Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, spherical PV, 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: delayed drones; the myth of the at-scale influencer economy; Instacart's Catch-22; iBuyers get into the brokerage business; Bob Dylan on technology; the myths of behavioral economics; rising desk job automation; and lots more below...

Stuff about Innovation and Technology
Google Deploys Denoiser
Google is rolling out a new feature that automatically eliminates background noise for its G Suite video Meet customers. The AI was trained with chatty YouTube videos and Google’s own video calls. In this detailed VentureBeat story, the engineer behind the project said that, when they did their first demo, people broke out in applause...which was immediately eliminated by the noise cancellation. Audio from a Google Meet call is end-to-end encrypted and run through Google’s custom TPU processors in the cloud (the secure service in the datacenter is referred to internally as “borg”). Google considered running the algorithm locally on computers; however, the local compute burden was inefficient compared to the mere 20 millisecond delay from cloud TPU cycles. Microsoft previously announced that a similar feature will be available for Teams in the future. Related, I recently tried out Google Meet’s real-time captioning of video calls and found it to be surprisingly good. The algorithm works in part by predicting what you might say, so it almost felt like I was reading my thoughts before I voiced them. 

It’s a Bird! It’s a Plane! It’s Not a Drone!
It’s been nearly seven years since Bezos went on 60 Minutes to show off Amazon Prime Air drone delivery and set a 2018 target to be live with the service. A year ago, Amazon said they would be delivering packages with drones “within months.” There have been a variety of reasons for the still delayed rollout, according to a Business Insider Prime article, including management changes and the difficulties of reconciling Amazon’s fast iteration process with the FAA’s slow regulatory approval. Renewed pressure has the Prime Air group focused on getting the service live as soon as possible. One FAA rule requires maintaining line of sight with the drone at all times. UPS and Google’s Wing have received waivers on this and other FAA requirements, which Amazon has yet to receive. It’s unusual to see Amazon, known for innovation and failing fast, to have failed so slowly compared to its drone rivals. One more optimistic explanation for Amazon is that there is no failure here – drones may simply not be an cost-effective delivery option for a long time to come.

Superior Spherical Solar Cells
Saudi researchers have created a spherical solar panel that absorbs 15-100% more photons per surface area compared to a flat solar cell. The ping-pong-ball-sized panels benefit from their ability to absorb light from more directions, including reflected off the ground (a similar concept to the albedo effect discussed in SITALWeek #219 for bifacial solar cells). The spherical boost to efficiency is noteworthy; but, perhaps more importantly, the researchers’ method of etching and folding a flat solar panel into a spherical shape suggests the potential for adding solar capacity to an array of oddly-shaped IoT devices. 

Robotic Process Automation
Wired reports on the rise of process automation as a result of COVID-19. The use of software to automate rote tasks, such as data entry or workflow approvals, will accelerate as AI begins to learn which tasks are amenable to automation and how to perform them. While software automation may increasingly impact higher paying desk jobs, it could also free employees to focus on more important tasks. Similar to manual labor automation, it’s not all bad news – the combination of humans working alongside robots and software is likely to be more powerful than either humans or robots alone. NZS Capital’s senior advisor, Jim Goff, always used to remind us that the golf carts are always coming for the caddies.

Big Tech Yields to Call for Facial Rec Regulation (sort of)
IBM took the moral high road last week by choosing to no longer allow general-purpose facial recognition on its cloud platform. They were soon followed by Amazon and Microsoft, who will now wait for the government to regulate the tools before allowing police to use them. Facial-recognition tech is problematic because the algorithms have inherent racial bias and thus perpetuate racism. This ongoing trend of creating and profiting from unvetted, potentially dangerous technology – and then waiting to get called out before doing the right thing – is disturbing (for more on the hypocrisy of tech platforms see last week’s SITALWeek). Microsoft called for regulation two years ago, and then apparently proceeded to sell their tools without it. Amazon and Microsoft didn’t mention whether other law enforcement agencies, such as ICE, will continue to use their tools, nor did the companies confirm what their plans are for the tools outside the US.

Influencer Economy all “Smokey Eye” and Mirrors 
Forbes recently ran an exposé on the inflated revenues of celebrity influencer Kylie Jenner’s cosmetic business. Forbes revoked the star’s billionaire status after learning that documents showing $360M in 2018 sales were falsified, with the reality closer to $125M. An icon of the Instagram influencer economy – and considered to be its best representative success story – it’s surprising to learn how paltry the brand's sales are (a drop in the bucket for the beauty industry) and how little her financial success apparently tracked with her rising number of Instagram followers (now clocking in at 179M). It’s a black eye for the aspiring influencer economy; although, certainly, a long tail of niche businesses for a small number of fans can still add up. It might be more logical to compare the influencer economy to the paid endorsement industry and the consumer brands market.

