ‘Charlie Brown’ Millennial Generation
The Atlantic discusses the bad luck of Millennials – they entered the workforce around the time of the banking crisis, and they are entering their peak earning years around the coronavirus crisis. The WSJ wrote a similar article on the topic – will they be the first generation that fails to build significant, sustainable wealth?

Amsterdam Will Trial “Doughnut” Strategy to Restore Economy 🍩
“The inner ring of her donut sets out the minimum we need to lead a good life, derived from the UN’s sustainable development goals and agreed by world leaders of every political stripe. It ranges from food and clean water to a certain level of housing, sanitation, energy, education, healthcare, gender equality, income and political voice. Anyone not attaining such minimum standards is living in the doughnut’s hole.
The outer ring of the doughnut, where the sprinkles go, represents the ecological ceiling drawn up by earth-system scientists. It highlights the boundaries across which human kind should not go to avoid damaging the climate, soils, oceans, the ozone layer, freshwater and abundant biodiversity.
Between the two rings is the good stuff: the dough, where everyone’s needs and that of the planet are being met.”
✌

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