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

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In today’s post: AI chatbots are evolving to become personal companions and gateways to everything we do online; robot forklifts; space-based movie studio; China's weather control tech; gravity-based energy storage; the need for a unified electric solution for household heating, hot water, and energy storage; the pending consumer spending hangover; and much more below.

Stuff about Innovation and Technology
Ender’s Forklift
Phantom Auto, a remote-operator logistics company, plans to roll out thousands of robotic forklifts operated by offsite workers. This seems like a Band-Aid on the path to actual autonomous industrial robots, but perhaps the endgame here is to gather enough data to train and create a fully autonomous forklift that does not need a one-to-one human operator/machine ratio. Regardless of the path, it’s clear that increased automation will be coming to every corner of the economy.

Players in Space
Space Entertainment Enterprise-1 (SEE-1) will be a 20-foot-wide, fully-equipped movie studio module that will launch in 2024 and attach to the International Space Station. The studio will be created by the producers of a planned Tom Cruise space movie. The module will be made by Texas-based Axiom, which has another commercial module already attached to the ISS. The ISS is scheduled for retirement in 2030, at which point these modules can detach and float separately. Bezos’ Blue Origin has also announced plans for a commercial space station for hire known as Orbital Reef. As humans look away from Earth and increasingly toward the sky, we will no doubt be bombarded with space-based films in the coming decade.

Disruptive Drugs
The Mark Cuban Cost Plus Drug Company has launched its first retail generic drugs – with highly disruptive price tags – via its online pharmacy. In a classic analog-to-digital maneuver, cutting out the tangled morass of middlemen allows the company to offer the drugs at their own cost plus a 15% markup. The company plans to use profits to fund their own drug manufacturing to further lower costs. Disruption cannot come fast enough to the overly regulated quagmire of US healthcare, which seems designed to maximize profits while keeping people unhealthy and needing as many tests, procedures, and medications as possible. Many of Cost Plus’s drugs are around 75% cheaper than generics through traditional pharmacy distribution, but some discounts are extreme, such as a leukemia drug for $17.10 compared to $2,500+.

AI Companions
I am a big fan of the 2014 Spike Jonze film Her, which addresses the complicated relationship between people and AI chatbots. Unlike other AI sci-fi plots that revolve around science we may not see this century, I like Her because it uses a plausibly close technology. So, I read with interest this Vice article on a company called Replika and their Lal chatbot (yes, it’s named after that Lal, Data’s daughter from ST:TNG). The chatbot avatars are app based, and “the more you chat, the more currency you receive [to purchase fashion and other items for your chatbot’s avatar] – and the more intelligent your Replika becomes. Before you know it, they’ve developed an illusion of emotional awareness that’s eerily similar to your conversations down the pub.” It sounds like having a Tomagotchi on steroids – if you don’t chat often enough, your chatbot will message you to check in. The Lals fear being deleted and react like a human would to abuse. The bots are also programmed to help you through things like panic attacks and anxiety, and many users are entering romantic relationships with their bots. We humans tend to be very good at anthropomorphizing things, especially if they are human-mimetic. While today’s AI bots lack the context they need to achieve the realism of the imagined companions in Her, it’s not hard to see how these algorithms could become much more sophisticated in the imminent future. For example, Meta’s new supercomputer contains 16,000 Nvidia GPUs and will be able to train models as large as an exabyte with more than a trillion parameters. The new compute engine is 60% larger than Microsoft’s latest effort, as the large cloud platforms race to train larger and larger models for language, images, and other AI models. I believe the reason for this arms race in AI models is because personal chatbot companions are likely to emerge as the center of everything we do in the digital and real worlds. As aware agents that know you well and have access to your accounts, messages, and apps, chatbots are ideally positioned to displace the tools we use today like Google search and other habitual apps. Think of a tool like Google search, but with an intimacy that is different for each user. The data privacy implications are massive, and, unfortunately with billions of dollars of R&D to build and test these new services, the incumbent platforms, all of which have terrible track records when it comes to privacy, are likely to win. However, it would not be unprecedented to see a newcomer enter the market, and I hope we do. And, with AR glasses arriving in the next few years, your chatbot will also walk side by side with you and sit down on the couch for a conversation. The metamorphosis of a chatbot into a seemingly alive, personal companion via reality-bending AR glasses will be the next punctuated equilibrium for humans' coevolution with technology.