Instacart’s Catch-22
Instacart faces a classic marketplace vs. vertical integration dilemma. The company currently delivers items from grocery stores and other retailers. Ultimately, however, having a delivery middleman adds to the costs, and someone has to foot the bill besides VCs. So, unless consumers are willing to pay more, or unless we see a deeper subsidization of delivery costs from retailers and brands shifting promotion dollars (which would also hurt margins at those same grocery stores Instacart relies on), it’s not a viable long-term model. Instacart could instead begin building their own, tailor-made local grocery fulfillment centers and vertically integrate, but that would surely run off their current grocery store partners. It’s a classic business model Catch-22 without a clear resolution. My hunch is vertical integration is the only strategy that will win local logistics long term, but we could also see a platform created for local small-business fulfillment as well – following a classic power law dynamic with a long tail. In the meantime, ModernRetail reports that Instacart is focusing on growing with smaller chains instead of the big platforms, since the former are less likely to build out their own digital fulfillment, at least near term.

Cultivating Culture in a Remote World
Former Zillow CEO – and current LA-based VC – Spencer Rascoff posts on dotLA about how to maintain corporate culture in a work-from-home environment, emphasizing increased internal communication that repeats priorities often. In the past, Spencer has also talked about the importance of having an “internal brand” for employees. For example, companies should have a robust internal marketing group – something beyond simple HR – that messages the culture of the company in a sincere, high frequency way. 

Nextdoor Riddled with Racist Moderators
Nextdoor, the neighborhood-level social app, known as much for reuniting lost dogs with owners as it is for “snitching Karens”, has struggled to control racist moderators on the platform. The app cedes moderation control to local neighborhood leads, which has led to the takedown of many pro-Black-Lives-Matters posts and other biased censoring. The qualifications for becoming a neighborhood lead? Whoever first launches the app in a neighborhood becomes the lead. No training. In response to a disturbing exposé on rampant racism on the platform, Nextdoor is working harder to explain what’s allowed to neighborhood leads. I have never used Nextdoor because I’ve followed the Twitter account Best of Nextdoor for years, and I couldn't bear to find out the truth about my neighbors! Like all other social networks created to date, Nextdoor has in many cases elevated conflict and pushed people further apart without taking any responsibility for its platform. 

Arm Up on the Competition
Amazon’s ARM-based, custom Graviton2 chips are now in general availability with a 40% price/performance improvement compared to Intel chips. The announcement includes a number of customer testimonials, including Netflix who is using the chips for streaming, encoding, data processing, and monitoring – with a reported 50% improved performance over the last generation chip. 

TSMC’s Full Steam Ahead
Chip giant TSMC said last week they weren’t taking down guidance for the year despite the ban on shipping to HiSilicon/Huawei. In part, the COVID-accelerated tech adoption might be offsetting demand weakness. Meanwhile, Nikkei reports that chip design software maker Cadence has seen an 80% increase in sales over the last two years in China – to 13% of revenues – despite no longer selling to Huawei. Nikkei suggests, without significant evidence, that perhaps regional Chinese government research labs are picking up the slack, and that perhaps those might be affiliated in some way with Huawei. And, I would speculate, also without evidence, that perhaps those satellite research centers are placing orders for chips on Huawei’s behalf. Demonstrating just how hard it can be to figure out who is in charge of what in China, last week Arm fired the head of Arm China for serious violations of policies, only to have Arm China declare they couldn't. It’s unclear exactly what’s going on, but the JV, which Softbank setup for puzzling and unexplained reasons after it purchased Arm, ceded 51% control to China, and very well may have ceded control over the CEO as well.

iBuyers Add Brokerage
Real estate consultant Mike DelPrete reports that iBuyers Opendoor and Offerpad started offering brokerage services last week. So, in addition to buying houses, they will also directly list properties for sale. It’s one strategy for capturing a lead that comes in but ends up seeking a higher price than an iBuyer offer (indeed, only 2-3% of people who seek an iBuyer offer take it). The platforms are now more in-line with Redfin in terms of options for sellers (Opendoor and Redfin also have an ongoing partnership). This latest development reinforces the notion that a full-service, real-estate technology platform is likely to ultimately take significantly more market share given the diversity of homeowner needs.

