The Geek’s Reading List – Week of September 19th 2014
I have been part of the technology industry for a third of a century now. For 13 years I was an electronics designer and software developer: I designed early generation PCs, mobile phones (including cell phones) and a number of embedded systems which are still in use today. I then became a sell-side research analyst for the next 20 years, where I was ranked the #1 tech analyst in Canada for six consecutive years, named one of the best in the world, and won a number of awards for stock-picking and estimating.
I started writing the Geek’s Reading List about 10 years ago. In addition to the company specific research notes I was publishing almost every day, it was a weekly list of articles I found interesting – usually provocative, new, and counter-consensus. The sorts of things I wasn’t seeing being written anywhere else.
They were not intended, at the time, to be taken as investment advice, nor should they today. That being said, investors need to understand crucial trends and developments in the industries in which they invest. Therefore, I believe these comments may actually help investors with a longer time horizon. Not to mention they might come in handy for consumers, CEOs, IT managers … or just about anybody, come to think of it. Technology isn’t just a niche area of interest to geeks these days: it impacts almost every part of our economy. I guess, in a way, we are all geeks now. Or at least need to act like it some of the time!
Please feel free to pass this newsletter on. Of course, if you find any articles you think should be included please send them on to me. Or feel free to email me to discuss any of these topics in more depth: the sentence or two I write before each topic is usually only a fraction of my highly opinionated views on the subject!
This edition of the Geeks List, and all back issues, can be found at www.thegeeksreadinglist.com.
ps: This was a bad week for tech news. Most of the first part of the week was speculation about the “revolutionary” new products fashion company Apple would launch, along with ground breaking features. In the second half of the week, most stories were either 1) people making fun of the abject banality of the products Apple launched or 2) people praising the genius of Apple’s latest products. While both postmortems were amusing to read (for different reasons) they were probably repetitive, suggesting sock-puppetry and/or other efforts at manipulating the coverage were in force.
1) Got iTunes? You got a U2 album. Here’s how to delete it.
We have all been in meetings where people say stupid things like “maybe we should tell our customers about the bug” and stuff like that. So you can imagine a meeting where somebody at Apple said – aloud – “Hey, I like U2, we all like U2, everybody in the world likes U2, so let’s push the latest U2 album onto all our customer base’s devices!” What’s even worse is the thought that, apparently the leadership at Apple went along with this brilliant idea, oblivious to the fact that many of their customers were toddlers the last time U2 had a major hit. Mark 2014 as the year Apple invented musical malware.
“Do you own an iTunes account? Congratulations. You also own at least one (quite possibly only one) U2 album. Apple marked the iPhone 6 launch by slipping a copy of the ageing Irish band’s latest album into every account, deliberately infecting gadgets with some people’s idea of musical malware. Think of it as a surprise Christmas present from a relative who doesn’t know you very well. Or knows you really well, if you like U2. If you DO like U2, great. It’s a Beautiful Day* and you’ll probably find Songs of Innocence an uplifting collection of soft-rock ballads. If you don’t, you’ll probably want to get rid of it, pronto.”
2) Apple releases U2 album removal tool
As a follow up, the complexities of the deadly embrace which is iTunes and related cloud services meant that removing the aforementioned US album was not easy. After all, whats the point of malware if it is easy to remove? I can’t wait for a class action suit to arise out of this fiasco. I stripped iTunes off of all my gear for the same reason I removed Adobe PDF reader: any piece of bloatware which needs to be updated on a weekly basis is not something I want running on any computer I own.
“Apple has released a tool to remove U2’s new album from its customers’ iTunes accounts six days after giving away the music for free. Some users had complained about the fact that Songs of Innocence had automatically been downloaded to their devices without their permission. It had not been immediately obvious to many of the account holders how to delete the tracks. The US tech firm is now providing a one-click removal button.”
