The Geek’s Reading List – Week of October 31st 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!
Surprisingly there were lots of interesting tech pieces this week, though no theme emerged. The Internet was in a virtual frenzy over developments, or rather lack of developments, with Apple’s mobile payment system, which I believe is doomed to failure. There were a number of developments in networking and computing technology as well as further signs of “blow back” associated with the Snowdon/NSA revelations.
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1) Google’s Secretive DeepMind Startup Unveils a “Neural Turing Machine”
Neural networks are based on a simplified model of the function of a brain. Not a “human brain” per se because brains work pretty much the same way across species. Brains are very good at certain things (consider the complex behavior of a mosquito, despite a microscopic brain) such as pattern recognition and adapting to varying conditions, but not very good at other things like repeatability and math. This appears to be a novel type of neural network, however, it is not clear that such a design is useful for any real-world application.
“One of the great challenges of neuroscience is to understand the short-term working memory in the human brain. At the same time, computer scientists would dearly love to reproduce the same kind of memory in silico. Today, Google’s secretive DeepMind startup, which it bought for $400 million earlier this year, unveils a prototype computer that attempts to mimic some of the properties of the human brain’s short-term working memory. The new computer is a type of neural network that has been adapted to work with an external memory. The result is a computer that learns as it stores memories and can later retrieve them to perform logical tasks beyond those it has been trained to do.”
2) Retailers are disabling NFC readers to shut out Apple Pay
The Internet jungle drums beat mightily all this week after this news broke, prompting an unrelenting slew of increasingly hysterical defenses of Apple’s offering as well as condemnation (complete with allegations of conspiracy) of a rival technology. Frankly, it is hard to believe so many people give a damn which payment system, if any is successful. Such is the might of marketing in the Internet age. For the record, I believe the odds of Apple’s system being successful are next to zero: their market share is too low, especially among the ranks of, say, Walmart shoppers. The most likely successful payment system, assuming one emerges, is bound to not be tied to any smartphone OS or vendor.
“The fight for control of the mobile payments market is opening a rift between merchants and banks. Banks and credit card companies have enthusiastically supported Apple Pay, seeing it as a way to increase the number of purchases people make with their credit cards. But Apple has struggled to get merchants on board. A quick look at Apple’s website explaining the service highlights just 34 retail partners that support the system. Eight of those are different flavors of Foot Locker. One is Apple itself.”
3) Big Factories Won’t Solve High Cost of Electric Vehicles, Carnegie Mellon Researchers Say
There is a popular misconception that battery prices have been plummeted, aided and abetted by the cult following around Tesla, jabbering idiots on Wall Street, and the traditional wishful thinking among the “green” energy crowd. Batteries are very simple things: containers with metal and chemicals inside. They are not significantly more difficult to manufacture than cans of soft drinks and, as a consequence, the process is highly automated and continuous. Similarly, the materials are industrial commodities made in enormous volumes and not amenable to significant improvements to the cost of production. Nonetheless, the expectation persists that an enormous factory will somehow make a difference – at least among those who know nothing about batteries.
“”Electric vehicle batteries are expensive,” Michalek says. “Federal and state governments have been subsidizing and mandating electric vehicle sales for years with the idea that increasing production volume will reduce costs and make these vehicles viable for mainstream consumers.” Tesla’s planned Gigafactory has a similar hope, promising major cost reductions at higher volume. “But we found that battery economies of scale are exhausted quickly, at around 200-300 MWh of annual production. That’s comparable to the amount of batteries produced for the Nissan Leaf or the Chevy Volt last year,” Michalek said. “Past this point, higher volume alone won’t do much to cut cost.””
4) 255 Terabits/s: Researchers demonstrate record data transmission over new type of fiber
This announcement made headlines, and it is pretty impressive. Plus, the multi-core approach seems to be the sort of thing which might be expanded and probably should be relatively straightforward to manufacture. However, the problem is not that fiber isn’t fast enough but that it doesn’t go to enough places, mostly because it is expensive to run the cable. So expensive, in fact, that cables often contain a multiplicity of individual fibers, even if most are left “dark”. So, what we really need is an incentive to string more fiber-optic cables to more places, not faster fibers.
