The Geek’s Reading List – Week of November 28th 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!
The US Thanksgiving holiday always a slow news period . There were some amusing developments in the Tesla saga, and a trade show led to a fair bit of coverage regarding self-driving vehicles. Uber was in the news as it was banned from Nevada and rumors emerged of a potential financing at a staggering valuation. Even though “Black Friday” made headlines, don’t expect a lot of upside in terms of profits for tech or CE companies: most markets are mature, pricing is coming down, and margins are collapsing. This should have a significant impact on suppliers as well.
This edition of the Geeks List, and all back issues, can be found at www.thegeeksreadinglist.com.
1) Uber’s tech is what taxis are missing. T-Dispatch wants to solve that problem
About 25 years ago I designed the software for a digital tax-dispatch system, and a few years after that developed, with my good friend Allan Brown, the hardware and software for a dispatch system which was still in use, at least in New York City, a few years ago. Essentially we had to develop, from scratch, all of the technologies which come on even the cheapest smartphone today. All this is to say that there is nothing particularly complicated or difficult in developing a car dispatch system as T-Dispatch, and dozens of other Uber clones are demonstrating. It makes you wonder if the valuation being placed on the likes of Uber (http://www.bloomberg.com/news/2014-11-26/uber-said-close-to-raising-funding-at-up-to-40b-value.html) show the sort of disconnect from reality that Pets.com and other dot com flame-outs demonstrated. Its just a bloody dispatch system.
“While Uber and taxi companies are fighting over different regulations in court in pretty much every city out there, Berlin-based T-Dispatch found a solution that could solve part of the problem — and quietly raised 1 million euros. The problem taxi companies face with Uber is not only the price and the new competition but also the technology. While Uber operates through a simple app, taxi companies receive calls and requests through their own websites and have a hard time organizing fleets, as they do not know if a driver is available or who might be booked with other services such as mytaxi. Also, cab drivers pay up to 15 percent of their fare price when accepting a mytaxi request.”
2) Intel promises 10TB+ SSDs thanks to 3D Vertical NAND flash memory
We continue to believe Solid State Drives (SSDs) will substantially replace Hard Disk Drives (HDDs) and they are superior in all respects except price per bit. When analyzing the purported limitations of SSDs, including pricing, it is important to understand that NAND has only been used for mass storage for a relatively short time. Unfortunately, this article does not address pricing, which is more of an issue at this time than multi-terabyte capacity. Nonetheless, we expect pricing to follow a typical Moore’s Law curve. One threat to NAND, albeit a few years out, is commercialization of HP’s memristor technology, which has the potential to disrupt the space.
“At present solid-state drives with extreme capacities are very expensive and even the best of them cannot match high-capacity hard disk drives for nearline storage applications. However, thanks to the evolution of NAND flash memory in general, and 3D vertical NAND (3D V-NAND) in particular, the situation may change soon and SSDs with 10TB or higher capacities will become reality. Intel Corp. revealed at its Investor Meeting 2014 event this week that in the second half of 2015 its joint venture with Micron Technology – Intel Micron Flash Technologies (IMFT) – will start mass production of 3D vertical NAND flash memory chips with up to 256Gb (multi-level cell, 2-bit-per cell) or 384Gb (triple-level cell, 3-bit-per cell) capacity. 3D V-NAND flash memory chips will feature 32-layer vertically stacked cell arrays that are “interconnected” using four billion through silicon vias (TSVs).”
3) In a self-driving future, we may not even want to own cars
I tend to believe people will willingly abandon driving once they have become convinced of the reliability of self-driving cars. Furthermore, I also believe that usage of cars will tend towards a rental or taxi like system, especially in urban areas where parking is scarce. This will require a far more reliable vehicle than those which exist today, since rental vehicles will be in almost constant use and travel far more kilometers per year than the average car currently does. Of course, there are people who will still prefer to drive, just as there are people who like to ride horses today, but I doubt this will represent more than a small minority of consumers.