3) Why most people aren’t downloading apps anymore
It stands to reason the early adopters of smartphones would also be the sort of people most likely to experiment with apps, so, as the smartphone market matures, the average new buyer is less likely to download a pile of apps. Furthermore, there tends not to be much in the way over novel apps, though plenty of “me too” products with marginally better (or worse) features and functions. All this is to say that the “app factory” gold rush is probably as over as over can be right now.
“In August, a widely reported report from comScore, a measurement firm, concluded that the majority of smartphone users in the United States download precisely zero apps in any given month. “One possible explanation is that people just don’t need that many apps, and the apps people already have are more than suitable for most functions,” speculated Quartz’s Dan Frommer at the time. New data from Localytics, an app analytics firm which tracks 28,000 apps across 1.5 billion global devices, lends some evidence to this theory.”
4) Radical New DNA Sequencer Finally Gets into Researchers’ Hands
For those who don’t know, DNA is composed of four nucleic acids (Cytosine, Thiamine, Adenine, and Guanine), and the sequence of those nucleic acids directly code for every known living thing. Traditional DNA sequencing is a chemical process whereby the end of a sequence are identified one nucleic acid at a time. Despite massive improvements to sequencing equipment, the fact it is a chemical process means it takes a fair bit of time to complete. This novel approach proposes to pull a strand of DNA through a tiny pore and measure the change in charge as each nucleic acid goes through. Apparently, the process is prone to error, which is not surprising given the scales involved, however, I suspect that statistical techniques could be used to essentially provide error correction to the results. This would result in extremely rapid, low cost DNA sequencing.
“One day in 1989, biophysicist David Deamer pulled his car off California’s Interstate 5 to hurriedly scribble down an idea. In a mental flash, he had pictured a strand of DNA threading its way through a microscopic pore. Grabbing a pen and a yellow pad, he sketched out a radical new way to study the molecule of life. Twenty-five years later, the idea is now being commercialized as a gene sequencing machine that’s no larger than a smartphone, and whose effects might eventually be similarly transformative.”
5) Progress rarely glows blue: EEStor and the lure of new technology
I have a theory that whenever the word “energy” is invoked, people’s IQ drop by at least 50 points. That makes for some interesting investment outcomes and, needless to say, I have to be cautious about what I say in order to not get sued. The author seems to fail to recognize that he fell hook, line, and sinker for a series of effusive claims and press releases without evidence (let alone proof) any of these were reflective of reality. And that is the problem with “long shots”: first you eliminate the ones which defy the laws of physics, then you use common sense to evaluate what remains. Admittedly, common sense ain’t so common when your IQ has taken a 50 point hit, but it is also useful to remember that tiny, obscure companies rarely deliver breakthroughs in physics or chemistry.
“I wrote about it several times, saying, “If the Texas company EEStor is running a scam, it’s a frakking brilliant one” and “If this is a bluff, it is one of the ballsier, more elaborate bluffs the cleantech world has ever seen.” Gold star if you can guess where this is going. In April, while I was on break, I saw this headline: “ZENN Motor Company’s EEStor technology fails again after year of excuses.””
6) Wave Power’s Uncertain Future
On a related note, we see a retrenchment on the “wave power” front. The idea is an appealing one: since water is in constant motion, and because water is much more dense than air, it should be possible to extract significant amounts of energy from ocean currents. Based on what I have read the problem with wave power is that the stresses on the systems move over several orders of magnitude due to storms so it is hard to design a system which is at the same time cost effective and able to sustain extreme forces.
“Buried in wave power device company Ocean Power Technologies’ latest quarterly report and press release is a seemingly backwards move: one major project in Australia has been terminated, while another signature project in Oregon is in the process of “winding down.” A company determined to build commercial-scale wave power facilities is apparently not interested, at least at the present moment, in building commercial-scale wave power facilities. Instead, OPT will focus their efforts on “next generation designs,” an idea that experts say is probably the only way to go at the moment.”
7) The Idea Builder: Dremel Releases a Mass-Market 3D Printer
Dremel has been a popular vendor amount hobbyist for many years. They sell a premium product and have a fair bit of shelf space in the retail channel. Their entry into the 3D printer market is intriguing, though I am still not convinced there is a mass market for the product. Nonetheless, the presence on retail shelves, and the comfort of knowing the unit will be supported by a recognized brand might prove me wrong.