Miscellaneous Stuff
Dylan Unpacks Murder Most Foul
Ahead of the this coming Friday’s release of his first original album since 2012, Bob Dylan did an interview with the New York Times:
NYT: There is a lot of apocalyptic sentiment in “Murder Most Foul.” Are you worried that in 2020 we’re past the point of no return? That technology and hyper-industrialization are going to work against human life on Earth?
Dylan: Sure, there’s a lot of reasons to be apprehensive about that. There’s definitely a lot more anxiety and nervousness around now than there used to be. But that only applies to people of a certain age like me and you, Doug. We have a tendency to live in the past, but that’s only us. Youngsters don’t have that tendency. They have no past, so all they know is what they see and hear, and they’ll believe anything. In 20 or 30 years from now, they’ll be at the forefront. When you see somebody that is 10 years old, he’s going to be in control in 20 or 30 years, and he won’t have a clue about the world we knew. Young people who are in their teens now have no memory lane to remember. So it’s probably best to get into that mind-set as soon as we can, because that’s going to be the reality. As far as technology goes, it makes everybody vulnerable. But young people don’t think like that. They could care less. Telecommunications and advanced technology is the world they were born into. Our world is already obsolete.

COVID-Induced CO2 Shortage Snarls Supply Chains
Ethanol production decreased 45% this spring following a flood of cheap gas and new regulations that exempted some gasoline manufacturers from using the additive. Similarly, carbon dioxide – a byproduct of ethanol production that’s used in food safety, beverages, and wastewater treatment – is now in low supply. The ethanol industry is responding by trying to retool some capacity from fuel grade to food grade, which could help the situation, but it’s a reminder of just how surprisingly intertwined supply chains are.

China Grants Protections to Endangered Pangolins
Pangolins, “the world's most heavily trafficked mammal” and intermediary thought to have played a role in the inception of COVID-19 infections in humans via Chinese wet markets, have been removed from an official list of traditional medicines by the Chinese government. Also removed from the official Chinese Pharmacopoeia were pills made from bat feces. 

Hot Hand is Real
Jason Collins has an insightful post on various behavioral economics myths, on which many still rely, despite the theories having been disproved. Bias is everywhere, even when we’re trying to uncover bias.

🐷🐷🐷 on a ✈
Russian cargo airline Volga-Dnepr has been flying thousands of pigs from France to China during the pandemic to help restore herds hit hard by African swine fever (slightly unnerving given the ease in which some types of viruses – notably NOT SARS-CoV-2 – move from humans to pigs and back again). The airline is also moving entire production lines out of China to countries who want to repatriate production of critical items, like face masks. Reuters reported on the problems Japan is having bringing manufacturing home from China – including the need to bring R&D back with it. And, Bloomberg also ran a long story on the complications of moving supply out of China despite intentions.

RVs all the Rage as Remote, Mobile Offices
As RV sales recover from a 2-year downcycle that began in 2018 (see SITALWeek #207 and #244 for more context on RVs), the WSJ reports on their rising use for remote work (and, I’d add that, if local zoning permits, they can make for a good home office in your driveway!). I’ve joked in the past that Tesla might build an RV now that Elon has given up all his houses, and I think the Tesla supercharger network would be an important asset, as some stations could be turned into RV parks for owners on the move. Rivian could potentially emerge as an EV chassis provider to Thor, Winnebago, and others (Class B RVs are van conversions, while Class C RVs are built on chassis from companies like Ford). Tesla could also adapt their Semi cab into a Class A RV. A boy can dream...

Stuff about Geopolitics, Economics, and the Finance Industry
The “Will to Solvency”
Fiction continues to reflexively create facts in our post-truth, high-velocity, information-based reality as Hertz, which previously filed for bankruptcy, is now considering an equity offering instead of debtor-in-possession (DIP) financing. Typically, equity values are wiped out or restructured in favor of first-priority debt investors in bankruptcies; but, in this case Robinhood day traders (or other speculators) seem to have willed the company back into solvency? While the debt was trading at 40 cents on the dollar, a lawyer for Hertz said: “The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity”. Yes, unique.

Big Brother’s Watching Your Zoom
Zoom disabled multiple user accounts following private calls on the platform that discussed the anniversary of the Tiananmen Square massacre, based on reporting from Axios and the FT. Shutting dissident accounts, which were outside of China, further calls into question the independence of the company, which has the majority of its engineers in China. Zoom has since reinstated accounts but reported that it will be monitoring IP addresses going forward in real time of meeting participants in order to comply with Chinese laws, which is disturbing to say the least. This news is in addition to their previous statements that they are not encrypting free video calls so as to comply with any law enforcement requests. 

Sweeping Huawei Restrictions Ensnare Government Contractors
New US regulations would force any company providing a service or product to the federal government to eliminate Huawei and ZTE equipment from not only their company, but also any company they work with. Bloomberg reports on the uncertainty begat by the requirement, which is set to begin in just two months. For example: “The provision could also apply to a pharmaceutical company that sells medicines to the U.S. Department of Veterans Affairs, if the company, for example, has an Indian manufacturing plant that taps one of India’s largest telecom companies, Bharti Airtel Ltd., for its employees’ mobile phone service. Airtel relies on Huawei for networking gear to operate its mobile phone services.”

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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 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. Often I try to make jokes, and they aren’t very funny – sorry. 

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