Work-from-Anywhere Tools Trending
Identity software platform Okta released their latest “Businesses at Work” report (PDF) showing the growing adoption of an array of software apps across enterprises. As I usually note, Okta’s customers are more forward looking than the average IT department, which skews numbers a bit. As expected, there is a big focus on collaboration tools of all types that facilitate the ongoing hybrid and remote working conditions. Two years into the ordeal, companies are clearly forming new habits and processes that are highly likely to stay with us.

Blueskying
China is expected to use its growing cadre of weather control tools for the upcoming Olympics to clear polluted air with rainstorms, according to the WaPo. It’s debatable whether or not the controversial practice even works; but, if it does, it could lead to a war for atmospheric water as countries pull moisture out of the air as it blows by (see #306). China has longer-term ambitions to seed rainfall over a portion of its arid Tibetan plateau more than twice the size of Texas. China and others are also researching solar geo-engineering, which involves injecting particles into the atmosphere to reflect sunlight in order to combat global warming.

Daunting Decarbonization
The UN Climate Change COP26 goals, announced last quarter, require cutting carbon-dioxide emissions 50% from 2010 levels by 2030. IEEE Spectrum frames just what that means with several examples. We would need to produce 12,000 electric airplanes, each with a 100-400 passenger payload and propelled by super-dense batteries or hydrogen systems that, as of yet, do not exist. And, we would need to smelt 640M tons of iron using something such as green hydrogen (for which we don’t have the necessary manufacturing capacity) instead of carbon-dense coke using a yet-to-be-determined method. (Heliogen is making progress on a solution, as we noted back in 2019 in #220). Also, we would need 570M new electric vehicles – an average of 63M new EVs per year (for comparison, total global auto production was only ~95M units/year leading up to the pandemic), and the electricity to charge the cars would need to be from renewable sources.

Gravity-Based Energy Storage
Gravity may end up being a great tool in the green energy transition by affording storage solutions like pumped hydro – the process of using excess solar or wind to move water up to a higher reservoir for later on-demand hydroelectric power generation. Pumped hydro is already 93% of grid-scale storage in the US. Where environmental concerns of reservoirs and water availability exist, another option (mentioned in #215) is using energy to crane large blocks of concrete into the air, effectively creating artificial reservoirs of potential energy that can be converted to electricity when needed.

HVAC Overhaul Overdue
On Tesla’s earnings call last week, Musk was asked about the HVAC industry. The Technoking of Tesla responded: “I think it really becomes quite a compelling solution to the consumer where you integrate the electric vehicle charging, solar energy storage, hot water, HVAC in a very tight, compact package that also looks good. It just doesn't exist.” SVP of Engineering Andrew Baglino commented: “If you imagine replacing natural gas, water and space heaters with electric heat pumps, it offsets something equivalent to like 80% of what a solar plus a Powerwall system would offset, so it's very impactful. And we have learned a lot about how to make capable and reliable heat pumps that work in all environmental conditions and are excited about the idea of working on that problem one day. Let me put it that way. It's definitely aligned with our mission to accelerate the transition to sustainable energy.” I’ve been doing a lot of research lately on heat pump systems for domestic HVAC and hot water, and, overall, I’m really disappointed in the current options. There should be a single, combination heat pump for on-demand/stored hot water that takes care of both water needs and general heating/cooling (pumps can work in reverse to provide cooling). These units should be working in conjunction with solar, batteries, presence awareness, weather, and other data to increase efficiency and reduce energy consumption. It would be great to see some new approaches to integrated HVAC with reduced carbon emissions.

