Welcome to Stuff I Thought About Last Week, a collection of topics on tech, innovation, science, the digital economic transition, the finance industry, 1991, and whatever else made me think last week.

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In today’s post: the rock 'n roll culture of Gen Z is video games; EV trucks; Amazon's massive pawn shop; the powerful bundle of YouTube Premium; walking whales; how a 1991 representation of VR might inform the direction of AI and shed a little light on consciousness itself; and much more below.

Stuff about Innovation and Technology
“The Ultimate El Camino”
MotorTrend reports on their test drive of the new Rivian R1T pickup truck – with glowing reviews of the functionality and drivability that are somewhat offset by not-so-great impressions of the user interface (which they deemed overly software based for making comfort and other adjustments). Overall, MotorTrend’s Aaron and Christian were impressed with the acceleration and handling – both on- and off-road – thanks to software-controlled power management and suspension systems that are simply not achievable with a traditional drivetrain. While I have no view on Rivian as an investment (Elon shared his view, dripping with irony: “Don’t want to be unreasonable, but maybe they should be required to deliver at least one vehicle per billion dollars of valuation *before* the IPO?”), overall, the reviews of the EV-specific capabilities of this vehicle are yet more confirmation of the vast difference in skill set, hinging upon a software-centric mindset and vertical integration, for producing a modern EV compared to a dinosaur-fueled ICE vehicle. All that said, there are still no Rivian, Ford, Tesla, or other consumer EV trucks on the road yet, so take it for what it's worth. Ultimately, form factor (truck, van, SUV, sedan, hatchback) and brand are important for a lot of drivers, so rather than a Model-T scenario, we will see a proliferation of makes and models over time. It remains an open question if there are enough network effects in data and software to create a winner-takes-most outcome for autos. I talked a bit more about EVs in #297.

Digital River of Stolen Goods
The WSJ reports on Amazon’s standing as the largest shady pawn shop in existence, with a massive rise in shoplifting rings utilizing the website to hawk stolen goods. From meds to power tools, US retailers are suffering $45B in annual losses, up from $30B ten years ago. Of course, not all of that flows through Amazon, but the article cites many examples of multi-million-dollar, third-party sellers dealing in stolen goods. I remember, many years ago, RFID tags were slated to improve inventory tracking, but their usage never really materialized. It seems illogical to not be tracking reasonably high value retail goods at the item level to know if they’ve been stolen and resold. With all of the ambient tracking networks launching from Apple, Amazon, etc., it seems like maybe there is a technological solution that could be implemented at some point. In the meantime, it’s a free-for-all at drug stores and big retailers – with shoplifting up 30% since the start of the pandemic – and more and more inventory is going under lock and key, all of which is helping consumers choose ecommerce over physical shopping. In some cities chains are simply closing stores or dramatically reducing hours, which benefits no one...except Amazon.

Gen Z’s Rock 'n Roll
YouTube’s head of gaming, Ryan Wyatt, posted an insightful thread on Twitter about the rising importance of gaming to Gen Z and how the gaming industry is evolving to create platforms to engage creators in order to build a broader, more sustainable ecosystem. Gen Z’s favorite entertainment activity is gaming (26% vs. only 10% for TV/movies; source). For Millennials, votes for gaming and video were nearly equal (16% vs. 18%, respectively), and Gen X is nearly the inverse of Gen Z, with only 10% preferring gaming and 29% opting for TV/movies as their top entertainment choice. Wyatt points out that we appear to be in a period of proliferation for new games and that game developers increasingly need to embrace content creators to take share. YouTube’s main perspective on this trend is the growth in video game streamers on their platform, but I think it also applies to creators who make and contribute digital items for the games. Token-based games, NFTs, and a robust creator/gamer ecosystem may be a winning formula. And, games will increasingly cross from the virtual to the real world. In the Philippines, some stores are accepting payment in SLPs (Smooth Love Potion), the tokens from the popular Pokémon-Go-style game Axie Infinity, which recently passed $1B in NFT sales. Tokenomics could play a much larger role in the future economy. Every generation has its own cultural art form and expression. Immersive gaming, or watching live-stream as people play games, is as foreign to some older generations today as rock ’n roll was to their parents in the 1950s/1960s. Video games are rock ’n roll, a culture for a younger generation that will have a wide ranging impact, just as rock music did, but perhaps more so given gaming’s technological underpinnings (although, rock music's ubiquity and accessibility was far greater than gaming so far, which might mean it carried a far larger cultural impact than gaming ultimately will). As games proliferate, the fragmentation of the art form might prevent one game from creating a winner-takes-most power law that would have a broader cultural impact (following my “no power laws in art” rule, as consumers’ tastes and artistic preferences are fragmented and fickle). Regardless of how it plays out, gaming’s impact on culture and society is likely to be as large or larger than the artistic movements of previous generations.

