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

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In today’s post: can nihilism and George Carlin teach us to make better decisions?; fickle music fans move from one social network to another; remote learning software was spying on your kids to sell ads; heat pumps are the future for HVAC; bike lane delivery robots; the declining value of car dealerships and what it means for other industries; are declining city populations and slightly rising births tied to the pandemic, or just another demographic wave?; a new paper on ergodicity shows that cooperation can emerge solely to increase growth; and, much more below...

Stuff about Innovation and Technology
Electric Air Taxis in 2024?
Electric vertical take-off and landing (eVTOL) aircraft maker Joby Aviation received FAA approval to start commercial air taxi service. Joby’s eVTOLs can carry a pilot and four passengers at 200 mph for 150 miles on a single charge. While FAA certification was a milestone, there are still more regulatory hurdles to clear, and commercial service is tentatively scheduled to begin in 2024. Joby hasn’t yet detailed where the central California-based startup is planning to launch.

Striking a Discord
Pitchfork discusses the evolution of musician fan clubs (to use an outdated term) on the social media platform Discord. Focusing on Weezer’s leading man, Rivers Cuomo, and his use of Discord servers for interacting with fans and outsourcing research, the article gives a sense for the unique positive and negative aspects of closed online communities. I’ve worried in the past about how increased fan interaction could shape music in a way that makes it more bland. I personally want art to reflect the heart of the creator, not the creator’s fans, but the lines can be blurry. There also seems to be the potential for artists to exploit devotees for free labor, but fans are rewarded by closer interaction with their idols, so I guess it’s largely mutually beneficial. We are living in a period of social platform proliferation, as fickle consumers fatigue on the last generation of time-waster apps and move onto something new (see Utility-Communication-Media matrix in this paper for more). As Cuomo notes: “I’ve seen platforms come up and they’re huge, they go away and nobody remembers them, I don’t expect that the neighborhood will be on Discord forever. Something else may come along.”

Fizzling Fusion
Nuclear fusion depends on the extremely rare element tritium, of which only around 20kg exists on Earth today. The substance costs around $30,000/gram (it’s a byproduct of nuclear fission, which is largely a dying effort), and a working fusion reactor would need 200 grams a year. Scientists had planned to use fission reactors to breed their own tritium; but the required costs and effort may push commercial fusion development decades into the future, according to Wired.

Remote Learning Data Funneled to Adtech
During the pandemic, many schools deployed remote learning tools that, according to the Washington Post, were sharing information with adtech companies to target ads to kids and families: “nearly 90 percent of the educational tools were designed to send the information they collected to ad-technology companies, which could use it to estimate students’ interests and predict what they might want to buy. Researchers found that the tools sent information to nearly 200 ad-tech companies, but that few of the programs disclosed to parents how the companies would use it. Some apps hinted at the monitoring in technical terms in their privacy policies, the researchers said, while many others made no mention at all. The websites, the researchers said, shared users’ data with online ad giants including Facebook and Google. They also requested access to students’ cameras, contacts or locations, even when it seemed unnecessary to their schoolwork. Some recorded students’ keystrokes, even before they hit ‘submit’.” As I wrote a couple weeks ago, the entire ad tracking industry is due to be shut down or heavily regulated and overhauled. 

Promoting Heat Pumps
Transitioning from natural-gas-burning HVAC to two-way electric heat pumps for domestic cooling/heating is a major win-win for the environment, consumers, and geopolitics. A new act in the US Senate called the HEATR Act would create tax credits through 2031 for consumer and commercial heat-pump air and water heaters and incentivize manufacturers to convert from AC (one-way heat pumps) to two-way units that also provide heat. On average, heat pumps are two to four times as efficient as traditional gas units, and they also dramatically reduce the amount of indoor and outdoor pollution. As I noted in #332, Tesla has hinted at their desire to enter the market, and combining a heat-pump system with solar and batteries is a big opportunity. 

