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

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In today’s post: the narrow appeal of being social in VR; pandemic-driven behavioral changes, or was it all just stimulus?; robots are slow moving, but slaughterbots are swooping in now; a look at the fragmentation of shared culture from ancient history to today; it's surprisingly hard for governments to spend money on infrastructure; Kenny G has something important to say; and much more below.

Stuff about Innovation and Technology
Robots: Crude and Creeping
The International Federation of Robotics reports that 2020 saw a 12% increase in the market for professional services robots – including cleaning, logistics, medical, hospitality, and agriculture – to $6.7B. Cleaning and medical applications accrued the largest increases. Consumer service robots for household use rose 6% to $4.3B, a little more than half of which was robotic vacuum cleaners. Wired reports further that robots are still pretty basic, showing little evolution over the years, and are still a far cry from the vision of autonomous, AI-driven humanoids. Even Amazon’s own robot ambitions leave much to be desired, as they are unable to do many of the basic tasks humans complete in warehouses. We’ve seen many examples of consumer-driven technological innovation influencing industrial and/or enterprise use cases (the smartphone being a prime example, which went from consumer apps to changing the way enterprise software is done), so we may want to place our hopes on domestic robot growth to create a platform for machine learning that may broaden use cases.

Slaughterbots Have Left the Barn
Autonomous rotary-wing attack drones, STM Kargu-2s, were used by Turkey to attack the Libyan National Army in 2020. According to the UN (PDF), it’s the first known report of a completely autonomous drone strike with no humans in the loop. The 7 kg drones can fly in autonomous swarms and have facial recognition capabilities, which make them the actual slaughterbot nightmares I’ve written about here previously. The drones are in mass production by a country not well known for its sophisticated ability to produce such things. Autonomous warfare was of course just a matter of time. In an op-ed in IEEE Spectrum, several academics, including MIT’s Max Tegmark, call for a moratorium on development of autonomous killing drones. But, with the technology essentially available off the shelf (drones, cameras, explosives, and open-source facial recognition algorithms), I am not sure that enforcement would be possible. Another author of the op-ed, Berkeley AI researcher Stuart Russell, commented in the FT: “Put very simply, we don’t sell nuclear weapons in Tesco — and with these weapons it will be exactly like that”. In a lecture cited in the FT article, Russell stated: “A lethal AI-powered quadcopter could be as small as a tin of shoe polish . . . about three grammes of explosive are enough to kill a person at close range. A regular container could hold a million lethal weapons, and . . . they can all be sent to do their work at once. So the inevitable endpoint is that autonomous weapons become cheap, selective, weapons of mass destruction.”

Pandemic Changes: Real or Stimulus?
Adding to a growing list of pandemic behaviors that don’t seem to be sticking, the WSJ reports that several restaurant chains are paring back or shutting down delivery options for stretches of time: “Some eateries, struggling with labor shortages and the return of customers to on-site dining, are choosing to scale back at times on often less-profitable delivery and to-go orders”. I’ll be curious to see how big the delivery market is long term – it still seems to be a zero-sum market (e.g., see #277). Someone might still emerge with a profitable formula for a large delivery platform, but it's not yet apparent to me who that might be. It’s hard to separate how much consumer appetite for delivery since the start of the pandemic has been an actual sticky behavioral shift vs. being powered by stimulus checks and fed by the desperation of restaurants trying to survive. Complicating the matters further, low rates and monetary stimulus over-funded venture funds, which then over-subsidized businesses like food delivery. Much as we saw with ecommerce, which pulled in some demand and then reverted to more or less trendline share gains vs. offline (see #323), it’s been difficult to parse the real underlying changes. As I reviewed the plethora of data from the “Turkey 5” ecommerce sales days, including Black Friday and Cyber Monday, the overall picture still seems somewhat murky. Ecommerce growth is slowing down and spreading out broadly, with some segments still gaining and some losing, and brick-and-mortar shops are a mixed bag as well (there's a good overview of the November ecommerce market on this episode of the Jason and Scot Podcast). Is it a slowing consumer spending environment in general, or are behaviors just normalizing back to pre-pandemic trends as excess money leaves the economy? More on that question can be found at the end of last week’s newsletter. For now, all we can do is wait and watch to see how it plays out as consumers begin to eat into their pandemic-driven savings boost.