YouTube Premium’s Powerful Bundle
I was a longtime big fan of Google Play Music, but apparently I was their only fan because they shut the service down in 2020 and migrated users over to YouTube Music. I dallied with Spotify for a while, but ultimately it wasn’t for me, so I switched over to YouTube Music, and I am quite happy with it. For new subscribers, YouTube Premium – which includes music and eliminates ads on all YT videos – is $11.99/mo (or $17.99 for up to five family members), making it one of the best subscription values out there, especially if you or your kids spend much time watching videos on YouTube (a music-only sub is $2/cheaper). Apparently, I am not the only one hip to this deal, as the FT reports on YT Music landing 50M total subscribers, up from 30M last October, and being the preferred platform for Gen Z (and this Gen-X’er) vs. Spotify. According to the FT, Spotify has 165M subs, Apple has 78M, and Amazon has 63M. It seems like Apple, Amazon, and Google were able to leverage their platforms to quickly build music subscribers, but, in the case of Amazon and Apple, their growth trailed off. We might expect something similar for YouTube Music as well. However, as I look across the four largest music streaming apps (outside of China), YouTube Premium’s video strength and powerful ad-free video+music bundle looks hard to beat.

Chipping Away App Store Tyranny
The trajectory of app stores toward openness and lower tariffs seems sufficiently obvious that I dislike writing about the topic, but some recent news is worth looking at more closely. Apple has made a few small steps under pressure, with some major exceptions, toward opening up the iOS app store. Recently, a settlement with Japan has resulted in Apple globally allowing developers to send users from an app to the app’s website to set up a direct account and payment methods that bypass the app store. This news follows a concession a couple of weeks ago that allowed developers to offer lower prices outside of the app store. But these changes don’t apply to mobile games, which, as the founder of gaming platform Epic has pointed out, seems to have no justification except for profit, given that games are estimated to be around 70% of total app store sales. Why should Netflix or Spotify be allowed to send users to create direct accounts and payments, at perhaps lower fees, but game developers are stuck with the 30% fees and no direct relationships? Indeed, Apple and Google have quite an unfair advantage in building their music streaming apps (see above paragraph), as they don’t need to pay themselves their own app store fee like Spotify does. South Korea recently passed legislation mandating the app stores allow alternative payment methods, and other countries could follow. App stores are very profitable – the FT reports that a disclosure (from a lawsuit brought by multiple US attorneys-general) showed a 62.5% operating profit margin for the Android Play store in 2019. That profit pool appears to include app store search ads but is still roughly twice the operating profit margin of Alphabet’s overall business (which is weighed down by moonshot and other investments unrelated to Google’s advertising-based businesses). It seems reasonable and obvious to everyone, except for Apple and Google, that the app stores could charge a fair, profitable fee that covers payment, fraud, and supervision costs while making additional profits on app search ads.

Miscellaneous Stuff
Limbed Cetacean
A fossil of a 43-million-year-old four-legged whale has been found in the Sahara Desert by Egyptian scientists. Whales are believed to have evolved from terrestrial, deer-like herbivores to aquatic carnivores over a span of just ten million years.

