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

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In today’s post: digital sovereign currencies are poised to institutionalize deeply negative interest rates, and that's a big problem in an economy with technology driving deflation; health tech is getting better batteries, the ability to detect pregnancy, and the power to examine your poop; the tribalism torch is shifting back from politics to sports, and that makes me happy; Microsoft gives up on bringing people back to the office; Jaron Lanier connects the dots; detecting emotion is very hard, if not impossible; and much more below.

Stuff about Innovation and Technology
Whoop for Silicon
The new Whoop fitness band features batteries with silicon anodes from Sila. The silicon replaces graphite in order to hold more lithium ions compared to current technology. The incorporation of Sila’s silicon anode material is said to give the new Whoop a 17% increase in energy density over the prior version, which allowed Whoop to shrink the wrist device by 33% while maintaining five days of charge. As is always the case with novel battery improvements, commercial scaling has proven to be extremely difficult. Sila, run by a Tesla veteran, has pushed back its goal of creating batteries for EVs (they have a current partnership with BMW, among others) from 2023 to 2025, stating: “We were naïvely optimistic about the challenges of scaling and bringing products to market”. One issue is the complexity of completely replacing graphite with silicon – for now, Sila’s material is only 25% of the Whoop battery.

Wearable for Early Pregnancy Detection
Smart ring maker Oura posted results of their conception study showing that the temperature sensors on the ring were able to identify conception in all study participants “on average 9 days before these individuals received a positive at-home pregnancy test and only 5.5 days after conception”. While the findings were based on only 30 pregnancies, the data were consistent across the study group.

‘Seatable’ for Early Disease Detection
Researchers at Stanford’s School of Medicine hope to have their new smart toilet in clinical trials later this year. The porcelain doctor has cameras, dipsticks, and algorithms to identify solid waste characteristics, ‘urodynamics’ (including color and volume), and biomarker analysis to spot suspect parameters. For toilets with multiple users, the device recognizes everyone’s unique ‘anal print’ 🧐💩. Data is reportedly anonymized before it’s uploaded to the cloud. Researchers at Duke also have a smart toilet in development, and several startups are working on smart seats and other connected bathroom devices.

Tribalism Torch Passes Back to NFL, Disney Superheroes
Last week’s NFL kickoff game had the highest ratings for a season starter since 2015. News of record sales for 2022’s Super Bowl ads landed last week as well. And, rounding out news of strong NFL interest is Amazon reportedly looking to supercharge Prime with the big Sunday Ticket package at a cost of $2.5B/year. Sports are a primary surrogate for humans’ tendency toward tribalism. And, so is politics. For the past few years, politics really took the lead in human tribalistic expression, and perhaps we are seeing that torch go back to sports. As I wrote earlier this year in #286: “We humans love rivalries – a good ‘us vs. them’ – we can’t help ourselves. Sports provide that outlet for many people. Last year, there was plenty of ‘us vs. them’ going on without sports, so perhaps sports can regain their spot as our tribalism of choice at some point in the future.” And, there are other indicators of shifting tribalism outlets, most notably the ongoing decline of religious membership in the US. In contrast, one new form of religion – superhero movies – seems to be doing quite well. Disney’s Shang-Chi had the best Labor Day weekend in history, despite the ongoing pandemic. The success caused Disney, which is perhaps feeling pretty good about its Disney+ subscriber base, to announce exclusive theatrical releases for the rest of this year instead of simultaneous streaming+box office releases. Since evolution has forced our brains into always picking sides, I’ll take sports or superheroes any day over a two-party political system.

Staying Flexible During the Great Work Reshuffle
After eighteen months of uncertainty over returning to the office, Microsoft is throwing in the towel and no longer targeting a specific date for the reinstatement of in-office work. The decision comes despite a new peer reviewed study of 61,000 Microsoft employees showing that collaboration between groups at the company has been stymied by remote work. Microsoft is in a unique position to both experimentally improve flexible work and gain from the outcome as the new way of working further embeds their suite of productivity tools in the corporate world. The company is iterating quickly on new software+hardware collaboration products and staying flexible themselves, as they explain in this blog post. A LinkedIn poll indicates 87% of workers prefer to stay remote at least half of the time (based on ~300K employees at 60+ global employers), and 81% of companies are changing policies as a result (per 500+ surveyed executives in the US and UK). The adaptability of most technology-based companies should continue to give them a significant leg up in recruiting given the increasing permanence of the hybrid work world.