“With a combination of accessible features, smart packaging, and a $999 price point, it’s obvious that the Dremel 3D Idea Builder is a machine aimed squarely at the mass market. The Idea Builder, announced today at MakerCon in New York City, is the first 3D printer to be released by a major tool manufacturer, and represents further maturation of at-home additive manufacturing. With initial sales being handled by traditional tool-sales outlets Home Depot, Amazon, and Canadian Tire, it promises to help expose 3D printing to a new range of users.”
8) Study: Cities with super fast Internet speeds are more productive
One always has to be careful confusing correlation and causation and, in particular “studies” often invoke questionable assumptions. Nonetheless, it follows that a state of the art infrastructure would empower the development of state of the art business models and hence improved productivity. Unfortunately, some governments, notably the Canadian government does not seem to grasp this.
“It’s become an article of faith among politicians, investors and entrepreneurs that the Internet — and access to it — is an economic engine. It helps connect Americans to education and government services. It serves as a platform for new ideas and companies that wind up changing the world. And it reduces costs for consumers and businesses everywhere.”
9) India Wants To Build Massive Digital Infrastructure To Cover 800 Million Rural Citizens by 2019
As a follow on to the previous item, developing countries recognize the importance of a modern telecommunications infrastructure and are planning to deploy them in order to spur economic development. Although coverage of 800 million people represents only part of the India population, the fact the Indian government has this objective is praiseworthy. In contrast Canada, which has a wired infrastructure in place – meaning deployment of true broadband would be even easier and cheaper – has no such goal, or indeed, any broadband strategy worth discussing.
“A $17-billion government program to build a national optical fiber network that will connect India’s gram panchayats, or village-level governments, aims to cover the entire country in three years and could be a game changer, an Indian minister told Forbes. Ravi Shankar Prasad, minister of communications and IT, and the head of the advisory group which supervises the implementation of the Digital India program, as it is called, said the program was approved by the Indian cabinet last month, and aims to cover 50,000 gram panchayats this year, 100,000 next year and the remaining 100,000 the following year. India’s 600,000 villages where over 800 million live, are administered by these local self-governments.”
10) Artificial sweeteners induce glucose intolerance by altering the gut microbiota
This is a surprising result and it will be interesting to see if the results can be replicated and/or are transferable to humans. Gut bacteria are increasingly recognized as important to human health (leading to the development of procedures for fecal transplants) so the ‘prior plausibility’ of this result is relatively high.
“Non-caloric artificial sweeteners (NAS) are among the most widely used food additives worldwide, regularly consumed by lean and obese individuals alike. NAS consumption is considered safe and beneficial owing to their low caloric content, yet supporting scientific data remain sparse and controversial. Here we demonstrate that consumption of commonly used NAS formulations drives the development of glucose intolerance through induction of compositional and functional alterations to the intestinal microbiota. These NAS-mediated deleterious metabolic effects are abrogated by antibiotic treatment, and are fully transferrable to germ-free mice upon faecal transplantation of microbiota configurations from NAS-consuming mice, or of microbiota anaerobically incubated in the presence of NAS. We identify NAS-altered microbial metabolic pathways that are linked to host susceptibility to metabolic disease, and demonstrate similar NAS-induced dysbiosis and glucose intolerance in healthy human subjects. Collectively, our results link NAS consumption, dysbiosis and metabolic abnormalities, thereby calling for a reassessment of massive NAS usage.”
11) 18 Views of the Silicon Horizon
Take the predictions of any industry analyst with a large sack of salt: they are rarely close to what actually happens and are even frequently directionally wrong. In particular, I would question any growth rate greater than growth in GDP since there are few large, rapidly growing end markets, and most those are replacing other shrinking markets, so its a bit of a wash. The thing to know is that some people make investment decisions based on these staggeringly expensive industry reports.