“Researchers at Eindhoven University of Technology (TU/e) in the Netherlands and the University of Central Florida (CREOL), report in the journal Nature Photonics the successful transmission of a record high 255 Terabits/s over a new type of fiber allowing 21 times more bandwidth than currently available in communication networks. This new type of fiber could be an answer to mitigating the impending optical transmission capacity crunch caused by the increasing bandwidth demand.”
5) ESB and Vodafone to invest €450 million in 100% fibre broadband network
This ties to the prior article: electric power distribution companies are natural partners for the deployment of true, fiber-optic based broadband. After all, wherever electricity goes there is a need for broadband, especially as the Internet of Things emerges. Because fiber does not conduct electricity and is unaffected by electricity (unlike, say cable or telephone cables) there is no problem at all keeping fiber and even high voltage cables in close proximity so every pole, tower, or conduit which carries an electric cable can also carry fiber. It is a pity so few electric power distributors have the imagination to exploit this opportunity.
“ESB and Vodafone today signed an innovative joint venture agreement to invest €450 million in building a 100% fibre-to-the-building broadband network offering speeds from 200 Mbps to 1000 Mbps, propelling Ireland into the ranks of the world’s fastest broadband countries . Ireland will also become the first country in Europe to utilise existing electricity infrastructure on a nationwide basis to deploy fibre directly into homes and businesses, initially reaching 500,000 premises in 50 towns. The fibre will be deployed on ESB’s existing overhead and underground infrastructure, ensuring a fast and cost efficient roll-out to every county in Ireland and reversing the digital divide between the capital and regional towns.”
6) Netflix and other OTT giants use ‘net neutrality’ rules to clobber EU rivals
I confess to being baffled by those who defend the Internet Service Provider side of the “net neutrality” debate. Obviously, if, through some accident of history, I owned a footpath that people had to use I would be delighted at the opportunity to gouge them at every opportunity. However, ISPs exist only because of inept (or corrupt) regulation – they don’t develop technology, they do not create content, they add nothing of value: they are simply exploiting an historical right of way. Simply put, ISP do not deserve more than a nominal return on invested capital and, ultimately, they will be pushed to side.
“Cable giant Netflix and other big firms are using calls for greater net neutrality to drive down the prices they pay, according to recently published research. Referring specifically to the Dutch internet market, late last week John Strand of Strand Consulting said: “Net neutrality law (which limits operators’ ability to manage networks and recover costs) is meant to herald a flowering of internet innovation and content. Instead, it rolls out the red carpet for the American giant [Netflix]. Netflix, already larger than any cable company in the world by subscribers, is not a company in need of corporate welfare,” added Strand. “It’s time to stop Netflix’s abuse of the political and regulatory system.””
7) Hungary internet tax canceled after mass protests
The singular obliviousness of many governments to the importance of Internet services to the common folk (and all businesses) is breathtaking. Consider the proposal by Hungary to tax traffic at $0.60 per gigabyte, a tax which would increase the cost of residential service dramatically – imagine paying an additional $60 per month for your Internet. Of course, one would not expect a group of middle aged politicians to know better as is demonstrated by the telecommunications policy framework in most countries.
“Hungary has decided to shelve a proposed tax on internet data traffic after mass protests against the plan. “This tax in its current form cannot be introduced,” Prime Minister Viktor Orban said on Friday. Large-scale protests began on Sunday, when demonstrators hurled old computer parts at the headquarters of Mr Orban’s ruling Fidesz party. The draft law – condemned by the EU – would levy a fee on each gigabyte of internet data transferred. The protesters objected to the financial burden but also feared the move would restrict free expression and access to information. The levy was set at 150 forints (£0.40; 0.50 euros; $0.60) per gigabyte of data traffic.”
8) Huge potential FCC ruling sets the stage for Apple and Amazon to replace your cable company
We’ll see whether the broadcast lobbyists let this actually happen. As the Canadian example shows politicians have a bit of a problem when they try and enact rules which as not favorable to the media as the media would like. It is interesting that this ruling comes after the Aereo decision, which seems to have shut down a similar business model. I believe “over the top” delivery of video is the future, at least in jurisdictions where broadband is affordable and available. This will spell disaster for the traditional cable TV business model, however, it will create significant opportunity for content creators. Currently, of course, cable operators are the same companies as those who deliver broadband, however that is an historical artifact and not an inherently stable situation. Eventually that will change as well. Thanks to my friend Rami Nasser for alerting me to this development.