CAC Stymies DTC
Retail guru Jason Goldberg points out the disappointing results of the leading direct-to-consumer brands like Warby Parker and AllBirds. The main problem is the unsustainably high cost to acquire or re-acquire customers (to the benefit of the big Internet ad platforms like Facebook). It’s a particular problem for low-frequency purchases like eyeglasses, where you might need to keep re-acquiring the same customer relationship. The issue, Jason indicates, may favor in-house brands at the likes of Target or Amazon, where existing relationships lower customer acquisition costs dramatically.

Miscellaneous Stuff
The Invisible AI Hand
Jaron Lanier, a founding father of VR and current Microsoft researcher, has always offered sharp insights into the intersection of culture and technology, so he’s frequently quoted in SITALWeek. Last week, Lanier spoke with Lex Fridman (YouTube video) on a variety of topics, notably including Lanier’s opinion that AI is just another tool humans invented, not some new higher power, and the problems with social media. While these might be cliché topics in many circles, Jaron’s perspective and ability to connect dots yields interesting insights. One observation connecting tech and economics that stood out to me was: “The AI idea isn't really new, I would say it was born with Adam Smith's invisible hand with this idea that we build this algorithmic thing, and it gets a bit beyond us, and then we think it must be smarter than us. And, the thing about the invisible hand is absolutely everybody has some line they draw where they say no, no, no, we're going to take control of this thing. They might have different lines, they might care about different things, but everybody ultimately became a Keynesian because it just didn't work. It really wasn't that smart. It was sometimes smart and sometimes it failed you know, and so if you really know people who really, really, really, want to believe the invisible hand is infinitely smart screw up their economies terribly. You have to recognize the economy as a subservient tool; everybody does when it's to their advantage. They might not when it's not to their advantage. That's kind of an interesting game that happens, but the thing is it's just like that with our algorithms, you can have a sort of a Chicago economic philosophy about your computer and say no, no, no, my things come alive, it's smarter than anything.” For those on holiday last week, I mentioned Lanier’s coining of the term VR in 1987, and I wrote about how peering into our subconscious predictions will likely be a source of information for future algorithms; and, VR may even allow us to actually see those simulations that run below our conscious perception.

Context Key to Decoding Emotion
A new paper from Lisa Feldman Barrett and collaborators shows just how hard it is for humans – let alone AI – to read emotions based on analysis of facial expressions without other context. It turns out that even professional actors, who tend to be extremely adept at portrayal of authentic emotions, rarely utilize stereotypical emotional expressions (e.g., a scowl for anger or pouting for sadness). Indeed, not only did actors communicate the same/similar emotions using a variety of facial expressions, they also used expressions with underlying similarities to convey a diversity of emotions – depending on the situation. Barrett and colleagues were able to conclusively tease out the importance of context for facial expression interpretation using several clever studies. In one study, participants were divided into two groups that had to assign emotional states to photographs of actors either with (one group) or without (other group) the corresponding written scenario the actor was portraying in the photo. Importantly, the written scenarios didn’t give direct emotional cues, like “pretend you are sad”, which are often interpreted with stereotypical facial expressions; rather, they consisted of descriptions lacking direct emotional references, e.g.: “He is a motorcycle dude coming out of a biker bar just as a guy in a Porsche backs into his gleaming Harley”. For the vast majority of photos, the assigned emotions didn’t match up between the group who had access to the scene description and the group who didn’t, indicating that context plays a vital role in assigning emotional state. In another study, Barrett had professionals score the same photos using the Facial Action Coding System (FACS), which breaks down muscle movements into action units (AUs) that can be used to extrapolate emotion (apparently, they tried computerized FACS analysis but had to rely on humans when the algorithms systematically miscoded certain AUs). The researchers then compared the coded faces against the emotions assigned to the corresponding written scenarios by a separate group of study participants. The Authors found little common ground in AU assignments within emotional categories, and similar AU clusters matched up with a diversity of emotions. So, not only could the computational algorithms not get the raw data inputs right, but any emotional extrapolation based on scored facial characteristics alone is likely to be incorrect given the variety and inconsistency of facial expressions used to convey a particular emotion (and that was just among a group of English-speaking North American actors). My conclusion from this interesting research is that it’s going to be darn near impossible for AI to accurately read human emotion without an enormous amount of context, which in many cases is not going to be accessible. The Nature Communications paper is explained in detail in this article.

