Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, Entertainment Island, 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: a short story about human ingenuity; WhatsApp with Facebook in India?; Google trying again for ecommerce marketplace alternative to Amazon; video games could face new content delays; coronavirus’ unexpected impact on drug cartels and organ transplants; aging in place on the rise for Boomers; thinking about de-globalization; and, lots more below...

Stuff about Innovation and Technology
Welcome to Entertainment Island, a dispatch from the year 2030
A decade ago, as rolling shelter-in-place orders kept the global economy in limbo amid record unemployment, an idea was formed to reboot the struggling sports and entertainment industries. Fears of infection had stopped movie and television production along with all live sports. During the summer of 2020, people had run out of things to watch and had no one to root for – there were no stories of triumph or despair, no happy endings, no rivalries, no comebacks. People played more video games and watched surreal life streaming, but a tangible connection to the real world was lacking. 

Then came a vision: Entertainment Island. It started as a joke in some obscure newsletter, but soon caught on. Several sports leagues sent all their players, staff, and TV production crews to a single location to quarantine for a few weeks. Fans came and quarantined as well. Then, entire seasons were played to live audiences in a single location, broadcast around the world. Hollywood jumped on board, relocating actors, directors, technical staff, production teams, etc., and movies and TV began filming again. In December 2020, after a massive effort to put everything in place, the newly-walled-off Las Vegas Strip officially became Entertainment Island. 

The Strip’s row of world-famous casinos was the ideal location for Entertainment Island. It had a football stadium, arenas, and enormous convention centers that functioned as sound stages. Unending hotel rooms housed teams, actors, fans, and all the staff needed to support a small city. There was ample kitchen space and other infrastructure. Isolated by an encircling border wall, shipments of food and other consumables, along with needed equipment, came in at a central location to be disinfected. Within months, a hundred-thousand laid-off workers from around the US had been funneled through quarantine and were living with free room and board, attending live sports and concerts, starring in reality TV, and generally having a good time. 

The NFL season began with two games a day, five days a week, which stretched the season to around 25 weeks. NBA restarted soon after, but had to play a shorter schedule until construction was completed on four new arenas over the next several years. At first, there was no location to play baseball, but soon the MLB heavily modified the rules so that it could be played on jet skis on Lake Bellagio – needless to say, it got much more interesting.

In January 2021, President Cuban was sworn in during a ceremony outside of Caesar’s Palace in between filming new episodes of Shark Tank, and construction began soon thereafter on White House II, with most of the government relocating eventually from D.C., to enable operation during pandemics. Movie and television production had started in earnest throughout the vast ballrooms and outdoor areas. Within a few months, there was a steady stream of new and acclaimed content for all the streaming platforms. 

Every night there were endless choices of live shows, matches, and activities – much of it broadcast around the world. More and more people were needed just to fill all the seats. Magicians Penn & Teller, the longest running headline show in Vegas before the pandemic, started up their show again by taking over for David Copperfield at the MGM (Copperfield elected to stay sheltered on his private island) and played to twice the audience every night.

Everyone was free to leave Entertainment Island, they just needed to re-enter quarantine if they returned. Eventually, owing to advances in health-monitoring wearables, quarantine was replaced with health checkpoints, but few people left. Now, 10 years later, as I write this from Tower 12 at the Wynn, over five million people live in the expanded radius of the Las Vegas Strip, and cranes fill the sky with new construction. Of course, there is no longer a quarantine, but the region remains ready to begin a lockdown procedure if necessary, so that entertainment and government function can be isolated from disease outbreak. A desire to create a virus-proof city resulted in heavy investments in robotics, automation, software and communication infrastructure, so that now the city virtually runs itself and has become a model community for the world. Everyone who lives in Entertainment City has all their costs covered by the revenues that sports and entertainment generates globally, and there is virtually no crime. It’s an accidental paradise.

