Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, ouroboros, 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: electric tankers; rise of Chrome OS; Texas freezes fabs; reverse-digital taxes and the synthetic news/social economy; pain is more in your head than you think; machine learning physics without models; million dollar virtual goods and the human nature of scarcity; and lots more below...

Stuff about Innovation and Technology
Seafaring Electric Vessel
Developed by a consortium of Japanese shipping/maritime companies, the “e5” tanker will be the first all-electric vessel of its kind. At 60 meters long and powered entirely by lithium ion batteries, its power is equivalent to 40 Tesla Model S vehicles. Asahi Tanker plans to employ the e5 primarily to carry diesel fuel for traditional boats over short ranges. For longer range ocean transport, Corvus (which supplied the e5’s batteries) is working on a combined hydrogen fuel cell/lithium ion battery system they hope to debut in 2023.

Chrome OS now 2nd to Windows
Pandemic-fueled Chromebook sales surged to 14.4% share of the global PC market in Q4 2020, up from 5.3% in Q1, according to IDC. For the year, Chrome rose 4.4% to 10.8% share, a much larger gain than for Apple, which went from 6.7% in 2019 to 7.5% in 2020. Microsoft, which still dominates PC operating systems, is working on a new lightweight version of Windows. The new Windows 10X bears a resemblance to Chrome OS and is slated to launch this year in an attempt to regain lost share, particularly in the education market.

Kia’s Connected Car Network Outage
The upside of connecting everything is you can use an app on your phone to remote start and check on the status of your car. On the downside, when your car company has a systemwide outage, you can’t use your app and dealers can’t order parts, update software, and have a lot of angry customers on their hands. This happened last week to Kia, which is still trying to get their systems online. They claim the outage isn’t a result of being hacked. The rising importance of having world-class software and security remains under appreciated by many legacy companies.

Texas Deep Freeze Derails Chip Fabs
While I am usually ranting ad nauseum about the fragility of the global semiconductor supply chain related to the extreme concentration of manufacturing in Taiwan, now Texas is in the crosshairs. The brutal cold caused Samsung to take down all of its Austin capacity at a time when the industry is already experiencing significant chip shortages. You cannot simply reboot an advanced chip fab, so the capacity could remain offline beyond the current inclement weather in Texas. The WSJ reported that Austin represents 28% of Samsung’s chip capacity (according to a Citi analyst), but that number strikes us as much too high of an estimate (this report in Semi Engineering puts it at 5%). Samsung is mulling a $17B capacity expansion in the state, but they might want to look West for warmer weather. Regardless of how much capacity Samsung (not to mention many other chip companies) have in Texas, the point remains the same: the world is too exposed to an overly fragile semi supply chain.

Hazards of Digital Taxation
Maryland state legislature passed a 10% tax on all revenues from digital advertising shown in the state for any company with over $100M in yearly income from ad sales. I’ve discussed the rise of digital taxes in the past as the economy transitions from analog to digital, and, if this type of tax spreads, it would represent a meaningful negative impact to large companies like Google, Facebook, and Amazon (the three companies are backing a lawsuit against Maryland). Australia has been in the news for looking to tax Google and Facebook by forcing them to pay when news shows up in search results or is shared on Facebook. Google caved and struck a global deal with News Corp to pay for news, while Facebook just banned users in Australia from sharing any news across their social networks (and blocks any news from ‘Australia’ from being shared anywhere around the world, which raises the question: if a Koala does something cute Down Under, and no one shares it on Facebook, did it really happen?). Maybe every time someone searches for NZS Capital and clicks on our website, Google could give us a dollar? Or, when someone shares SITALWeek on Twitter, maybe I should get a dollar from Twitter too? My sarcasm here should tell you on which side of this “link tax” debate I stand.

If we step back and look at this issue from a higher level, it seems like a pretty decent chunk of the Internet economy today is a snake eating its own tail. Advertising drives app downloads and news (or more often ‘news’) consumption, which drives advertising for more games/social apps and news with more ads... On the one hand, I disagree with the way Apple is approaching their privacy changes with IDFA (I think customers should be able to clearly choose whether they want targeted advertising, and Apple’s products shouldn’t be treated as special). On the other hand, a world without an ever-bloating fake news/advertising ouroboros seems nice. I am pro-ads – combining useful ads with content can be a win-win. I also live off of and heavily support quality journalism; however, only a small fraction of the news that is feeding the snake is quality. Pardon me as I wistfully dream of how much better the world was before Facebook.

Engineering Legend Talks with Lex
Jim Keller, who recently left Intel and landed at Tenstorrent to pursue deep learning, was on Lex Fridman’s podcast last week (YouTube video version). I think the key concept that drew Keller to Tenstorrent is the general idea that instruction sets and faster processors don’t matter as much as advancements in AI and scaling of simultaneous workloads. It’s a wide ranging conversation covering many interesting topics.

Shopify Staying Seller Focused
I revisited the topic of Shopify and why I think they should NOT start a marketplace in this tweet, which includes some comments from the Shopify CEO on their recent earnings call.