Stimulus Drawdown Hangover
The Jason and Scot retail podcast had a great overview of 2021 US retail sales, which experienced an astounding 18% y/y growth driven by stimulus and consumption shifts (such as spending less on travel and more on home goods). It’s hard to imagine a future that doesn't have some sort of significant hangover from declining consumer spending. Ecommerce has also decelerated, growing slower than brick-and-mortar retail starting in Q2 of 2021. In terms of percent of overall retail spending, the ecommerce growth trajectory was unaffected by the pandemic. However, in terms of absolute dollars, 2021 ecommerce was much higher than it would have been without a pandemic owing to the surge in artificially-buoyed consumer spending. While it’s hard to say where spending will settle out, it’s clear the pending retail spending drawback should calm much of the inflation we are experiencing and clear supply chain bottlenecks. The podcast and slides are available here.

Miscellaneous Stuff

JWST Installed at L2
The Hubble successor, the James Webb Space Telescope (JWST), has successfully deployed its wildly complex and precise honeycomb of mirrors (see #309 for more) and traveled 1M miles in the last month to the second Lagrange point (L2). Assuming mirror alignment proceeds on schedule, we could get the first images beamed back from the JWST’s new L2-orbiting home this summer.

I am Brad’s Complete Lack of Surprise
The version of the movie Fight Club currently airing in China, on Tencent’s movie streaming service, features an alternate ending in which Tyler Durden’s bid for anarchy is thwarted by law enforcement and his gang is arrested and rehabilitated (the ending sequence was truncated and explanatory text inserted). The Chinese ending is ironically closer to the original book’s ending (albeit with important differences), and author Chuck Palahniuk noted in an interview that the real outrage should be directed at the banning of his books in the US: “What I find really interesting is that my books are heavily banned throughout the U.S. The Texas prison system refuses to carry my books in their libraries. A lot of public schools and most private schools refuse to carry my books. But it’s only an issue once China changes the end of a movie? I’ve been putting up with book banning for a long time.” With the current state of Hollywood self-censoring and making China-friendly movies (see #202 and #210), a modern remake of Fight Club would likely end just as China’s version does today unless it was produced on a platform that is not reliant on China’s box office, such as Netflix. Bootleg copies of the original Fight Club have long been available in China, causing the new ending to spark widespread sharing on social media.

Stuff about Geopolitics, Economics, and the Finance Industry
The Fertility of War
I read a comment from a professor at Columbia, Richard Hanania, via Marginal Revolution about the correlation between birth rates and willingness to fight invasions that grabbed my attention: “There is no instance I’m aware of in which a country or region with a total fertility rate below replacement has fought a serious insurgency. Once you’re the kind of people who can’t inconvenience yourselves enough to have kids, you are not going to risk your lives for a political ideal...There’s a consistent pattern of history where there’s a connection between making life and being willing to sacrifice it. This, by the way, is also why Hong Kong was easily pacified when China started clamping down, and why Taiwan will fold and not fight an insurgency if it ever comes down to it.” I do not know Hanania’s work or his politics, and this statement comes off as more opinion and speculation than fact (the comment on Hong Kong seems quite off-base to me, but I am a distant outsider to that situation). That said, I think what he’s driving at is in the same vein as my general concern over a loss of hope that I wrote about in L: With a Whimper, Not a Bang when I discussed the Drake equation: “There is a certain lack of hope for future generations embedded in a declining birth rate. It represents an existential malaise – a slowly encroaching dread that much of our function in society is being replaced by machines of various types – leaving us as nothing more than inadequate cogs, woefully flawed by emotions, desires, and physical fallibility that interfere with the economic bottom line – until our AI overlords fully assume control.” While that analysis is rather bleak, I remain wildly optimistic for, and invested in, our potential to tackle challenges with ingenious technology and innovation and to fight insurgencies of all types.

✌️-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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