“We’ve known for a while that over-the-top Internet streaming will be the future of television and now a new potential rule change from the Federal Communications Commission could make that future closer than ever before. FCC chairman Tom Wheeler on Tuesday proposed a new rule-making process in which the FCC would consider revising its rules to ensure that over-the-top Internet streaming services are given the same treatment as cable companies and satellite television companies. This means that broadcasters would be barred from stopping online video providers from carrying their content and that online video providers would be empowered to negotiate fair licensing deals with content providers.”
9) The Social Network That Pays You to Friend
One valid criticism of social networks is that the users provide almost all the value for no real remuneration. Indeed, some prominent bloggers who draw thousands of advertisement watching users, have been forced to pay for the privilege of posting their content. It is interesting to speculate as to what alternative business models might arise.
“Asked about the inspiration for Tsu, the social network he’s just launched, Sebastian Sobczak doesn’t immediately mention Facebook or Twitter. Instead, he talks about Ed O’Bannon. Mr. O’Bannon, a former U.C.L.A. basketball player, sued to challenge N.C.A.A. rules banning athletes from making money from their own images — in August, the Supreme Court decided in his favor. And for Mr. Sobczak, he’s a sort of personification of Tsu’s ethos: People should get paid for the content they produce. While Facebook and Twitter have been criticized for failing to share their profits with those who post on their platforms, Tsu pledges to do just that: It will give 90 percent of its ad revenue back to users.”
10) KMG Q3 Report: Mobile Spend 117% Up from a Year Ago
The likes of Google and Facebook appear to have finally figured out mobile ads. Mobile ads are pervasive in “free” apps howeverI remain highly skeptical of such nuggets as “Hot Penny Stock Tips” in a 1 cm banner when I check my stock quotes but apparently there is a market there. The technology for blocking mobile ads is not as advanced as in PCs but you can do something about them, at least under Android (https://adblockplus.org/en/android-install).
“On 14 October, KMG released its Digital Marketing Report Q3, which details massive growth in most areas of the paid search sector. KMG compiles data from its own clients, 50 of whom are members of the Internet Retailer Top 500. Search engines and social networks alike experienced big growth since the third quarter of 2013, demonstrating that it is more important than ever for companies to carefully explore search data.”
11) Drones could 3D-map scores of hectares of land in just a few hours
I remain skeptical of most non-defense applications of drones: it is unlikely governments are going to permit swarms of autonomous machines with sharp blades flying about, and the payload of most such drones is way too low to be of any use for delivery. Larger drones raise the prospect of failed machines dropping to earth and maiming people. One viable application for drones would be photo surveillance (i.e. taking pictures of accident scenes after an accident, inspection, and mapping. All would be done by trained pilots under careful control of their aircraft, of course. Thanks to my friend Humphrey Brown for this item.
“Unmanned drones aren’t just for warfare. In recent years, they’ve been used to map wildlife and monitor crop growth. But current software can’t always handle the vast volume of images they gather. Now, researchers have developed an algorithm that will allow drones to 3D-map scores of hectares of land in less than a day—an advance that is important for cost-effective farming, disaster relief, and surveillance operations. “It is revolutionary for the problem of mosaicking large volumes of imagery,” says computer scientist Dalton Rosario of the U.S. Army Research Laboratory in Adelphi, Maryland, who was not involved with the study.”
12) Lowe’s replacing (some) humans with robots
You would have thought Home Depot would be the first to show off a “shopping robot” since there are very few sales associates in their stores, and, should you hunt one down, they are generally clueless as to the products they carry or their application. No doubt the OSHbot is simply a publicity stunt with little practical value, however, it is kinda cool. Store could solve a lot of customer problems just by providing a touchscreen or app which would direct people to the products they are looking for and what the stock is.
