Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, ketchup, 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: billion dollar machine learning models; NFL up for grabs as streaming services increasingly need to bundle and provide more value; Jack Dorsey on regulatory capture and algorithm curation; glasses vs. goggles tech battle for augmented reality; lower power 5G; thoughts on blockchain technology; Taiwan in the spotlight; and lots more below...

Stuff about Innovation and Technology
You Say Tomato, I Say Semiconductor
Heinz has introduced their new Keystone Automatic Condiment Dispenser. Most people will see a sanitary way to perfectly proportion out 0.5 ounces of ketchup, but, as semiconductor investors, we see a new use case for an optical sensor, a safety switch, a microcontroller, and a motorized pump! Now, it really is a matter of national security that we increase US chip production. Keystone comes in ketchup red or mustard yellow.

Digital Humans Made Easy
Epic’s Unreal Engine released their MetaHuman Creator, “a cloud-streamed app designed to take real-time digital human creation from weeks or months to less than an hour, without compromising on quality. It works by drawing from an ever-growing library of variants of human appearance and motion, and enabling you to create convincing new characters through intuitive workflows that let you sculpt and craft the result you want.” The first video on this product page is a good way to see how easy it is to use and how realistic the results are.

Autonomous Lettuce Weeders
A new study in Salinas Valley – the “Salad Bowl of the World” – showed autonomous weed machines were effective at removing around 50-60% of weeds from romaine fields compared to 30% for standard human-based methods. In multiple trials, the machines removed as much as 85% of weeds in half the time.

Runaway Costs of Language Models
The Next Platform discussed the rising cost of language machine learning models, which could top $1B to run five years from now. “Bryan Catanzaro, VP of Applied Deep Learning Research at NVIDIA put this into staggering context when he told us that he thinks it is entirely possible that in five years a company could invest one billion dollars in compute time to train a single language model. Think about that for a moment.” The value of the output of these models could be in the billions, but, obviously, only a few companies will be able to afford them. In the AI race, small leads can compound into unbeatable and potentially concerning monopolies through the increasing returns of the technology.

Clouds Heading Green Energy Race
The massive data centers at Amazon, Google, Facebook, Apple, and Microsoft consume 45 terawatt-hours a year – similar in size to the energy needs of all of New Zealand – according to the FT. Overall, the tech sector (including consumer devices) only accounts for ~2-3% of global greenhouse gases; and, in the face of rapidly increasing demand, the tech giants are charging ahead to secure renewable energy and achieve carbon neutrality or, in some cases, net negative carbon footprints. The FT cites one report that tech companies have accounted for 38% of new renewable energy capacity in the last five years. Google and Microsoft are already 100% renewable for their data center energy needs. Facebook’s energy needs quadrupled from 2015 to 2019 as users spent more time consuming streaming video.

Top Dollar NFL Media Rights
Last Sunday’s big football game on CBS had 5.7M streaming viewers – up from 3.4M in 2020 – and more than double 2019’s 2.6M online viewers. Overall, viewing was down from 102M in 2020 to 96.4M across all venues (following a 1% viewing rise from 2019 to 2020). All of the NFL rights are effectively up for renewal, with a deal expected soon that could fetch as much as $100B over the next decade, a significant increase over the current $7.5B annual rights. With a lot of moving parts and various players jockeying for marquis games to bolster streaming platforms, it will be interesting to see how it all plays out.

Mega Media Bundle in the Works?
The Information speculates that Comcast is looking to bundle Peacock with HBO Max or Viacom’s new Paramount+. I’d take the speculation a step further and suggest there is a very high chance we will ultimately have a bundle of everything that is not Netflix or Disney+/Hulu. Combining, in a single consumer app, all the content from WarnerMedia, ViacomCBS, NBCUniversal, and the very long tail of stub content seems like the only way forward for both consumers and media companies. This would greatly simplify the situation and solidify the power squarely on the side of content owners rather than traditional distributors or the new connected-TV providers like Roku and Amazon Fire. There is the obvious joke about bundling, de-bundling, and re-bundling, but what’s changed today compared to the days of the cable bundle is the content owners have a direct connection with their customers.

