Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, conversations with the unknown, 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: AI teaching itself in robotics and flight; the opportunity for financial education as banking goes digital; silicon architectures proliferating in the cloud and on PCs; blockbusters; miles of rock paintings; illogical vaccine prioritization; algorithm middleware; our discomfort with the unknown future; and lots more below...

Stuff about Innovation and Technology
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Hive-Mind Dog Bots
KODA is a robot dog built to learn from its tribe of other robot dogs around the world via distributed learning and secure blockchain technology. This humanoid’s best friend is filled with sensors, processors, and learning capabilities that even include “ephemeral memory loss”, allowing it to relearn the same tasks in different ways to optimize outcomes. The robot dogs use IPFS (InterPlanetary File System) peer-to-peer sharing so they can all share knowledge with each other. And, when it “sleeps” it dreams...er, mines bitcoin for you.

99 Autonomous Loon Balloons
Loon, Google’s fleet of Internet-beaming balloons, is now controlled by “a set of algorithms both written and executed by a deep reinforcement learning-based flight control system that is more efficient and adept than the older, human-made one.” In other words, the balloons decide for themselves how to fly. The achievement, the first of its kind in commercial aerospace, was done on simulated systems given the difficulty and expense of real-world training with high-altitude helium balloons. As described in Nature: “in a Loon superpressure balloon, vertical motion is achieved by pumping air ballast in and out of a fixed-volume envelope, and horizontal motion is dictated by the winds at the balloon’s location. To navigate, a flight controller must therefore ascend and descend to find and follow favourable wind currents.” The goal is to keep the balloons close to ground-based devices (with which they can connect via LTE wireless), and the autonomous, RL-driven AI proved far superior to human-devised algorithms in keeping track of the “high-dimensional, heterogeneous inputs” to plot a string of chess-like moves to achieve the endgame.

Peek into Future of Entertainment
Rival Peak is an interactive, live reality show on Facebook powered by AI characters instead of real people. The characters’ decisions can be influenced 24/7 over the course of 12 weeks by people watching the show on Facebook from anywhere in the world. The game/show/whatever was created by Genvid on the Unity engine and is yet another example of a shift from scripted, formulaic Hollywood content to the growing world of interactive engagement.

Roblox Universe Gains Ryan’s World
The star of Ryan’s World, the popular toy-unpackaging YouTube videos that spawned a $500M media empire around the 9-year-old, is opening up shop inside the virtual universe of Roblox. The WSJ reports: “‘Ryan’s World’ in Roblox will offer interactive areas and activities for players, including a racetrack, a school, a city center and a ‘fun zone,’ where players can challenge each other in obstacle courses. The world will also feature characters from Ryan’s TV shows and videos such as Red Titan, a superhero version of Ryan, and Combo Panda, a headphone-wearing cartoon animal that plays and reviews games. Ryan, whose real name is Ryan Guan, will occasionally participate, giving fans a chance to meet him virtually.” So, here’s yet another example of the shift from scripted TV and Video to interactive, immersive worlds.

Gamification of Digital Banking
TikTok phenom Charli D’Amelio made her first venture capital investment – in the teen-focused online bank Step. The bank is one of many financial startups aimed at a younger generation. It will be interesting to see if financial literacy is promoted with the sector’s newfound ability to insert more education via gamification into digital banking compared to the analog predecessors. Alas, so far, the gamification in new stock and cryptocurrency trading apps seems to put gambling and dopamine ahead of education.

Daimler’s Folly
Daimler will pay less money to parts suppliers and use that savings to fund software engineers to better compete with Tesla. I know I am a broken record on this topic (well, most topics), but there is no better example of the extreme dislocation of an analog-to-digital transition than the automotive industry. Traditional automakers need to gain expertise in software, data, AI, batteries, etc., and they have the rapidly moving target of Tesla to catch. If you’ll pardon the cliché, they need to change the wheels (and engine, body, sensors, processors, and just about everything else) while driving down the highway at 100mph. And I’m not just talking about the cars themselves – but the businesses as well. When Industrial Age businesses go digital, the winning characteristics are vertical integration, adaptability, platform network effects, and non-zero sum – the amount of win-win created by the company. Sacrificing your suppliers to hire a bunch of software engineers is likely to be a zero- or negative-sum game. The only option left for most legacy car companies will be to license a complete, modern car platform from a company like Tesla and then transition to focus solely on design, marketing, brand differentiation, and service.