“If you plan to shop at Lowe’s (LOW) Orchard Supply Hardware store in San Jose, Calif. next month, you might find your sales associate replaced by a 5-foot-tall talking robot. These robotic shopping assistants, or OSHbots, will be the first of their kind in the country. They will greet customers, ask them if they need help and show them through the store to the customers’ desired products. The robot will also feature screens on its front and back which will display ads for products as well as allow customers the option to videoconference with an in-store sales associate.”
13) HP embraces ‘blended reality,’ dives into 3D printing
The headline, along with HP’s position in the printing market, might lead you to believe there are entering the 3D printing market with a consumer product. This is not so: not only is the device directed at commercial applications, but it uses a novel approach which results in impressive specifications and a compelling price. If Multi Jet lives up to its billing this could be a disruptive product.
“HP today announced a new 3D printing technology called Multi Jet Fusion that it said will enable mass production of parts with a technology traditionally reserved for rapid prototyping. The new industrial 3D printer, about the size of a washing machine, is 10 times faster and 50% less expensive than current systems on the market, HP said. The printer can also use a myriad of colors and materials.”
14) Banning mobile phones in cars saves lives. No it doesn’t. Yes it does. No it doesn’t.
The question of laws against “distracted driving” makes for an interesting conversation but it is a separate issue from whether texting while driving is likely to lead to more accidents and deaths: it surely does, as does fixing your hair, reading while driving, etc.. There is nothing wrong with laws against distracted driving (laws which are regularly flaunted), however effective publicity campaigns such as the ones used against drunk driving might yield better results.
“Restrict cellphone use in cars and accident rates go down, right? Not necessarily. The results are mixed. Some studies show a correlation between using a phone while driving and a higher incidence of accidents. Now comes a new study on California drivers that shows virtually no meaningful change in accident rates before and after a cellphone ban took place. Unless this study is refuted, the best safety advocates can say is that cellphone bans may improve road safety.”
15) How Far Can the P2P Revolution Go?
I thought this was about Peer-to-peer networking but it is actually about Peer to Peer services such as Airbnb. There are clear potential hazards to the use of P2P business services, not the least of which is being ripped off or having substandard or even dangerous work done. Governments have reason to be concerned due to the potential loss of tax revenue, though that is a risk unlikely to be mitigated by banning such practices. Since the Internet revolution now provides a means distribution and pricing visibility which was non-existent previously, these sorts of business activities (which include the emergence of eBay) are not going away. If you think about it, this is not entirely novel: neighbors used to sell produce and crafts to each other, have boarders, and so on. All that has changed is the ability to cast a broader net.
“How far can the peer-to-peer revolution be pushed? It’s time we start to speculate, because history is moving fast. We need to dislodge from our minds our embedded sense of what’s possible. Right now, we can experience a form of commercial relationship that was unknown just a decade ago. If you need a ride in a major city, you can pull up the smartphone app for Uber or Lyft and have a car arrive in minutes. It’s amazing to users because they get their first taste of what consumer service in taxis really feels like. It’s luxury at a reasonable price. If your sink is leaking, you can click TaskRabbit. If you need a place to stay, you can count on Airbnb. In Manhattan, you can depend on WunWun to deliver just about anything to your door, from toothpaste to a new desktop computer. If you have a skill and need a job, or need to hire someone, you can go to oDesk or eLance and post a job you can do or a job you need done. If you grow food or make great local dishes, you can post at a place like credibles.co and find a prepaid customer base.”
16) Ubuntu’s Unity 8 desktop will remove the Amazon search ‘spyware’
The introduction of a partnership with Amazon confounded many Ubuntu users, leading to a lot of criticism, and, no doubt, the choice by some to abandon the distribution for a more philosophically consistent open source package. One can understand the desire to make money from there efforts but the open source community is downright touchy about such things. It is good they are withdrawing the “feature” and, hopefully, they have learned a lesson.
“Unity 8, seen in the Ubuntu Desktop Next images and Ubuntu Touch phones, removes a controversial feature branded “spyware” by some and fixes one of Ubuntu’s most long-standing complaints. When Unity 8 is stable and ready, Ubuntu won’t send your local searches over the web and show you Amazon product results anymore, quelling some longstanding fears in the open-source community.”