Dorsey on Regulatory Capture and Algorithm DJs
Regulatory capture is a real phenomenon that happens over and over again – governments try to regulate companies with too much power, and, in doing so, entrench that power even more. Jack Dorsey’s sincere desire that regulation still allow for startups to thrive and new ideas to take hold is refreshing to say the least. Speaking at the Goldman Sachs tech conference last week Dorsey said: “That's really our focus as some of the proposals being made by governments around the world would further entrench some of the biggest players because of the resource requirements in order to operate them. And that really takes away from any start-up being able to start. Like if we were starting Twitter today versus 15 years ago, be very, very challenging given some of the requirements and proposals being made to even begin because of the operational needs and requirements in order to do so. So that's what we want to put first and foremost, is we need to optimize for more ideas, more experimentation, and that's really going to manifest in more start-ups being able to start and contribute to this space.” As I have mentioned in the past, I am a fan of Twitter’s algorithm curation efforts (a project called Bluesky), which would allow third parties to express different versions of a social feed. Commenting on Bluesky, Dorsey said: “The value of hosting content on a service like ours is diminishing greatly. The value of being able to recommend content on a large corpus of conversation is where everything is moving to. And that's why the focus on these recommendation algorithms and opening it up to third-party developers or companies to provide their own ranking algorithms and creating that marketplace for it and taking on a market-driven approach is so important.” We discussed the idea of algorithm DJs back in SITALWeek #272.

AR Overlay vs. Immersion
Based on various rumors, Apple is initially not planning on using the same nanostructure waveguide technology for AR that Microsoft uses in the HoloLens and Magic Leap uses in the ML1. The drawbacks of the waveguides are a smaller field of view and the energy needed to achieve acceptable levels of brightness. The benefits are that you actually get to see the real, three-dimensional world through the lens, which saves significant computational power required to recreate the world on a screen, and it leans on the brain’s ability to fill in the gaps (effectively outsourcing some of the AR computation to humans without us knowing it). It’s also, at least in my experience, less prone to causing nausea than full immersion. The Information reports that Apple’s first headset will use cameras to film and recreate the outside world on a completely immersive screen, and The Nikkei reports that Apple is working on a new display technology called micro OLED, created directly on semiconductor substrates to save power and space, possibly for an AR headset. It’s not clear (assuming any of this is even true) whether Apple’s plan is a stop gap or if their end game is to have AR be completely immersive, replicating the 3D world on a 2D surface. Sony has had micro OLEDs commercially available for a while as well, so Apple is playing catch up. Meanwhile, research continues to improve nano waveguide technology as Harvard scientists have overcome some of the aberration problems of red, green, and blue light passing through substrates.

Super Fast and Efficient 5G Chip
Qualcomm is showing off a new 5G chip called the X65 that can download at speeds of 10Gbps (under ideal conditions). While it’s true that wireless networks run on a finite amount of spectrum (limited by RF breadth) and must contend with noise-limited transmission rates (per the Shannon-Hartley theorem), as speeds increase into the Gbps range, we end up creating a lot more space in time – like increasing the volume of water running through a garden hose by turning the sprayer from ‘mist’ to ‘jet’. For example, if I can download an entire movie in one second vs. ten seconds, it frees up 90% of the previously allocated time for other users. So, concurrent usage can still be an issue, but the speeds are so fast you end up with fewer overlapping users. However, the bigger news in the Qualcomm announcement is the X65’s lower power requirements in both handsets and fixed wireless access points. That means that fewer access points and less power are needed to send and receive, both of which could significantly lower the cost of using 5G as a fixed-line broadband substitute or as a replacement for WiFi in buildings.