Miscellaneous Stuff
Modulating Pain Perception
The feeling of pain in the human body is a complex interaction of the brain’s prediction of potential pain, feedback from damaged tissue, and the activity of neurons throughout the body. Pain itself, like all of the brain’s attempted interpretations of reality, can be conceived as a simulation. Simulating pain before feedback of real damage has the advantage of increasing endorphins, the body’s endogenous painkillers. The evolving view of pain raises the question about how big of a role the brain can play in pain relief, and VR opens up the potential to reconstruct reality in a way that can decrease the perception of pain, according to this BBC Science Focus article.

ML Throws Theory Out the Window
Inspired by the theory that the universe we inhabit might be a simulation, Hong Qin of the Department of Energy’s Princeton Plasma Physics Laboratory created a new type of machine learning algorithm to predict the nature of physical systems without any theory, e.g., predicting the motion of planets without knowing physics or Kepler’s three laws. If the universe is or acts like a simulation, then space can be broken down into discrete units, and interactions can be analyzed using discrete field theory. The algorithm may be useful in controlling the plasma in fusion reactions (something I noted in SITALWeek #277 that Google’s DeepMind is also striving for a breakthrough on). “‘In a magnetic fusion device, the dynamics of plasmas are complex and multi-scale, and the effective governing laws or computational models for a particular physical process that we are interested in are not always clear,’ Qin said. ‘In these scenarios, we can apply the machine learning technique that I developed to create a discrete field theory and then apply this discrete field theory to understand and predict new experimental observations.’” The question remains open as to whether it’s helpful to have theories of how things work, or if it’s better to just have data and be able to make predictions without theories.

Did Magnetic Reversal Force Neanderthals into Caves?
New evidence theorizes that Neanderthals retreated to caves to protect themselves from increased radiation caused by the dramatic flipping of the Earth’s magnetic field 42,000 years ago. The period also coincided with a low point of solar activity, which would have exacerbated the increased cosmic radiation and UV exposure (from shifting/reduced ozone cover). One of the more speculative, but interesting, postulations tied to this theory is that red ochre cave paintings largely came about because humans started using the medium as a form of sunscreen, and sheltering from the harsh atmospheric conditions afforded time and opportunity to create art.

Stuff about Geopolitics, Economics, and the Finance Industry
Rarifying Digital Assets
A certified version of the epic Nyan Cat meme sold on Friday for 300 ETH (worth around $590k at the time of the auction) via the Foundation app. Recently, the CryptoPunks 4156 digital avatar sold for over $1.2M. The new owners of these digital assets are in possession of a bit of code certifying they own the virtual item. These are examples of non-fungible tokens (NFTs), and they use blockchain technology to create verifiable ownership (in part or whole) of physical or virtual items. They enable the rise of collectables marketplaces like Rally Rd (see SITALWeek #265), and are increasingly used to create ownership of less tangible items like digital artwork or even tweets. I’ve talked in the past about the collision of abundant capital and scarce assets, and this trend is hitting overdrive right now as the price of everything with any sort of scarcity is rising at a rate that should also raise eyebrows. When excess liquidity is the most abundant force in markets as a result of fiscal and monetary policy (enabled by technology-driven deflation, which may just be getting started – see SITALWeek #258), and you are penalized for holding cash, the idea that money is literally burning a hole in your wallet is real. The marketplace seems to be responding with “why not” – expressed clearly by Elon Musk last week in this tweet: “When fiat currency has negative real interest, only a fool wouldn’t look elsewhere. Bitcoin is almost as bs as fiat money. The key word is ‘almost’.”

Some items have inherent value because they can be used to produce objects that create even more value, e.g., semiconductor chips that run AI that creates billions of dollars in revenue for Google. Other things are valuable because of a shared fiction that they should be valuable. Art can sometimes be uncategorizable. I tend to agree with Penn Jillette who characterizes art as the high velocity collision between the intellectual and the visceral - an explosion of thoughts and feelings. With NFTs the intellectual part is clear, but the visceral feeling for digital goods is perhaps harder to grasp.

The concept of scarcity can perhaps contribute to a visceral feeling about a digital item, and there seems to be a human desire to manifest scarcity out of abundance. I was struck by the framing of Rony Abovitz, the visionary founder of Magic Leap, on the topic of NFTs in these tweets: “in the physical world scarcity is the norm, and getting something amazing to everyone is really hard and expensive. In the digital world everyone can in theory enjoy from the cornucopia of plenty - and it is hard and somewhat tricky to make digital things scarce - because they naturally like to be free. Yet we take great pains to bring in the problems and scarcity of the physical world into the digital world. Somehow the utopian notion that everyone can easily partake in digital things is something we can not deal with as a society. It really feels like old economic theories colliding with something bigger, and the outcome is not yet clear.”

Tim Sweeney, founder of Epic, which created the popular game Fortnite, opined on NFTs in reference to this long post: Into The Void: Where Crypto Meets The Metaverse, tweeting: “This is the most plausible path towards an ultimate long term open framework where everyone’s in control of their own presence, free of gatekeeping” while also noting that the current state of the art for NFTs “is far from the 60Hz transactional medium needed for 100M’s of concurrent users in a real-time 3D simulation.”

It seems that excess liquidity in the real world has made scarcity even more scarce, and the next logical maneuver is to go from scarce analog assets to scarce digital assets. The sky appears to not be the limit, at least for now. Paradoxically, the democratization of asset ownership via NFTs may ultimately just replicate and reinforce the same concentration of wealth and scarcity dynamics seen in the analog world.

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