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

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In today’s post: apple-picking drones; advertising privacy versus changing media preferences; an easier way to think about censorship and responsibility as media consumption rapidly evolves; methane leaks; singing whales; the interest rate pin pricks asset price bubbles; eventual converging of private and public market valuations; and much more below.

Stuff about Innovation and Technology
Produce PickerBots
Tevel is an Israel-based company building robotic technology for crop harvesting. The company claims to have apple-harvesting drone technology, comprising several autonomous flying drones – sporting robotic appendages with what appear to be octopus-like suckers on the ends – tethered to a central collection unit and capable of 24/7 operation. The drones can assess ripeness using machine vision, reach out to pick apples, and then deposit them according to various categorizations. The video of the drones in operation is futuristically mesmerizing. While the company claims the system will be cheaper than seasonal labor, pilot tests are still on the come. It appears they plan to rent the units out. Given the seasonality of harvesting, I imagine the robots could have different attachments for different crops and be moved around region to region. With slowing population growth and decreasing immigration in developed countries, these types of purpose-built robots are likely to proliferate across all industries.

Ad Dollars Chasing Consumers
After some extreme reactions, both positive and negative, to recent earnings reports from the US Internet giants, there seems to be some remaining confusion about whether it’s Apple’s privacy changes or evolving user behavior that are to blame for shifting tides in the global $1T+ advertising and ecommerce markets. There is no single explanation or villain; rather, it’s a complicated and ongoing evolution of many factors. While Apple’s privacy push is a disguised attempt to grab power and money, it’s still a welcome improvement in user rights and safety. There is also clearly an attention issue – people have more choices and limited time, so while the pie is still growing, it’s also shifting around between slices (e.g., TikTok and video streaming are gaining share at the expense of Meta's apps – see Spiraling Content Meets Maxed-Out Attention). Alphabet, Meta, and, increasingly, Amazon are reliant upon advertisers for profits, a revenue stream driven by attention and reaction. Advertisers want to be where their target audience is, and they want those people to either have a positive brand association or a call to action (such as buying something or signing up for a new service). Targeted ads have historically relied on a constellation of data, which has become increasingly invasive for users. This article in The Markup questions whether we are heading for a complete ban on behavioral advertising targeting, which does seem increasingly likely. This focus on user privacy continues to create a scarcity value for first-party data (the targeting data that apps have on users without requiring input from other sources, see Pursuit of Pivotal First-Party Data for more). Primary data is table stakes, and then layering on the audiences and growth in engagement/usage that advertisers are chasing is likely the winning formula for the next few years until we reach saturation and the pie stops growing. Meta in particular, whose stock caused a tidal wave in the investment market – declining nearly 30% since earnings were reported on February 2nd – is facing increasing competition from user-generated, professionally-produced, and gaming content proliferating across a multitude of apps. Consumers’ media attention is typically more fickle than their use of utility-like apps (e.g., Amazon and Google search – see Utility-Communication-Media Matrix in the final section of the linked whitepaper for more). I believe consumers ultimately gravitate towards quality content, both professional and amateur, as well as quality interactions, and advertisers will follow them wherever they go.

Databases Evolving
The database market has gone through quite a few evolutions this century. From the juggernaut relational databases of structured data, like Oracle and SQL, to the rise of warehouses of unstructured data, like Hadoop, there’s been a lot of change and growth. Ongoing extraction of massive amounts of data, growing by the minute, gave rise to an open-source tool called PrestoSQL from Facebook. Presto is a federated database, which means you can query the data where it sits rather than having to extract it. Two companies, Ahana and Starburst (the latter with backing from Salesforce), have commercialized PrestoDB (now called Trino, which is still open source) for enterprise use both on-prem and in the cloud. The CEO of Starburst explains to Next Platform: “As it turns out, extracting data from Salesforce for analytic purposes is one of the top use cases – if not the top use case – for Snowflake, and that means a ton of people are taking data out of their CRM and loading it into Snowflake just to run analytics. Well, what if you never had to do that? What if you could just query that directly and incorporate that in your analysis? ...This is data warehousing analytics without the data warehouse.” The only things I have ever been able to understand with certainty about the database market in the 20+ years I’ve watched it is that both the data and the ways to analyze them are always growing.