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Virtual Concerts
Musician Travis Scott did a brief world tour inside of Fortnite last week, performing his new track in each region around the world, with his debut concert garnering an audience of ~12M viewers (including players who also live streamed on YouTube and Twitch). Fortnite metaverse inhabitants could also buy merchandise in the in-game store, such as outfits and emotes for their avatars. Musicians are increasingly connecting with fans through alternative mediums, especially with live music likely shut down until a vaccine is available and deployed. Twitch has been a standout, and the company recently hired Spotify’s lead product manager, Tracy Chan, to oversee artists and events on the platform. Chan will focus on building tools to support musicians live streaming to fans. Spotify seems to be missing out on the interactive and video-based ways that artists are increasingly connecting with listeners.

Smart Hats
LA-based WorkerSense makes hard hats that track social distancing and alert construction employees when they are within six feet of another worker. The helmets also allow supervisors to monitor workers remotely, as reported by dot.LA.

Viewers Hunger for Something New
WWE Raw, the longest-running weekly episodic show on television, experienced record-low ratings last week, and yet gained share among 18-49 year-olds – landing at the number one cable show for that demographic. It seems to indicate that, although there are fewer folks watching cable, those that are seek live action. The show, which is airing without its usual, boisterous, sign-waving audience, is odd to watch – it’s an uncomfortable combination of silent loneliness and a new intimacy in bringing viewers closer to the action and the wrestling stars. I heard that the McMahons were in early discussions to take over an exclusive venue on Entertainment Island to showcase all WWE events going forward.

Facebook’s Investment in Jio – a Coming-of-Age Story
From NZS’s Joe Furmanski: Five years ago, when Mukesh Ambani’s Reliance Industries launched a new Indian telecom company, many were left scratching their heads. One could see why at the time: The Indian telecom industry was highly competitive (albeit fragmented), the vast majority of the population would be unable to pay premium prices, and rolling out such an endeavor on a national scale would require billions of dollars in upfront costs. It was a high-risk investment that many investors felt would never earn its cost of capital. Fast forward to today, and Reliance Jio has the third-largest subscriber base in the world and is the only profitable telecom company in India. More importantly, Jio started a phenomenon that brought a large portion of India’s population into the Digital Age, with Jio phones being their first and only access to the Internet. Concurrently, Reliance amassed a retail empire, serving a broad range of Indian consumers, and launched an eCommerce offering, all the while keeping companies like Walmart and Amazon at bay.

So, the announcement that Facebook (who has been, by their standards, largely unsuccessful in penetrating the Indian market) will take 10% stake in Jio should be viewed as a Coming of Age for the high-risk venture launched five years ago. This new Facebook + Jio Platform + Reliance Retail partnership is poised to bring together the various pieces needed to facilitate eCommerce in India. The stake by Facebook seems like a savvy way of driving deeper penetration into India for WhatsApp (especially from a payments perspective), and Jio gets a partnership with a leading Indian communication app that can close the gap on B2B and B2C payments, which Jio has been slow to address. The combination begins to look like what Tencent has created in China – a platform juggernaut across multiple end markets.

People are Tired of Their Homes
Zillow reported a significant uptick in people looking for a new place to live last week, with page views up 18% y/y for the week ending April 15th. This rebound erases much of the 19% decline to the mid-March low-point, thought obviously actual sales remain depressed. However, requests to connect with premier agents via Zillow were actually up y/y after declining steeply in March. Perhaps, with everyone stuck at home, people are realizing they need a bigger space (or, alternatively, how much they dislike their neighbors). Back on April 17th, Redfin CEO Glenn Kelman indicated there was a “profound, psychological change among consumers who are looking for houses” as searches for rural locations rose sharply, reversing a long preference for urban migration. Prices are up as inventory remains tight and lower rates have improved affordability. These headwinds are offset by significantly stricter lending standards, creating an interesting dynamic in the housing market, which could open the door for a market maker to step in – iBuyers could be well poised to take over a large segment of the real estate market.

Virtual Court Now in Session
State and local software provider Tyler Technologies has 60 court systems using its new virtual court platform. The system allows defendants to appear via video from remote locations and integrates with Tyler’s real-time, case- and document-sharing platform. Summaries and fines are automatically sent to defendants, who can use online tools for resolution.