Until the End of the World: 1991’s Virtual Reality Informs Consciousness
1991 was a great year for movies. According to IMDB’s ranking of the most popular releases from that year, there are classics in the top ten like Silence of the Lambs, Terminator 2, Thelma and Louise, and Point Break (you can also view the list ranked by US box office, with Beauty and the Beast on top at $219M). There were some great comedies (a seemingly dying medium for film and TV these days), like City Slickers, What About Bob, Father of the Bride, and LA Story (it was a big year for Steve Martin, starring in three top-100 movies, including the often overlooked, but excellent, Grand Canyon). There is a prevalent sense of dejection that the movies of the 1980s and 1990s wouldn’t get made in today’s clickbaitable and often mediocre streaming world – or at least not made for cinema, even putting the pandemic aside. As I compare that 1991 list to today’s meager cinematic offerings, I find myself sharing in that lamentation. But, we have much to learn from the popular movies that came out before the commercial Internet and long before smartphones turned us into zombies.

Many classic 1980s/1990s period films exploited glimpses of emerging technologies that were still decades away, like mind-body interfaces and virtual reality. Jaron Lanier, now at Microsoft, coined the term ‘virtual reality’ in 1987, and it rapidly started to enter the pop-sci lexicon. One of my favorite films of 1991 is Wim Wenders’ epic Until the End of the World (the five-hour director’s cut is streaming on the Criterion Channel app). It’s at least two films in one, and today it perhaps might get made as a multi-part show for an ambitious streaming app. Without giving too much away, the first three hours are a classic road trip/detective/chase movie, and the last two hours explore the concept of VR and neural interfaces in more depth. I’d rather not admit to how many times I’ve seen the movie, but, in a recent rewatching, the latter section landed a bit differently with me as we stare down the arrival of VR and neural interfaces for the masses in the next decade or two. Thirty years ahead of its time, Wenders touched on some provocative themes. Another movie that comes to mind from that cinematic golden era that deals with VR and brain interfaces, in a much darker way than Wenders’ classic, is 1995’s Strange Days.

When I think about VR, I immediately start thinking about consciousness. One of my favorite experiences occurred when I first donned the prototype Magic Leap headset – and could actually feel an AR pixie on my finger. Later on, the incredible app Tónandi, produced in collaboration with Sigur Rós, created a similar melting of the real and virtual for me. Consciousness is essentially a filter that creates a certain ‘movie’ – a virtual reality representation of the world around us – that is composed and played for our conscious, awake awareness. The world we experience is thus one of illusion, by many measures. To take a basic example from daily life: our brain offers us a simplified version of reality in which the sun appears to rise, move through the sky, and then set. But, in reality, we are actually hurtling essentially backward through space away from the setting Sun as Earth rotates, with the sun staying fixed relative to Earth. Because we are so used to our brain’s version of events, it’s perhaps not surprising that total solar eclipses can be so strange to experience in person – even when we know, intellectually, what’s really happening, it just doesn’t fit with our brain’s prediction of what is supposed to happen: the sun just doesn’t simply evaporate from the sky in the middle of the day! If you consider a world devoid of conscious awareness, our raw sensory data would consist of electromagnetic and pressure waves. It’s our brain that creates a view of reality based on these alien inputs. Here is how Victor Johnston beautifully puts it in his book Why We Feel:

Consider a world without consciousness. The darkness is a bubbling cauldron of energy and vibrating matter, locked in the incessant dance of thermal agitation. Through shared electrons or the strange attraction of unlike charges, quivering molecules, not free to roam, absorb and emit their characteristic quantal packages of energy with the surrounding fog. Free gas molecules, almost oblivious to gravity but buffeted in all directions by their neighbors, form swirling turbulent flows or march in zones of compression and expansion, according to the dictates of oscillating substrates. A massive solar flux and cosmic radiation from events long past crisscross space with their radiant energy and silently mix with the thermal glow of living creatures, whose hungry metabolic systems pour their infrared waste into the chaotic milieu. But within the warmth of their sticky protein bodies, the dim glow of consciousness is emerging to impose its own brand of organization on this turbulent mix of energy/matter. The active filter of consciousness illuminates the darkness, discards all irrelevant radiation, and in a grand transmutation converts and amplifies the relevant. Dead molecules erupt into flavors of bitterness or sweetness, electromagnetic frequencies burst with color, hapless air pressure waves become the laughter of children, and the impact of a passing molecule fills a conscious mind with the aroma of roses on a warm summer afternoon.