Between Cancel Culture and Anarchy
It’s been hard to avoid the media frenzy over Spotify and the Joe Rogan Experience (JRE) podcast. Despite the pages of ink and endless social media posts on the topic, this situation seems more straightforward than most people realize. First, anyone should be able to say what they want to, no speech should be banned (other than incitations to violence), and I support Joe Rogan talking to whoever he wants, and broadcasting it far and wide. Second, anyone should be able to disagree with speech and counter it with more speech if they want to. Third, it’s ok to believe those first two statements and still decide to not support a platform that is amplifying speech that you disagree with in order to sell ads or subscriptions. When people, and the platforms that enable them, are creating negative-sum or zero-sum content in order to maximize their profits, then you can choose to stop supporting the platform and switch to an alternative and still support free speech. These are all perfectly fine and nonconflicting beliefs to have, and when it comes to streaming audio, there is no shortage of good alternatives to Spotify.

The weaselly part of the JRE situation in my opinion is Spotify CEO Daniel Ek’s self-serving interpretation of their role in promoting the JRE podcast. Ek said in an email to employees that Spotify is not the publisher of JRE. Maybe that is true in some impractical legal definition, but the reality is they reportedly paid $100M for the exclusive rights to the podcast and promote it to Spotify users. I think there is a line crossed when you go from a platform that allows all podcasts and all music, even if they might offend people, to one that pays for the exclusive right to promote such material. Spotify is the only source for the JRE content, and they are adding content warnings and agreeing to take down certain episodes (at JRE’s request), much like a publisher might. Thus, in the case of the JRE podcast, Spotify is acting like a publisher for all practical purposes, and they should assume some amount of responsibility for the content they broadcast in the same way a TV news program, radio station, or newspaper would. I think it is good the JRE allows alternative views on the show (even when they are wrong), and I also believe that some disclaimers, corrections, and counter evidence should be provided on what is believed to be the largest podcast in the world with a regular audience over 10M listeners. To use another analogy, Spotify is acting no different with the JRE than a traditional radio station that plays music and has talk show hosts subject to oversight of their content. Ek’s shirking of his responsibility has to do with tech platforms not wanting to be legally regulated as publishers, and more importantly, Spotify’s existential need to diversify away from unprofitable music streaming. (Note: for more discussion on the challenged economics of music streaming, see this Atlantic article by Arcade Fire band member Will Butler and this article in The Hustle. For even more context, I wrote about how music labels operate as specialty lenders and the issues of the music ecosystem in #300.) As I noted in my post on Section 230 (#267), I think there should be two types of media platforms that post user-generated content: one type that is completely unmoderated (with the exception of calls to violence) and does not amplify – or benefit directly from – specific content, and a second type that is clear about their moderation rules, follows regulatory guidelines, and can choose to promote specific content (e.g., for monetary gain or to grow their user base). Only the former is an open platform, while the latter is a publisher. These two types of media platforms shouldn't just be for audio but for all social media, YouTube, etc. Let's ignore all of the preceding nuanced arguments and analogies and just try to answer the following question with some common sense: if you paid $100M to a podcaster with more weekly reach than almost any other media personality in the world, and that person's guests were giving life or death medical advice without being challenged, would you provide listeners with disclaimers, corrections, and counter evidence?