17) China will upgrade all PCs to Linux by 2020
A number of years ago I read an interview with a government official from a developing country who mused whether it was wise to install software on their computers which came with an “off switch” installed in Redmond, Washington. Chinese authorities have, no doubt, arrived at the same conclusion – after all, why would you risk your spies’ computers being delivered with their spies’ software? Recall that until 20 or so years ago the US government placed sever restrictions on the export of technology, now it is the other side which is beginning to restrict the import of technology. I believe this suspicion is warranted, and it is is probably a matter of time before governments migrate away from Intel architectures for the same reasons. This move would be simplified by a transition to Linux, of course.
“China have announced a new time frame in which they will move to a new operating system. It will consist of 15% of government computers being switched to Linux per year. The report by Ni Guangnan outlining the transition won government approval and by 2020 the Chinese Government’s transition to Linux should be complete. Earlier this year the Chinese Government decided that they would ban the use of Windows 8 and upwards on Government computers due to security concerns about the operating system, it was assumed that China would seek to move to a Linux distribution for government computers, this has been confirmed and they plan to make the complete switch by 2020.”
18) Brazil-to-Portugal Cable Shapes Up as Anti-NSA Case Study
This article provides some insight into the rolling ramifications of the US spy program and the willing cooperation of technology giants in the program. To repeat my earlier comments, the NSA revelations only provided specifics as to what was broadly understood and probably came as no surprise to national security officials in foreign countries. However, having incontrovertible proof of the activities of the US and the active cooperation of all of the large US technology companies is something governments and businesses cannot afford to ignore. This isn’t 1995: most technology has been commoditized and governments and companies have choices, especially if they do not need cutting edge gear.
“Brazil is planning a $185 million project to lay fiber-optic cable across the Atlantic Ocean, which could entail buying gear from multiple vendors. What it won’t need: U.S.-made technology. The cable is being overseen by state-owned telecommunications company Telecomunicacoes Brasileiras SA (TELB4), known as Telebras. Even though Telebras’s suppliers include U.S. companies such as Cisco Systems Inc. (CSCO), Telebras President Francisco Ziober Filho said in an interview that the cable project can be built without any U.S. companies.”
19) A victory for free software over the “Microsoft tax”
This was an interesting and very promising legal decision which was long in coming: the purchase of a PC is really two separate transactions, namely the purchase of the machine from the vendor and then the agreement to the EULA (End User License Agreement) which completes the licensing of the operating system. What happens if you bring your new computer home and you do not agree to the EULA, even though you like the computer? An Italian court has ruled, correctly in my view, that you should get a credit for the Operating System, provided you refuse the EULA and do not use it. I rather doubt other courts will follow suit, but it would be a great thing if they did, though, admittedly, not so for Microsoft.
“The Italian Supreme Court (Corte di Cassazione) issued a judgment1 that bans the “Microsoft tax,” a commercial practice that discourages users from converting their PCs to GNU/Linux or other free operating systems by forcing them to pay for a Windows license with their PCs. PC producers in Italy now cannot refuse to refund the price of the license to purchasers that will not run Windows. The ruling definitively concludes the case filed in 2005 against a hardware producer by Marco Pieraccioli, with the support of the Consumer Association ADUC, and affirms Marco Pieraccioli’s right to a refund for the price of the Microsoft Windows license for the computer he purchased.”
20) Weeks after winning a Nobel Prize for his microscope, Eric Betzig just revolutionized microscopy again
I heard this guy being interviewed shortly after learning he had one a Nobel Prize. Clearly, he is extremely intelligent, but more significantly, he appears to think far “outside the box”, which leads him to invent simple, yet elegant, solutions to very difficult problems in microscopy.
“Earlier this month Eric Betzig shared the Nobel Prize in chemistry for his work on high-resolution microscopes — specifically the one he’d designed and built on a friend’s living room floor. But when Betzig, a researcher at the Howard Hughes Medical Institute’s Janelia Research Campus in Ashburn, Virginia, got news of his win, his best work yet was still a few weeks away from being published. Thursday in Science, he and a team of his colleagues reported on a new microscopy technique that allows them to observe living cellular processes at groundbreaking resolution and speed.”