VR’s Narrow Appeal
In an interview with IEEE Spectrum, Philip Rosedale, the architect of Linden Lab’s Second Life, notes that the virtual world-building program – from the 2000s – still has 1M active users and does around $650M a year in transactions. He also says that virtual social interactions work great for a very small minority of people, but present problems for almost everyone else: In VR “People are not able to communicate with facial and body language yet, in a way that is anywhere near adequate. And I think that it's a very steep cliff. If you have the alternative, to have your social life happen in the real world, I think a great majority of people make that choice, and it's a binary choice. They don't split their social life partly between the real world and partly online. I think that's the reason why we don't see the breakout yet, and nothing that Facebook has said or demonstrated changes what I just said.” Rosedale has spent the last five years at his startup, High Fidelity, and notes how hard it is to get people to adapt to VR interactions. Another challenge is large gatherings, as it’s currently not technically possible to get more than 100 people into the same virtual environment. Instead, copies of the same experience must be created for every 100 or so people.

Miscellaneous Stuff
Digital Tribalism
The Yellowstone Season 4 opener on the Paramount Network drew over 10M viewers on its premier day, which amounted to a 4.19 rating, meaning just over 4% of households watched the episode. Adding simulcast views on other Paramount-owned networks, the total number was probably closer to 5%. It was the most watched live cable premier since 2017 (the episode was not available on streaming). Back in the middle of the 20th century, there were just three TV networks in the US. In 1960, top-rated TV show Gunsmoke pulled in 18.44M households – more than a third of all US households at the time – all watching the same program at the same time and discussing it the next day. These days, garnering simultaneous viewing by a third of US households takes an event like the Super Bowl (38% of households – 92M people – in 2021). Blockbuster movie premiers can also command a significant audience. In 2019, Avengers: Endgame had around 35M people watch it over the opening weekend. That’s still less than one-third of the people who watched the Super Bowl this year, and a smaller percentage of the population compared to something like Gunsmoke in 1960. And, of course, Netflix has achieved some big view numbers for their movies and shows, but it’s hard to pinpoint what the first couple of days viewership looks like. The reason I emphasize the timing of the viewing is because, for the sake of the discussion that follows, I’m interested in common cultural moments – the uniting forces of entertainment, sports, religion, etc. – that bring a large percent of a population (by country, or around the world) together in a shared experience.

I’ve been thinking about our loss of common culture lately given the increasing fragmentation of media. With smaller, niche-ifying audiences, the Yellowstone-like examples of shared experiences are increasingly rare, and even those pale in comparison to historical events. If we travel back to a time long before television and radio, events were largely collectively experienced by members of a small tribe or town. However, between tribes of differing backgrounds and regions, there would have been very little overlap of shared experiences (outside of rare, major events like an eclipse). There was no common culture to unite peoples in contiguous geographic areas, let alone disparate regions across the globe until the agricultural era created larger populations and shared seasonal events. Humans have thus progressed from small tribes of intensely shared culture, to an expanding and amalgamated common culture throughout the 1900’s radio and television era (at least in developed countries), back to small – often digital-only – tribes based on increasingly fragmented experiences.

The rise of digital tribes seems potentially correlated with waning local tribalism (e.g., the notable decline in religious affiliation in the US). Of course, there have been benefits to the rise of online tribes, as people from all over the world can unite over common interests not necessarily shared by their geographically proximate neighbors. However, social network algorithms have reflected and amplified our innate tribalistic tendencies, driving wedges between people who would otherwise probably be agreeable (see also #320 “Surveillance Troubles Paradise”). It’s hard to imagine that humans would have devolved so quickly to this level of tribalism without social media acting as a reinforcing circular reference for negative human behavior, forcing everyone to pick sides. Once you have binned someone into a particular tribe (i.e., exchanged their individual identity for a label), it’s easier (indeed, largely automatic) to adopt an ‘us vs. them’ mentality. Afterall, such categorization has been our brain’s quick and dirty, energy-minimized way of distinguishing friend from foe that’s kept us alive for millions of years. However, modern society affords us the luxury of not having to deal with saber-toothed tigers around every corner, giving us the opportunity to take a moment, burn a few extra calories, and consider 'others' as nuanced individuals rather than crude categories. But doing so requires energy and presence of mind, which seem to be ever in short supply, especially with the pandemic trying our patience.