Google Taking Steps to Democratize Marketplace
Google Shopping will no longer charge fees to list items for sale. While Google Shopping has far less traffic than Google’s organic results and search ads (per ChannelAdvisor), this policy change could mark a more concerted effort by Google to create a real shopping marketplace, and is no doubt in response to the letdown that Amazon has become. In addition to disadvantaging 3rd-party sellers as discussed last week, Amazon has failed to effectively communicate with customers regarding supply/delivery problems and is still charging full price despite not holding up the promise of Prime. I’ve been visiting a lot more independent sites over the last couple weeks (many powered by Shopify), and would welcome a new marketplace search engine. Shopify is a good candidate for such a marketplace aggregation service, especially as they expand further into payments and logistics. However, the potential failure of the US Postal Service, which Trump is pushing for, will heavily favor Amazon and larger retailers such as Walmart because independent sellers would have no cost-effective shipping alternative.

Video Games Face Content Lag
Video game sales are booming, but problems abound for game developers. The rapid transition to working from home has delayed game launches and could delay new downloadable expansion content for existing games – at a time when gamers are hungry for new quests. New games also must go through certification for all the major consoles, which, when done remotely, can create security issues. Delays in the release of new Xbox and Sony consoles, originally slated for this fall, could also cause significant ripple effects for new titles coinciding with their launch. Some game developers, with whom Jason Schreier spoke for the NYT article, said rather than delay games, they would be cutting back on scope, which will no doubt also disappoint gamers.

Zooma Zoom Zoom
With 300M daily active users, Zoom usage is now nearly 1/3 the estimated daily user base of Microsoft Outlook.

Miscellaneous Stuff
RNA Vaccine
Bill Gates shares his outlook on moving forward and his optimism for an eventual RNA vaccine with WaPo:
“The new approach I’m most excited about is known as an RNA vaccine. (The first covid-19 vaccine to start human trials is an RNA vaccine.) Unlike a flu shot, which contains fragments of the influenza virus so your immune system can learn to attack them, an RNA vaccine gives your body the genetic code needed to produce viral fragments on its own. When the immune system sees these fragments, it learns how to attack them. An RNA vaccine essentially turns your body into its own vaccine manufacturing unit.”

Theme Park Reopening Predicated on Vaccine? 
Theme Park Insider theorizes about various ways Disney and others might reopen parks. Based on the discussed options, including fewer attendees, gloves, testing, sanitation, etc., it’s easy to see why we simply might not have any mass gatherings until a vaccine is ready and well distributed.

Coronavirus Hurting Drug Cartels
A combination of missing precursors for synthetic drugs and less border traffic has made times tough for drug cartels. One company in Wuhan – subsidized by the Chinese government – supplies most of the ingredients necessary to make illegal fentanyl, according to the AP.

Organ Transplantation Down along with Violent Crime/Accidents 
Transplants are down for a variety of reasons, including hospital safety and availability; but, perversely, fewer car crashes and gunshot wounds (see cartels above) are a key driver – fewer organs are available to transplant.

New Zealand’s Doomsday Mansions
If you are a rich person fleeing to your secret underground lair in New Zealand, make sure you know under which rock the access key is hidden. Bloomberg reports on the problems people are having as they adjust to bunker life. One shelter operator got a call from an owner wanting “to know how to open the secret door to his multimillion-dollar bunker 11 feet underground”. The whole thing is quite precious: I too used to make forts...when I was eight.

Black Lodge Coming to Entertainment Island
Director and painter David Lynch is enjoying his time in isolation, but believes it’s unlikely any filming can start back up before a vaccine is available given the nature of production sets. Rumors are that his agent is in talks for a deal to recreate the Black Lodge on Entertainment Island.