“The semiconductor industry will see “good but not great growth,” with rates in the high single digits, in 2014 and beyond, according Bill McClean, president of the market watcher IC Insights. Electronic system sales will rise 5% this year, nudging chip sales up 7%. Capital equipment spending is rebounding from a 3% decline last year and will grow 12% this year (see below).”
12) Apple’s New IPhones Seen Fueling Switch From Android
I used to work with a sell-side analyst who did “channel checks” which consisted of calling a few Radio Shack stores to see how sales were doing. Actually, that was nothing: I know of another analyst, still on the job, who just makes stuff up. So, I figure the value of RBC’s comments regarding iPhone 6 demand are about as reliable as those of IC Insights concerning the future of the semiconductor industry (see previous item). That being said, given all the hype and hysteria generated by Apple it is credible that their willingness to bring their products closer to the state of the art would evoke some converts. So what?
“When Apple’s main product, featuring bigger displays and faster chips, goes on sale starting in Australia, they may be best remembered as the generation of iPhones that won over consumers from rival smartphones. Trade-ins of Samsung phones with smartphone reseller Gazelle Inc. tripled last week and about a quarter of potential iPhone 6 buyers are new to Apple’s ecosystem, according to RBC.”
13) Audi gets first official California self-driving permit
A sign of things to come: as the article shows most of the industry is preparing real life trials of autonomous vehicles, suggesting this are moving along nicely. I continue to expect this technology to lead to another “industrial revolution”.
“Audi is the first auto manufacturer to receive an official permit from California to test its self-driving cars on the state’s highways. California, Nevada, Michigan and Florida are the only states to date permitting such testing. Cars have already been seen in on-road tests in California, but the state now requires registration and is issuing testing permits.”
14) LG Chem’s super-efficient OLED lighting has life of 40,000 hours
As the article notes, the problem with OLEDs is that they are currently quite expensive, however, this may represent the beginning of the cost curve with significant opportunity for improvement down the line. One advantage of OLED is that they emit light over a sizable surface area, rather than a point emission as with LEDs. As a consequence, you don’t need diffusers and complex optics and this may offset some of the cost of the fixture.
“Korea JoongAng Daily, providing details last week, said that LG Chem, Korea’s largest chemical company, has developed an OLED panel with the world’s best luminous efficacy and longest life. “The company under LG Group said its OLED panel has a luminous efficacy of 100 lumens per watt, almost double compared to 60 lumens per watt achieved before, and a life of 40,000 hours.” LG Chemical plans to focus on markets in North America and Europe and it has already secured 50-plus lighting companies, including Atlanta, Georgia-based Acuity Lighting, said Korea Bizwire.”
15) New data center protects against solar storms and nuclear EMPs
Protection against solar storms should be pretty straightforward: enclose the data center in a Faraday cage and isolate the power supplies. Protection against a nuclear EMP is another matter entirely: will you really care about your cat pictures if you emerge into a post-nuclear holocaust hell-scape?
“In Boyers, Pa., a recently opened 2,000-sq.-ft. data center has been purpose-built to protect against an electromagnetic pulse (EMP), either generated by a solar storm or a nuclear event. The company that built the facility isn’t disclosing exactly how the data center was constructed or what materials were used. But broadly, it did say that the structure has an inner skin and an outer skin that use a combination of thicknesses and metals to provide EMP protection.”
16) Vilified Bitcoin Tycoon After Losing $500 Million: My Life Is at Risk
Pro-tip: if you are going to run a ‘bank’ for a ‘currency’ mostly used for money laundering you had better be prepared for the consequences if said ‘currency’ gets ‘stolen’. A bonus pro-tip: if you are Frenchman, there are better places to hide from potential assassins than Japan. He kinda stands out.
“What was once the world’s largest bitcoin exchange, Mt. Gox, filed for bankruptcy protection in February this year after disclosing that a half-billion dollars worth of virtual currency had disappeared into the blue, allegedly hacked. A Japanese police investigation was launched in late July to try to find where the money went and how the bitcoins were swallowed, or if other crimes had been committed. An independent group of IT specialists living in Tokyo, headed by Jason Maurice of Wiz Technologies, began its own independent probe. Now the race for the truth is picking up speed.”