New Cloud-Based AI Training
Amazon flexed their silicon prowess this week, announcing an internally developed processor for AI training at AWS re:Invent. Amazon's Trainium processor will complement Amazon's Inferentia processor for inference (which was also developed in-house), and an SDK will make it relatively seamless for current Inferentia users to use both solutions and transition workloads away from GPUs. Trainium will be offered as an instance on AWS in the back half of 2021, and, presumably, will eventually be used to train Amazon's internal AI models, similar to how the TPU has been deployed at Google for several years now. Habana, recently purchased by Intel, will also be offered as an instance on AWS. Thus, with the addition of Trainium and Habana, customers will now have multiple alternatives to Nvidia GPUs for training AI algorithms on AWS. Both offerings are promising better performance/$ compared to GPUs, but it remains to be seen whether the discount is large enough to overcome the power and familiarity of Nvidia’s programming language CUDA. The beneficiary of this explosion in processor architectures continues to be TSMC, where all leading AI-training solutions will be manufactured, including Intel's Habana processors.

Other re:Invent News
Other products from Amazon last week with equally unimaginative names were Monitron, for monitoring factory equipment via the IoT, and Panorama, which adds computer vision to camera surveillance for monitoring factory workers for safety violations. Amazon also changed Lambda so that it prices down to the single millisecond as more and more instances of software adopt the serverless architecture. Previously the service rounded up to the nearest 100ms, but many new apps run individual instructions in the cloud that are far shorter.

Arming of PCs Continues
Regarding use of Arm processors in laptops, Qualcomm’s Senior Vice President and General Manager of the Mobile Business Unit noted how committed Microsoft is to making the low-power chips successful and increasing the 64-bit emulation breadth and performance:
“We are 100% dedicated to this market. I think Microsoft is 100% dedicated to us, to make sure that this is going to happen. And I think that, you have a $2 trillion company coming into the market and saying, this is the way to go...And guess what, we're inundated with calls to make sure that this is going to happen. So we're 100% behind this stuff.”
Back in 2014 in Complexity Investing, buried in a footnote about how the Clayton Christensen style of innovation strategy had caused problems for Intel, we noted: “we’d argue that Intel’s business model garnered asymmetric profits relative to their customers – ignoring the principle of NZS. This oversight appears to have cost them dearly in the battle they now face with ARM who shares a win-win relationship with their customers. ARM dominates the mobile and embedded markets, and it appears only a matter of time before they will breach the PC and server markets as well.” (Complexity Investing 2014, p. 29). With the introduction of the Apple M1 and Microsoft’s focus on Arm processors, Intel’s profit-maximizing, zero-sum game with customers has perhaps become an insurmountable problem for the chip maker. I expect the world will need even more x86 processors in ten years than today, but the majority of the incremental growth in compute workloads will likely not be on Intel chips. Speaking of emulation, Microsoft is also reportedly working to bring Android apps to Windows 10. Microsoft has been more focused on merchant silicon from the chip market compared to Google, Apple, and others, and I can’t help but wonder if their future roadmap should include acquisition of one or more big silicon businesses covering both the portable market and the cloud?

Blockbuster Movies Go Direct to Streaming
With the announcement that Warner Bros. will be releasing its entire list of 2021 movie premieres on HBO Max (in conjunction with theatrical releases, pandemic permitting), the experiment could yield a new model for Hollywood. I for one am excited that I won’t have to don a hazmat suit to see Matrix 4 and Dune. Will the LTV/CAC (lifetime value to customer acquisition cost ratio) prove that ultimately foregoing the massive $10B+ box office revenues is worth it to secure long-term direct customer relationships in streaming? The CEO of theater chain AMC commented:
“Clearly, Warner Media intends to sacrifice a considerable portion of the profitability of its movie studio division, and that of its production partners and filmmakers, to subsidize its HBO Max start up. As for AMC, we will do all in our power to ensure that Warner does not do so at our expense. We will aggressively pursue economic terms that preserve our business.”
I am also hopeful we see some more experimentation for premium viewing experiences, such as watch parties with the cast, etc. If Disney (~2/3 of the pre-pandemic US box office) also decides to bypass the box office window, it would accelerate the theatrical existential crisis (I talked more about the collapsing theatrical window in #237). But, we will likely be itching to get out of the house and do something to replace some of that theater going – what will take its place? Escape rooms, bowling, live music or theater, comedy clubs, or immersive art like Meow Wolf?