One definition of consciousness I’ve been thinking about is: a system or network sufficiently complex to run simulations, make predictions about future events, and check objective reality against those simulations with sensory input. This model for the brain is something I’ve discussed before, with the work of Lisa Feldman Barrett and Karl Friston (#272), and its focus on highly complex predictive ability is what most interests me as a defining element of consciousness. The sensory inputs used to create and check the predictions are sevenfold: sight, smell, taste, hearing, feeling (external sensation as well as internal feedback from our gut, heartbeat, etc.), thought, and emotion (these last two strike me as sensory inputs, but it’s a non-standard way of framing the senses). Consciousness then filters this reality into our awareness, but we aren’t aware of the unknown number of unconscious simulations the brain runs to try and predict reality. By unconscious here I mean those thoughts (if that is the right word) that we are not consciously aware of. Yet, what if we could be aware of those unconscious simulations? That’s the question that my latest rewatching of Until the End of the World raised for me.

Let’s say we have a VR device that could show you your unconscious thoughts via a neural link. Or, the device could replay your dreams from the night before for you to watch in full conscious awareness. And, it could show you other people’s recorded dreams or experiences, both conscious and unconscious. It doesn’t seem too farfetched to believe this could be possible one day, and that someone is perhaps even working on it right now. Here is where things get a little more trippy: what if an AI could access all of those unconscious simulations our brain is running to predict reality? And, what if it could look across millions of people running millions of simulations below the threshold of conscious awareness? What if that AI could then determine an algorithm that was better than our current “consciousness algorithm” that natural selection has come up with? That would be one heck of a prediction machine. Using my definition of consciousness above – a complex system that can predict with the help of sensory input – it would be an entirely new level of conscious awareness. If consciousness is effectively our waking awareness of the best algorithm natural selection arrived at for predicting the future in order for life to survive and reproduce, then imagine what access to those unconscious simulations at massive scale would bring. It’s the stuff of sci-fi movies for sure, and I am looking forward to someone in Hollywood bringing it to the screen, and then looking back thirty years from now to see how things ended up.

Stuff about Geopolitics, Economics, and the Finance Industry
What Would Marx Do?
Way back in the 1990s, while interviewing for a summer internship, I was asked who I thought Karl Marx would vote for in the next US presidential election. I got the answer wrong – because I naively answered it from an economics perspective – but luckily still got the job. The more interesting answer is that Marx would probably vote for whichever candidate is most likely to cause a proletariat revolt against the ruling class. For example, Marx would not have voted for Biden last year, even if he agreed more with his politics, because Biden is unlikely to provoke mass unrest. It’s just a silly thought exercise with no real-world value, but it keeps coming to my mind when I read about China. Most recently, the CCP has banned video game playing for folks under 18 except for one hour on Fridays, one hour on Saturdays, and one hour on Sundays. In light of the stats on Gen Z and video games above, the CCP’s new directive seems like a particularly harsh sentence. The WSJ reports the gaming ban is an effort to fight niang pao, or “sissy pants”, pop culture following “a notice from China’s Ministry of Education late last year warning that young Chinese men had become too ‘feminine’”. Going a step further, the CCP is banning all effeminate men from television. The lady doth protest too much, methinks. The CCP is also making dramatic changes that further limit personal freedom as well as motivation for entrepreneurship, thus widening the range of outcomes for the country (see #307). Citing such crackdowns as having an actress removed from social media and purging her 25-year film career from movie streaming services, NPR suggests the possibility of a Cultural Revolution 2.0. (As a side note, the increasing cognitive dissonance for a CEO like Tim Cook to endure in order to keep his company 100% reliant on Chinese production must be quite a challenging psychological accomplishment for him!) Birth rates have been dropping in China, even after the country shifted from a one-child to two-child policy in 2016, and men outnumber women by 35M. This declining birth rate trend might suggest a certain pessimism among China’s youth regarding the future. If there were an election in China, I think Karl Marx might favor the incumbent regime, but not as an endorsement of its political ideology.

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