Bike-Lane Bots 
Chick-fil-A is testing out Refraction’s robot-as-a-service delivery platform, which uses small autonomous delivery vehicles that can leverage the bike lane or the side of a road. I wrote a year ago that I thought we would see an ever expanding use of bike lanes for low speed autobots, ultimately leading to safer bike lanes, but progress seems very slow. The 30”-wide Refraction robots can carry six bags of groceries and travel at 15 mph.

Downsizing Dealerships
Many familiar forms of retail and distribution are feeling increasingly anachronistic. Take for example car dealerships. With most car shopping (and order customization) done online, a dealership is a formality at best. I’ll likely get in trouble with some car enthusiasts for saying so, but even test drives are increasingly unimportant as most low-, mid-, and high-end cars increasingly drive similar to others in their price range. Tesla famously sells direct to customers without third-party dealers, which makes the cars unavailable for purchase in all but a ~dozen US states due to anti-consumer laws protecting dealerships. The dealership stalwart is also significantly harming legacy auto makers by preventing the shift to electric vehicles (which are lower maintenance than ICEs and thus less profitable for dealerships over the EVs’ lifetime) and stifling ecommerce-enabled efficiencies (e.g., significantly lower inventories, consumer convenience). Of course, dealers – and certainly their service centers – will be around for decades as we slowly transition to 100% EVs, but they will continue to shrink in importance, number, and size. While there might be an opportunity to rethink dealerships, as Honda is doing with their blueprint for smaller dealers focused on EV selling and charging, for now, these dinosaurs serve as a major ball and chain for legacy car makers. Mercedes is looking to cut their dealer footprint by 10%, with a goal of selling 25% of their cars direct. And, VW is reported to begin testing a new direct-to-consumer brand, under the revived Scout name, in the US. In most cases, legacy business models across a variety of sectors relying on space, inventory (and its associated financing), ongoing maintenance, and people will be gifts to digitally-native, direct-selling disruptors. 

Shareholder Activism Fail
Amazon’s proxy vote this year contained fifteen shareholder proposals. Seemingly an example of activism run amok, there was a combination of bad and ok proposals on the list. Despite popular voting recommendation service ISS recommending a FOR vote on eight of the items, all of them failed to pass. There were two proposals aimed at improving Amazon’s lax oversight of how their tools, such as facial recognition, are used that I thought warranted passage (or at least more serious consideration by management). The company historically has had, at best, a strawman argument for absolving themselves of responsibility for abuse of its technology products, saying it’s up to governments, not Amazon, to set policy. Amazon should care more about the utilization of products they develop, especially given the vast impact of their cloud computing services.

Miscellaneous Stuff

Cognitive Lessons from a Counterculture Comedian
One of the biggest cognitive biases we should endeavor to overcome is recency bias, the tendency to overweight the value of more recent information vs. older information. There are different ways people use this term, but I think about how it relates to the way our brain makes predictions. To recap what I wrote in #272:
There are multiple lines of reasoning from various fields of study that all seem to point to this idea that our brain makes a prediction about the world and then tests that model against sensory input, adjusting the model as necessary. In other words, our brain has preconceptions about what we are experiencing before our current senses have a chance to exert an influence. Feldman Barrett characterizes the hypothesis-then-test neural algorithm as allostasis, or “automatically predicting and preparing to meet the body’s needs before they arise” (p. 8). Whatever we call it, there is a clear process by which our brain is constantly making predictions about the state of the world before checking against internal and external inputs. This is an inversion from the way we like to think the brain works, i.e., it seems to take in inputs, and then make a decision, which yields a false sense of agency over the entire process of thinking.
Importantly, the brain accords more weight to recent information about the world when making predictions. To take an example from recent headlines, Amazon canceling (and possibly subleasing) warehouse space and launching Buy with Prime (another sign of excess capacity) seem like end results of a prediction that overly weighted recent information. As I detailed in #336, Amazon was ratcheting down new leases in Q1 2022 after having doubled fulfillment capacity during the pandemic. Today, the company is now looking at minimal, if any, footprint growth for the foreseeable future as they digest capacity additions. Lockdowns early in the pandemic rocketed ecommerce, and apparently the brain’s best prediction was that ecommerce would gain share. So, the logical plan was to add capacity. But, now, overall ecommerce market share is back on the same path as it was pre pandemic, and Amazon is pulling back on capacity. Maybe that too will be an example of recency bias causing the wrong predictions – time will tell. If Amazon, one of the smartest, most data-driven organizations, can't accurately predict even the near future, we should be highly skeptical of our own ability to do so. If you’re an investor or a business leader, what recent information are you overweighting in your decision-making process? Simply asking the question can help uncover bias. 