I want to circle back to the very first statement in this section with respect to free speech. There is a general consensus that free speech stops at violence. Effectively, speech can go as far as your fist stopping a millimeter from someone’s face, but no further. That’s not much of a gap. Therefore, calls for real-world violence should be moderated regardless of whether a tool is an open platform or a publisher. However, COVID seems to fall into a gray area of the definition of violence. What happens when tiny droplets of spit are doing physical harm to other people – is that a form of violence? In other words, does misinformation about COVID and vaccines qualify as violence against others that should be moderated like any other call to violence? To complicate matters, COVID came with a great deal of uncertainty, unknowns, and miscommunications from authorities, opening up the situation to widespread speculation and conspiracies. It was important to air alternative viewpoints as COVID's early days unfolded. Things gets slippery very quickly. The worst outcome is to drive speech underground, which is exactly what has happened with increased moderation across social media and video sites, as apps like the enigmatic Telegram rise to power. (As an aside, this Wired profile on Telegram is worth reading to understand the complexities and lack of safety that even so-called private messaging apps contain). I'd rather have every idea out in the open. It’s easy to scapegoat the leaders of the tech platforms for their waffling on moderation, but the reality is society is grappling with a new type of mass communication, and we are still working out the best way to co-exist with it. The extreme position of anti-moderation proponents – that we should have anarchy instead of rules and civilization – is as childish as overzealous cancel culture. People seem to think that you either have to agree 100% or zero with things people say. I say it’s ok to agree with some statements but still debate other points. Sometimes I don’t agree with things I said an hour ago. I don’t even agree with everything I wrote in this newsletter. The three most powerful words in the English language remain: I don’t know. That’s the starting point for trying to find the truth with humility. People with large broadcast platforms should especially keep this in mind. We have complicated minds, and our communication is situation dependent, variable, nuanced, and often contrarian. In an evolutionary blink of an eye, we have amped up communication from small, intratribal, face-to-face groups to 8 billion people interacting remotely with virtually no common culture. Understandably, our interactions are fraught with misunderstandings and fear. It’s a wildly complex situation. However, our ancestors figured out how to productively assimilate the stone tablet, the printing press, radio, and television, and I’m optimistic we can find the right combination of openness and moderation in modern-day communication without needing to pick sides between anarchy and cancelation.

Miscellaneous Stuff

Equipment Failures Cause Massive Methane Emissions
The Tropospheric Monitoring Instrument (TROPOMI) satellite monitors methane gas emissions around the planet and has found 1800 sources of methane with at least 25 tons of emission per hour. These “ultra-emitters” seem to correlate with leaks and blowouts, rather than normal operations, and aren’t counted in standard emission inventories (to which they would significantly add, potentially ~10%). Two thirds of these polluters are from oil and gas sites while the remaining are from coal production, agriculture, and trash facilities. Among the top polluting nations were Turkmenistan, Russia, the US, Iran, Kazakhstan, and Algeria. The emissions have the equivalent carbon footprint of 18M Americans, according to the Economist. Ball Aerospace has built many of the spectroscopic monitoring systems in use, including the module for the MethaneSAT, a new satellite from the New Zealand Space Agency that’s slated to launch later this year, funded by the private Environmental Defense Fund and the Bezos Earth Fund.

Cetacean Soundtrack
The Monterey Bay Aquarium Research Institute has a website where you can listen to live audio of whales conversing. I’ve checked it a few times and have yet to be disappointed. It’s a good reminder that the world is teaming with all types of communication, much of which goes on outside our limited perception. Whether it’s the constant chatter of whales or mushrooms’ common mycorrhizal networks, there are signals everywhere in the noise.

Stuff about Geopolitics, Economics, and the Finance Industry
Companies Should Go Public Instead of Flying Through Rainbows
The size of the VC market has grown 25x to $250B from 2010 to 2021. Hedge funds, private equity, and mutual funds accounted for 78% of VC investments in 2021. So far in 2022, two unicorns ($1B+ private startups) are minted every day, according to CB Insights data. The lines are blurring between private and public markets, with some VCs forming funds that will hold on to investments after they go public and many public funds crossing over into VC investments. I would therefore expect a convergence of valuations over time for private and public growth businesses with similar characteristics at similar stages (they are miles apart today as money disproportionately flows to illiquid private assets in what some have called an illiquidity premium, the opposite of what illiquidity should be priced at). The excess cash going to private investments, in many cases by new market participants, is setting up companies to raise too much capital at too high of a valuation when many of them would be much better served by going public sooner (see also The Great IPO Debate).