Black Eye for Nursing Homes
NYT reports on the vulnerabilities of nursing homes exposed by covid-19. One trend that was already underway ahead of the pandemic was Boomers aging in place longer than prior generations. Back in SITALWeek #221, I discussed some of the impacts of this trend. The virus’ impact on nursing homes could cause Boomers to stay put even longer and/or downsize to continue living independently. We could also see more multi-generation living (Redfin noted anecdotally a rise in demand for homes with "in-law" apartments). More seniors living independently will no doubt increase demand for in-home health care, as well as tech for health monitoring technology and household automation.

Stuff about Geopolitics, Economics, and the Finance Industry
Decoupling
I continue to look for confirming or disconfirming evidence of onshoring, a trend I wrote about last week (paragraph entitled “Heartland Revival?”). De-globalization appears to be an increasingly broad (i.e., more likely to happen than not) prediction. Indeed, the trend was already underway – wage arbitrage was already running its course and trade tensions were causing supply-chain shifts – the coronavirus just added fuel to the fire. For example, a $25B outsourcing industry in the Philippines was disrupted by coronavirus right when many companies were experiencing a greater need for customer support. Similarly, India’s $100B IT outsourcing industry depends on workers being able to sit at their desks in secure offices (although the industry is rapidly adapting). As I wrote last week, when comparative advantage must consider a broader set of indirect costs, it makes sense to redomesticate jobs that are now fulfilled by overseas workers. In a more automated technological landscape, labor arbitrage, a key reason for globalization, isn’t a material consideration; for example, the FT wrote about the possibility of offshore call centers being replaced with AI. 

However, I want to be especially clear that I am not talking about any sort of nationalism or “they took our jobs!” silliness. While there have been consequences to globalization, outsourcing has had an overwhelmingly net positive impact on the world, lifting many people out of poverty. For decades, offshore outsourcing (e.g., shifting manufacturing jobs to China and IT/BPO jobs to India) fueled the rapidly growing GDP in emerging market countries. Now that it appears some degree of job repatriation will occur, can these countries manage a rapid transition to domestic consumption and a services-based economy? The issues at hand today, in an increasingly interdependent world, are twofold: 1) to what degree should each country have self-sufficiency for times of crisis; and 2) will the current global crisis be a catalyst for increased automation (both robotic and software-based) on an accelerated timeline.

Round Up of Post-Virus Life in China:
—Quartz reports on a slow economic return in China, with 41% of survey respondents planning to reduce spending. The Japanese term duansheli, meaning to cut out trivial things, is trending in China.
—Bloomberg reports on “dystopian” life in Wuhan: cars are selling well as subways and ridesharing remain less utilized; increased surveillance governs nearly all aspects of everyday life; a green code on your phone app is required to generally move around (a yellow code indicates you’ve been in contact with a sick person and you need to be quarantined).
—SCMP reports a bounce in tourism, as travel is expected to double for the upcoming holiday vs. one month ago; but, numbers are still down anywhere from 60-70%.
—Congress’s US-China Commission discusses data emerging from China that suggest a struggling economy as well as routs in the energy market and logistics. (PDF)
“Beijing’s Policy Responses to Weakened External Demand: Chinese policymakers are grappling with how to restore economic activity while avoiding another outbreak. Beijing also contends with a third risk: reduced external demand for Chinese exports. While low global demand may push China’s policymakers to resort to broader stimulus measures to forestall further economic weakness—as was done in the global financial crisis—Beijing is limited by already high levels of indebtedness and a stressed financial system. To protect its position, Beijing is falling back on state intervention in its economy to spur growth in prioritized industries, reinforcing the use of distortive economic practices.”

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Disclaimers:

The content of this newsletter is my personal opinion as of the date published and are subject to change without notice and may not reflect the opinion of NZS Capital, LLC (“NZS”).  This newsletter is simply an informal gathering of topics I’ve recently read and thought about. It generally covers topics related to the digitization of the global economy, technology and innovation, macro and geopolitics, as well as scientific progress, especially in the fields of cosmology and the brain. I will frequently state things in the newsletter that contradict my own views in order to be provocative. I often I try to make jokes, and they aren’t very funny – sorry. 

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