As long-time readers know, we wax on about how predictions of the future are a fool’s game, and we’ve tried to supply alternative frameworks for making better decisions in an uncertain world. Predicting the future becomes even more absurd when you consider that the less personally vested you are in a decision, the more likely you are to make the right call (ostensibly because you can be more objective when you are less emotionally tied to a particular outcome). Thus, paradoxically, the more important a decision is to us, the more likely we are to get it wrong. This is where a bit of agnosticism might be helpful. What if we went beyond not predicting the future to not caring about the future? This framework extension came after I finished Judd Apatow and Michael Bonfiglio’s new two-part documentary on the late comedian George Carlin (on HBO Max; it’s not nearly as good as Apatow’s excellent doc on Garry Shandling, but still worth watching). In Part 2 (~1h10m), there’s a segment with Charlie Rose, recorded later in Carlin’s life, when Carlin says:
“I have pulled away, and I now reside out where the Oort cloud is, where the comets gather, I finally decided that I would dissociate myself, view all of this as an absurd tragic comedy, and really have a point of view that allowed me to say anything that felt right, that expressed how I was reacting to all of this and how it made me feel. I sort of gave up on the human race, and decided that I didn’t care about the outcome...Not having an emotional stake in whether this experiment with human beings works. I really don’t care. I love people as I meet them one by one. People are just wonderful as individuals. You see the whole universe in their eyes if you look carefully. But as as soon as they begin to group, to clot, when there are five of them, or ten, or even groups as small as two they begin to change...I decided it’s all under the control of groups now, and I would distance myself from wishing for a good outcome...when you say to yourself I don’t care what happens, it just gives you a broader perspective for the art, for the words to emerge.” 
Most of the above quote is captured in this Charlie Rose clip (which has a different edit). Carlin’s outlook immediately seems nihilistic, and the open question as to whether or not Carlin went from idealist to nihilist later in life is explored in the documentary (and discussed by his daughter in several interviews). Carlin was known to say: “if you scratch a cynic, you’ll find a disappointed idealist”. As longtime readers will know, I hate cynicism and always try to never assume the worst. As such, I love skepticism, which rarely assumes the worst, and I cherish optimism because it’s always right in the long term. So, are we to believe this evolution from not predicting to not caring (or not wishing for a certain outcome) is a step that leads into the hellish hole of cynicism and nihilism? Or, can letting go of our desire for a certain outcome create space to more objectively analyze odds and make better decisions? There is one trick we can use to overwhelm the brain’s reliance on recent information and ingrained pattern recognition. I’ve written in the past about free will and Feldman Barrett’s idea that you can get your brain’s prediction algorithm out of a rut by consciously choosing to expand its experiential data (do new stuff, read new things, etc.). Practicing letting go of a particular narrative/outcome might also create a new set of patterns in the brain. As a student of comedy, I have heard many standups discuss the importance of letting go in order to find the right relationship with an audience. I'll experiment more with creating space, whether it be physical, temporal, and/or emotional, between the present moment and future outcomes to see if it is helpful in making decisions. Perhaps, as this Aeon article points out, we also just need to exercise our imagination.