17) How Close Are We to Star Trek Propulsion?
The answer is not close at all, but at least there are people looking at the math. The opening reference to the ‘impossible’ drive system is not really on topic as that system would not allow for relativistic speeds, however it would allow for trips within the solar system to take weeks instead of years, and therefore is more analogous to Star Trek’s ‘impulse drive’ than ‘warp drive’. Don’t hold your breath in either event – these are not easy problems to solve and even if they were it would require massive investment to development them.
“You may have heard about a new experimental NASA engine, as the story was circulating at warp speed less than a month ago. Stories have been quite optimistic, with headlines such as “Impossible NASA engine may actually work.” And now, because of inclusion of the word “impossible,” there’s been some backlash of skepticism based on a rationale that goes something like “How could it be that an engine violates Newton’s third law of motion (for every action there’s an equal and opposite reaction)? Surely NASA is more likely to be wrong than Newton.” We don’t know how the story will turn out, but for the record let’s establish one thing: if the new engine works, it does not violate Newton’s third law.”
18) The Uber effect: how San Francisco’s cab use dropped 65-percent
I always considered San Francisco – and otherwise great city – to have an abysmal taxi service. You’d wait 45 minutes for cabs which never showed up, etc.. Uber has completely disrupted that market by providing a reliable and cost effective service. The taxi industry is fighting back through efforts at re-regulation and through the adoption of apps allowing you to have some degree of confidence your cab will arrive. All in, it seems like a win for consumers. Needless to say, both the cab industry and Uber’s critics are saying that drivers can no longer earn a living from the activity. If this is the case then drivers will simply drop out of the labor pool and move things into balance.
“Hailing a ride has never been easier — just take out your phone, tap on an app and wait for your internet-wrangled chauffeur to arrive. Companies like Uber and Lyft are reinventing the transportation industry, and traditional taxi services are feeling it. According to Kate Toran, interim Taxis and Accessible Services director for the San Francisco Municipal Transportation Agency, the average taxi is only making about 504 trips per month. Two years ago (specifically, in March of 2012) the average trip per taxi averaged at 1,424.”
19) Sony Forecasts $2B Loss as Its Smartphones Lag
Sony is simply the recent example of what happens to substantially all consumer products companies over time: they because successful by providing a high quality solution to consumer’s needs. Over time they moved into a premium pricing model, but at least you were getting a superior product at a higher price. Eventually they dropped innovation and superior quality and simply maintained a premium price. Consumers eventually figure these things out and, as has happened with so many companies, stop being willing to pay a brand premium. This has happened before and it will happen again. I’m looking at you, Apple.
“Sony expects its annual loss to swell to $2 billion and has canceled dividends for the first time in more than half a century after writing down the value of its troubled smartphone business. Citing intense competition, especially from Chinese rivals, Sony said Wednesday it anticipates a net loss of 230 billion yen ($2.15 billion) for the fiscal year that ends March 31, 2015. Its previous forecast was for a 50 billion yen ($466 million) net loss.”
20) Leading tech investors warn of bubble risk ‘unprecedented since 1999’
Whenever the market is going up you can find all kinds of folk calling it a bubble. In this case I don’t disagree, however, I’d view the market as being bifurcated: there are weird valuations, companies run by CEOs who are just out of puberty, and so on, while there are real companies trading at modest valuations. Unless and until rising tech stocks become the lead item on the news, and microcap stocks are bid up to the stratosphere on the basis of an oblique relationship to a hot technology, it is nothing like 1999.
“Two of the world’s leading tech investors have warned the new wave of tech companies and their backers are taking on risk and burning through cash at rates unseen since 1999 when the “dotcom bubble” burst. Bill Gurley, partner at Silicon Valley-based investor Benchmark, sounded the horn of doom on Monday warning that “Silicon Valley as a whole or that the venture-capital community or startup community is taking on an excessive amount of risk right now.””