“A glimpse of the coming revolution can be seen in the models debuting this week at the Los Angeles Auto Show. Hidden under their hoods and dashboards are sensors that take the first steps toward autonomous driving. Already, cars can park themselves, slam on the brakes to avoid crashes and adjust steering to stay centered in a lane. But the disruption will go well beyond who is — or isn’t — at the controls. For a century, cars have been symbols of freedom and status. Passengers of the future may well view vehicles as just another form of public transportation, to be purchased by the trip or in a subscription.”
4) Self-driving vehicles may arrive sooner than expected
I take a more cautious view of “self-driving” cars than many people. I figure it will be at least 20 years before we see significant market penetration. Of course, a lot depends on what you mean by “self-driving”, but I mean a vehicle capable of moving, say, a child from one place to another without significant chance of a mishap. It is important to realize that critical infrastructure such as wireless broadband is missing from large parts of the planet, which will limit adoption outside of urban areas, and, even then, the technology will have to be extremely capable because there will likely be non-self-driving cars around for the next 40 or 50 years.
“A car that drives itself seems like the stuff of fanciful daydreams or science fiction movies, but it is only a few years away. Tech giant Google continues to test its self-driving car around Silicon Valley and this spring showed models without a steering wheel or pedals. Cadillac announced in September it will introduce a nearly self-driving car in 2017, featuring a “super cruise” feature that allows hands- and feet-free driving on both freeways and in stop-and-go traffic.”
5) Tesla to Replace 1,100 Defective Model S Drive Units in Norway
Tesla is endlessly fascinating to me: a large cap stock where observable reality is starkly at odds with Wall Street research. Take, for example, the easily verifiable poor reliability record of the Model S, which has been articulated by Edmunds, Motor Trend, and Consumer Reports as well as numerous posts on Tesla’s own website (see http://www.teslamotors.com/forum/forums/anyone-else-all-issues). If you want to know more, Google “Tesla drive unit failures” or “Tesla reliability” for endless reading. Whatever happens, a “tweet” by the CEO is all it takes for Wall Street – and investors – to ignore reality (“these aren’t the droids you’relooking for …”). Take this debacle, for example. (Longer articles are available in Norwegian). The “drive unit failure” problem was previously dismissed as a small issue corrected with a shim, however, somehow 1,100 units need to be replaced in Norway. Perhaps theyforgot to tell the shop floor about the shims. It doesn’t matter really – lousy engineering is the least of an EV problems: short-lived, and spectacularly expensive batteries are.
“According to a recent report, the American automaker is replacing 1,100 defective drive units on Model S sedans produced for Norway after several owners reported issues with the vehicles. Some owners stated that their vehicles made circular saw sounds or clunking noises and sensations. Tesla CEO Elon Musk sent an email out to the affected owners in Norway saying, “Unfortunately, this happened when a large batch of cars were produced for Norway, affecting approximately 1,100 vehicles. Approximately 1% have experienced premature wear out of the coupling.””
6) Tesla’s Musk: “We don’t have inventory.” Consumer Reports: “Yes, you do.” Musk: “Making cars is really hard.”
You might recall last week we carried an article which raised the question of missing vehicles. Personally, I’d be more interesting in failures and to beat a dead battery, the fact that the batteries are short lived and very expensive. The pandemonium created by the work behind that article is somewhat amusing, and a sign of lack of transparency. This should not be a difficult question to answer and the fact it has not been is not a good sign. Thanks to my friend Duncan Stewart for this article.
“In an earlier version, CR wrote that Tesla “has about 2,300 remaining 2014 Model S cars” which the company is trying to sell at steep discounts. The Daily Kanban received similar information last week. A source claimed that the inventory consists of “pre built cars”, “orphans’ , and “service loaners,” that the steep discounts are applicable only to “inventory cars that do not have auto pilot features,” and that most of the inventory cars that should not exist are about 3-4 months old. Apparently under pressure from Tesla’s combative PR department, empowered by the boss to go on a search and destroy mission against any perceived falsehoods, CR watered down its story a few times. Most of the changes are documented in Seekingalpha.”