Stuff about Geopolitics, Economics, and the Finance Industry
Immigration Up, Big Cities Lose Out
A handful of data points indicate some slight reversals in the pandemic-accelerated headwinds to population growth in developed countries. In the US, births ticked up slightly, the first growth since 2014. However, we must look to the past to explain this trend, as the biggest rise was with women in their late twenties and thirties (see 30-something sneaker wave for more). Immigration has also modestly rebounded in the US from a low of ~20,000 new legal arrivals to ~100,000 in the most recent quarter. Meanwhile, “unretirements” are going back to pre-pandemic levels, with ~3.2% of former retirees going back to work (up from ~2% during the pandemic). In other migration news, large cities in the US have lost residents to smaller cities. In some cases, big cities have dropped back to population levels seen a decade ago, and thus could be an interesting test case for economies that shrink as populations decline. Since the beginning of capitalism, we’ve only had population growth, and we are wholly unprepared for the consequences of a shrinking population and the accompanying economic contraction. Or, this city flight might end up being yet another temporary pandemic trend (recency bias!) that soon reverts back to the long-term migration into cities. Migration from cities to suburbs is also a trend tied to the 30-something sneaker wave of Millennials aging into family life. Population migration from cities to smaller towns has also been uneven in terms of the types of professionals that had flexibility to relocate, leaving us with a dearth of doctors, teachers, and trades in cities compared to a growing shortage in small towns.

Cooperation is Ergodic Key to Success
Ergodicity and non-ergodic systems are a topic I write about often, e.g., from #229: Ergodicity assumes that the expected value equals the average outcome of a specific action (e.g., coin toss) repeated multiple times. However, in the real, non-ergodic world of investing, all that matters to an individual is their path through time. There is no averaging (since we have no interaction with our other selves in parallel worlds), there is only a single series of events over time. As a result, in non-ergodic systems, multiplicative effects overwhelm additive effects, and power laws and inequalities thrive.
A recent paper from Ole Peters and collaborator Alexander Adamou indicates that cooperation increases growth rates in part due to ergodicity. If multiple individuals repeatedly pool and share resources, their outcome is less influenced by random chance and looks more like (as one might expect) an additive, ensemble outcome. Importantly, they demonstrate mathematically that cooperation confers a positive outcome that is greater than what could be achieved by a collection of individuals working independently. The simplicity of their mathematical models shows that cooperation is the default solution for enhanced success without needing to invoke such explanations as altruism, relatedness, or reciprocity. 
From the paper:
Living beings exist not as minimal self-reproducing units but as cells, organisms, families, institutions, nations and so on. Cooperation, which we model as sharing resources, is ubiquitous in nature and society.
This ubiquity is puzzling because sharing seems prima facie to require the better-off member of a cooperating pair to relinquish something of value to the worse-off member, with nothing in return. If naked altruism is an unsatisfactory explanation of evolved behaviour, then we must expose the advantage derived by the better-off entity in such an arrangement.
Classical explanations involve two ideas. The first is that a net benefit arises when two entities cooperate. Specifically, the gain of the recipient—often expressed in terms of ‘fitness’—exceeds the cost to the donor. The second is that, over time, some of the net benefit finds its way back to the donor. This can happen through reciprocity, where past donors become future recipients, or through relatedness, where the recipient carries genetic material that the donor wants to propagate. 
There are two fundamental growth rates in noisy multiplicative growth. The ensemble-average growth rate is that achieved by the population average in the large-population limit. It is independent of fluctuations. The time-average growth rate is that achieved by a single entity in the long-time limit. It is lower than the ensemble-average growth rate by a fluctuation-dependent term. The difference between these growth rates is a manifestation of non-ergodicity…We find that repeated pooling and sharing reduces the net effect of fluctuations, thereby increasing the time-average growth rate of each cooperator’s resources, which approaches the ensemble-average growth rate as the number of cooperators increases. Therefore, cooperation in our model is advantageous for the simple reason that those who do it outgrow those who do not. 
Since we focus on non-zero-sum outcomes at NZS capital, we are of course gratified (confirmation bias alert! 😉) to see new theories that show cooperation is the natural way to increase positive outcomes in the world.

✌️-Brad

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