Miscellaneous Stuff
Literacy, Luther, and the LvOT
Becoming literate changes humans’ brains in significant ways as children grow, yielding a “specialized area in your left ventral occipital temporal region, shifted facial recognition into your right hemisphere, reduced your inclination toward holistic visual processing, increased your verbal memory, and thickened your corpus callosum, which is the information highway that connects the left and right hemispheres of your brain.” Human brains began this shift widely in the 1500s due to the religious view of Martin Luther that everyone should be able to “read and interpret the Bible for themselves”. Joseph Heinrich, Chair of the Department of Human Evolutionary Biology at Harvard concludes: “The story of literacy, Luther, and your left ventral occipital temporal region is but one example in a much larger scientific mosaic that is just now coalescing. Our minds, brains, and indeed our biology are, in myriad ways, substantially shaped by the social norms, values, institutions, beliefs, and languages bequeathed to us from prior generations. By setting the incentives and defining the constraints, our culturally-constructed world shape how we think, feel and perceive—they tinker with and calibrate the machinery of our minds.”

Stuff about Geopolitics, Economics, and the Finance Industry
High Fiber SPAC
Breakfast cereal maker Post Holdings is launching an SPAC “to partner with a company in the consumer products industry that complements the experience and expertise of Post’s management team and is a business to which Post’s management believes it can add value”. One of the peak signs of the dotcom bubble was large corporations setting up venture capital funds. Perhaps history does rhyme.

Nobody Puts Taiwan in a Corner
With Taiwan increasingly in the spotlight (see our op-ed and/or CNBC spot from two weeks ago if you missed it – apparently even Biden is taking our advice 😉: “The Biden administration has pledged to take immediate action to address a global shortage of semiconductors that has forced the closure of several US car plants”), the island nation is in a great position to get other countries to directly acknowledge its sovereignty, which represents a challenge to neighboring China’s view of the situation, as the FT reports: “‘Everyone sees this situation and thinks that they cannot ignore Taiwan any longer’, John Deng, Taiwan’s trade representative, told the Financial Times. ‘This is definitely beneficial to Taiwan’s trade agenda.’”

NZS’ Complexity Investing Gets a Minor Facelift and Digest Version
If you liked the Brian Arthur review article on Complexity Economics that I talked about last week, you’ll love our paper Complexity Investing, which our tireless editor has cleaned up with seven years (!) of typo feedback. And, there is a brand new condensed version of the paper that we just published. Both can be found here.

Blockchain Technology
Blockchain-based technology, which effectively decentralizes trust, represents a significant innovation for financial transactions. As the internet moves information from centralized to decentralized, pockets of closely held information are increasingly not a source of advantage over others, which continues to have a massive impact on our world. Institutions that hoard information centrally and monopolize trust will increasingly become disrupted. We therefore follow closely the potential for blockchain tech to create a new financial operating system and democratize asset ownership. That optimism always needs to be balanced with the massive regulatory complex of the banking industry, which, in part, preserves dinosaur companies and harms consumers but is also useful for tracking down criminal activity.

It’s not clear yet how the battle will play out between financial innovation and the luddite banking sector, but the fight is certainly underway (our tech regulation paper on pace layers discusses how governments eventually catch up to technological disruption, and, in doing so, often tragically cement the incumbents). If financial innovation follows other trends in the analog-to-digital economic transition, then solutions that maximize non-zero sumness, or win-win, should prevail.

We suspect that, over time, more companies will transact in Bitcoin or other blockchain-based cryptocurrencies, and it makes sense for companies to hold reserves in currencies they transact in. In that light, Tesla buying $1.5B of Bitcoin probably makes practical sense given they are going to accept it for vehicle sales. It's logical that a digital currency will rise to prominence as the economy drops its analog shackles. Whether that digital currency will be Bitcoin, and what value it will hold, are questions left to the future unknown. But in the present, there seemed to be a lot of misplaced cynicism over Tesla’s Bitcoin buy, in particular related to Elon Musk. I suspect many people are bothered by Musk because he is a real person. Many people have come to expect that famous, wealthy, and/or intellectual people are robots playing a role without personality or conflict. (Elon's 2nd appearance on Rogan last week was an enjoyable conversation covering many fascinating technology topics.) Further cynicism over Tesla buying Bitcoin is related to the environmental impact of the energy consuming currency. Those concerns might be valid in the short term, but, longer term, blockchain technology could help reverse expensive negative externalities of the analog, Industrial Age economy; and, blockchain technology could even be used to create and tax the carbon economy, which would have far larger positive ramifications than the energy costs of Bitcoin.

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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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