Over the last few years, political labels have become a more pronounced focal point. I had hoped this year would bring a meaningful shift from political tribalism to more (generally) benign forms, like professional sports spectating, that might have deescalated some of our more violent, hateful tribal instincts. I worry the trend towards increasingly fractured online tribalism comes at the expense of our sense of community, both locally and more broadly, as well as our ability to treat people as individuals rather than categories. With fewer shared experiences, it becomes harder and harder to find common ground and cultural identity among individuals with increasingly polarizing labels and divergent life experiences and perspectives. Even families are fracturing more and more. I am not sure what unifying celestial force might cause humans to get back on the same page, or at least slow the fractal fracturing. Algorithms are increasingly influencing a larger portion of the population to the point where people are changing their behaviors to feed the algorithm that is subsequently changing their behaviors (this Vox article on the perils of the Spotify year-end review and its identity-creating algorithm is a good example of this phenomenon). The logical progression is towards a planet with eight billion tribes of one, with the individual, defined and crafted by algorithms, believing in a unique set of views that no one else shares. Instead of us vs. them, it becomes me vs. the Universe. Is this just a cultural evolution of the definition of human identity, or is it something much darker? I could see an improvement in leadership from both governments and corporations helping us out of this trajectory, and anything that can slow down the infinitely amplifying tribalism motivators of social networking and media is sure to bring some relief.

Listening to Kenny G
Speaking of shared cultural experiences at moment in time on a global scale, is there a better example than the Beatles? Well, there is if we leave the baby boomer's 1960s and look at the 1980s and 1990s. While I heard that a highly anticipated music documentary about the British rock band was recently released, the one I was much more interested in was Listening to Kenny G. Kenny G is not my favorite musician, so this requires some explanation. The HBO documentary (by one of my favorite documentarians Penny Lane; yes that is her real name; and, there is also a great side conversation available with her about the movie) is a deep dive on the saxophonist and global top selling instrumentalist of all time, Kenny G. If you dislike Kenny G, you might still dislike him after you watch this documentary, but I think part of you will also love parts of him. “Go for what you love and practice, practice, practice.” This is what Kenny G scrawled on the wall when he visited his old high school. And it’s Kenny G's dedication to practicing that you get to know throughout this documentary. Kenny G is a special kind of nut that can just sit and crank and practice for hour upon hour upon hour until he achieves what he wants. This is the big secret of all art: it's really damn hard, and it requires an enormous amount of practicing, crafting, and refinement. This is true of anything worthy of quality and care. And, it even includes investing and portfolio management (why do I bring investing up? well, in case you didn’t know, Kenny G was one of the first ten backers of Starbucks!). Quality is hard for a reason, and the few people who have the discipline and vigilance to create it make it look deceptively easy. The great irony of the documentary is that Kenny G is very much in on the joke, but the some art critics (in the movie and those that subsequently reviewed the movie) are not all completely in on the joke that they play very virtually no role in determining what is art or not.

Stuff about Geopolitics, Economics, and the Finance Industry
$1.2T Pipe Dream
The NYT reports on the challenges of big infrastructure projects. They take far longer and cost far more, with delays and costs being borne ultimately by taxpayers. Currently, with inflating input costs and the challenge of finding skilled labor, the mega $1.2T US infrastructure bill may fail to launch, or, if it does, projects will cost far more and take far longer. Only $550B of the $1.2T is above and beyond previous approved projects; but, with a five-year goal for zeroing the budget, the incremental money represents an astounding 37% annual increase in federal, state, and local government spending starting next year. One speculation I have is that the delays, costs, and labor problems may tangentially drive innovation in automation for the design and construction industry. If that happens, it would be an actual, long-lasting, positive legacy of the infrastructure bill.

Podcast Picks
If your podcast queue is running short, checkout this page for a list of podcasts featuring NZS investors.
✌️-Brad

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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 an informal gathering of topics I’ve recently read and thought about. I will sometimes state things in the newsletter that contradict my own views in order to provoke debate. Often I try to make jokes, and they aren’t very funny – sorry. 

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