Stuff about Geopolitics, Economics, and the Finance Industry
The Big Gig Economy
After appreciably dipping in 2020, the number of Americans who are classified as independent contractors rose from 41M in 2019 to 51M today. This surge follows a fairly flat growth curve over the five years prior to 2020. Nine of the ten million new independent workers from 2019 to 2021 were part timers, suggesting they might be picking up occasional gig-economy jobs like food delivery. This trend is evolving against the backdrop of millions of job openings as employers struggle to find full- or part-time wage/salary-based workers. Flexibility seems to be the main driver of the shift to gig work. Restaurant Dive indicates that the restaurant industry is still 1M workers short of pre-pandemic levels as folks have moved onto other industries – and seem unlikely to return.

Digital Currencies Enable Negative Rate Fallacy
A lot of people are worried about inflation in the short term, but longer term, I believe deflation is the more likely outcome thanks to ever accelerating technological advances (see: The Improbability of Rising Rates). And, with dramatically slowing global population growth – which is likely to go negative far sooner than people generally believe – the global economy is losing a key consumption-driven growth engine. Indeed, we seem to be losing the gas for Adam Smith’s vision for capitalism. Ultimately, I think the reality of deflation and changing population dynamics will indelibly change the theory of how an economy should work. For example, we’ve discussed Brian Arthur’s idea that the economy is moving from growth maximization towards a distributive era. Rather than maximizing the speed of pie growth, the shifting economic engines now favor attending to how best to divide the pie – ideally in a way that improves economic equality while still producing growth and a modest degree of inflation (which would stabilize rates and likely prevent deeply negative rates). However, the vast majority of policy makers are stuck in the “grow the pie as fast as possible” mentality of the last few hundred years, so much so that they are contemplating a future of dramatically negative interest rates. The WSJ reports on adoption of digital sovereign currencies backed by central banks, which could make it far easier to implement deeply negative rate policies. Negative rates incentivize hoarding physical money (which isn’t subject to rate deductions); but, if cash gives way to digital currency, negative rates could motivate people to spend or invest the money. To me, that line of thinking just highlights the problem – we are stuck in a high-growth mentality when we need to shift to moderate growth (or possibly no growth per capita) with faster redistribution. Do we really need deeply negative rates to drive even more asset price bubbles, which are a significant contributor to inequality? With 7.5M Americans effectively “losing” their job last week, as government pandemic support largely ended, pursuing an economic agenda to ward off deflation with ever-declining rates seems a bit misguided. It’s an Industrial Age mentality that just doesn’t fit with the world we find ourselves in today. Technological progress provides the deflationary backdrop and labor solution to complete this massive shift from growth to slower growth with increased distribution. The irony is not lost on me that, on the surface, China is trying to carry out this exact switch (under the surface, however, the aim is more likely about power consolidation than than redistribution of economic fortunes). The key difference for the West compared to China is: we are much better positioned to enter into a distributive era while preserving freedom, entrepreneurism, and the motivation for innovation. Indeed, I am optimistic that we can accomplish this redistribution (while maintaining modest growth) without resorting to authoritarianism. Our economy is a hugely complex system with wildly unpredictable outcomes, but one thing seems likely: as analog objects like money go digital, the pace of change is going to accelerate dramatically.

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