Miscellaneous Stuff
Linking the Gut Microbiome to Vitamin D and Health
Insufficient vitamin D is suspected to be associated with a weaker immune system and higher risk for various chronic conditions, but new research indicates it may have much more to do with the bacteria in your gut than the typically-monitored D vitamins circulating in your blood. Tracking the active form of vitamin D (which is actually a hormone) rather than precursors revealed: “a link between active vitamin D and overall microbiome diversity; the researchers also noted that 12 particular types of bacteria appeared more often in the gut microbiomes of men with lots of active vitamin D. Most of those 12 bacteria produce butyrate, a beneficial fatty acid that helps maintain gut lining health.” Since having elevated precursor stores in the body (e.g., from more exposure to sunlight or supplementation) was found to have surprisingly little correlation with active vitamin D, researchers were able to conclude that it’s the body’s ability to metabolize precursors to obtain the active form of vitamin D that’s important for health – a finding which suggests supplements and diet changes focused on the gut – rather than D3 – could be the future direction of research.

Amazonian Ice Age Art
Eight miles of rock paintings from around 12,000 years ago have been discovered in the northern part of the Colombian Amazon. The scenes and depictions of now-extinct giant herbivores the size of small cars come from a period when the area was transitioning from Ice Age savannah, scrub and riparian forest to tropical rainforest. “The thousands of ice age paintings include both handprints, geometric designs and a wide array of animals, from the "small" — such as deer, tapirs, alligators, bats, monkeys, turtles, serpents and porcupines — to the "large," including camelids, horses and three-toed hoofed mammals with trunks. Other figures depict humans, hunting scenes and images of people interacting with plants, trees and savannah creatures.”

The Human Condition: Belief in Something is Better than Nothing
This prose from poet David Whyte – concerning the difficulty humans have with an unknown future – is applicable to everything in life, and is certainly useful for investing, where relying on the comfort of predictions is a fool’s game.
“The only thing we can be sure of, and this truth is now being crystalized by the crazily self-magnifying power of the internet, is that human beings have a foundational difficulty in having any real conversation with the unknown. With or without an internet they are always supplying easy answers too early in the process before they ever have the experience, the understanding or even the right to know what is actually happening. From a collective point of view this dynamic grants an evolutionary advantage of course, as a portion of any given population will at least have got the possibilities right ahead of time by mere chance, thus ensuring survival of the species as a whole, but it has disastrous consequences from the point of view of individual human happiness.
Our foundational difficulty is that we human beings find it difficult to live with what cannot be yet understood, with what we are powerless to understand or name. Therefore, we will believe in all kinds of wild notions and nonsense so long as we can proclaim that we believe in something or any-thing at all; especially if we can form a tribe around that fictitious something; most especially if we can advertise through those beliefs, turn the advertising into dogma and then coerce and defraud the other members of that newly gathered tribe out of their money or their integrity.”

Stuff about Geopolitics, Economics, and the Finance Industry
Vaccine Scheming
STAT reports on the efforts people will make to cut the line for the vaccine, noting regulations will be vague and vary by state. As I was skimming the article, this caught my attention:
“The California health department confirmed financial services employees, including those needed to ‘maintain orderly market operations’, will have early access to the vaccine as essential workers, as will people in the news media, such as reporters. State health departments in New York and Illinois did not respond to requests for comment about whether those in financial services would receive a vaccine early.” I’d like to go on record that I do not consider myself an essential worker even if the state thinks that I am...that’s insanity, and I hope better logic is applied.

“How to Save Democracy from Technology”
An article in Foreign Affairs suggests the idea of middleware between big tech platforms and users. This concept is similar to the “algorithm DJs” we suggested in SITALWeek #272. I continue to think this is an intriguing idea that should be explored by governments and proactively by tech platforms themselves. In some ways social media itself is middleware – if you follow certain folks, they are curating what you see as they share and post. While the current iteration of information curation and dissemination seems to have caused more problems than they have solved, surely there are better solutions out there – maybe we should ask AI to tackle the problem, then we could tell the future story of: “How Technology Saved Democracy from Technology”.

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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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