Irrational is Rational
As longtime readers know, I am a critic of behavioral economics. While the field of study may contain some interesting analogies, the idea of calling humans irrational because they don’t conform to faulty models of rationality paints an inaccurate and depressing view of the world. Relying on dangerous and overly convenient dualities, like type-1 and type-2 thinking (essentially, emotion and thought), ignores the fact that non-dualistic decision making (and interoception), incorporating both instinct and brainpower, is often the better path. Behavioral economics also effectively assumes ergodicity, that everyone's path through time and circumstances are the same, which we know is simply not true. This critical review (PDF) by Oxford’s John Kay of a new book by Kahneman et al. called Noise: a Flaw in Human Judgment does a great job articulating some of the same concerns I have with the largely useless field of study.
Kay writes: “But just as much as behavioural economics fails to recognise that what are described as ‘biases’ are often adaptive responses to radical uncertainty, [the authors] fail to recognise that the differences in subjective judgements of complex situations—‘noise’—are not only inevitable, but are desirable means of advancing our collective knowledge and intelligence. The Darwinian insight that an element of randomness is the means by which evolution allows people and cultures to adapt to changing, complex environments illuminates almost every aspect of life. Perhaps noise is not ‘a flaw in human judgement’, but is ‘the secret of our success’.” I would second Kay’s point that noise (i.e., variable outcomes, in this context) resulting from subjective reasoning is an asset rather than a danger. I believe in any field that requires complex decisions, you want to actually create space for the noise in order to increase your odds of connecting dots and determining the potential range of outcomes. Rather than looking to meta-analysis of studies on bias, which themselves contain the bias of their authors, the better route to improving decision making lies in analyzing your own decisions in the context of your own unique path through life (for example, I personally am biased against reading Noise because I am biased against behavioral economics!). Further, find a colleague or partner who will honestly point out your biases to you (it’s much easier to see them in others than ourselves). I also recommend our essay Time Travel to Make Better Decisions.

If You Give People Money, They Will Spend It
Despite some signs in December and January that the US labor participation rate might finally be recovering somewhat, the US is still lagging other nations in that regard. A probable cause is the divergent path that other developed countries took regarding stimulus and employment during the pandemic, as noted by the WSJ. In contrast to other countries, the US cut checks directly to workers, rather than supporting workers via employers. While the US labor force participation rate is still down 0.7%, Japan, Canada, and Europe are all currently up by 0.2 to 0.8% vs. 2019. The US also stands out with 1.4% GDP growth from Q4 2019 to Q3 2021, while the other regions were down 0.7 to 2.1%. To state it plainly, the US has a larger GDP with fewer people working compared to other countries that experienced a similar pandemic. It’s a direct result of overstimulation from the government, a mistake they are now trying to remedy by increasing interest rates and tapering the Fed’s balance sheet. While the pandemic and the stimulus did clearly create some sustained economic value in certain beneficiary sectors, it’s not intuitively clear to me that the economy should be larger now compared to two years ago. US consumers spent 15% more on durable goods in December 2021 compared to February 2020, and services have recovered to roughly the same level over that period. While the stimulus clearly led to overspending, underworking, and, therefore, inflation, I believe the real target of rate increases may be asset prices, which seem to have overshot reasonable levels of fair value for a given level of inflation and rates. Declining personal balance sheets could cause people to reenter the labor force. The interest rate medicine may go down worse in countries like the US, given the magnitude of inflation and potential rate hikes. Much of the last two years has felt like a dream, and it appears much of the increase in asset prices and the economy are also an apparition that the Fed would like to scare off.

✌️-Brad

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