7) Full steam ahead for Hyundai’s hydrogen-fuelled vehicles Add to …
Well – it’s that time of decade again for fuel cell vehicles! I wrote a research piece in the early 2000s which articulated the challenges associated with fuel cell vehicles. Its one of a few pieces I wrote which got me death threats. Go figure. In any event the problem is not the fuel cell but the fuel (hydrogen) which is expensive to make and difficult to transport, and that is a problem of physics. Massive subsidies for “zero” emission vehicles can cause all kinds of illogical things to reach the market, ranging from EVs to fuel cell vehicles. One disadvantage FCVs have over EVs is that the subsidies are in the purchase of the vehicle with the ‘gotcha’ only coming when the hapless owner discovers the EV has zero residual value once the battery needs to be replaced. FCVs, on the other hand, will require fueling with expensive hydrogen, which is only subsidized to the extent of not taxing it fully. So the FCV owner will have to deal with that every time he/she “tanks up”.
“Hyundai Corp. is looking to revive the dream of a fleet of hydrogen-fueled vehicles driving on Canadian highways as it becomes the first auto manufacturer to launch in Canada a fuel cell version of an existing car model. Hyundai will announce Wednesday that it is offering three-year leases for the Tucson FCEV to drivers in British Columbia’s Lower Mainland, one of the few areas in the country that have hydrogen fueling stations that were put in place as B.C. sought to demonstrate the fuel cell hydrogen technology during the 2010 Winter Olympics.”
8) Population with internet access to pass 3bn next year
This study uses a pretty loose definition of Internet access – I would have preferred to know how many people would have access to Internet services at their residence, for example. Regardless, it does show the pace of adoption, which has to be much faster than any other communications technology in history. I would think that forward thinking governments would prommote such access, while dictatorships, etc., have the most to lose from it.
“The number of internet users worldwide will pass three billion in 2015, according to new estimates, increasing 6.2 per cent next year to reach 42.4 per cent of the world’s population. This year, internet user penetration will top the 40 per cent mark for the first time as the web reaches 2.89bn users across the world. By 2018, eMarketer estimates, nearly half the world’s population – or 3.6bn people – will access the internet at least once each month.”
9) Scientists urge governments to turn old TV frequencies into free “super WiFi”
Spectrum is a valuable resource and reallocating some of the former analog TV services to Internet access would make some sense due to the reach these lower frequencies might have. I think it is unlikely we will see this come to pass, however: there are powerful economic forces lusting after that spectrum and governments can use auctions to plug gaps in their budgets. Nice try through.
“Governments should sack plans to auction off old television frequencies to the highest bidder and instead use the bandwidth for free super-frequency WiFi if they want to boost the economy, scientists have said. Old television frequencies are becoming available for other uses around the world, thanks to a switch from analogue to digital transmission. However, while governments are for the most part auctioning these off to whoever is prepared to pay the most – usually mobile phone networks – they should instead be using the frequencies to create free-to-use, wide-range WiFi, scientists from the Karlsruhe Institute of Technology (KIT) in Germany have said.”
10) Li-Fi Gets Ready to Compete With Wi-Fi
This idea pops up from time to time. It has its problems, like, for example, ensuring receiver and transmitter have line of sight, something which might not be practical with, for example, a smartphone in a pocket or case. It is also not abundantly obvious which problem this solves, exactly: is WiFi technology, which continues to evolve, somehow a limiting factor for most applications?
“As LEDs become a more common source for room lighting, they’re opening a new pathway for linking mobile devices to the Internet, with the potential for wider bandwidth and quicker response time than Wi-Fi. At least that’s what researchers such as Harald Haas, chair of mobile communications at the University of Edinburgh, are hoping. “All the components, all the mechanisms exist already,” Haas says. “You just have to put them together and make them work.””
11) Print Thyself: How 3-D printing is revolutionizing medicine.
3D printing seems to be establishing a place for itself in the medical world, and most of the applications outlined in this article don’t really require “new science”. Presumably it is a matter of time before medical schools start introducing students to the applications of 3D printing in medical practice, after which it should really take off.
“In February of 2012, a medical team at the University of Michigan’s C. S. Mott Children’s Hospital, in Ann Arbor, carried out an unusual operation on a three-month-old boy. The baby had been born with a rare condition called tracheobronchomalacia: the tissue of one portion of his airway was so weak that it persistently collapsed. This made breathing very difficult, and it regularly blocked vital blood vessels nearby, including the aorta, triggering cardiac and pulmonary arrest. The infant was placed on a ventilator, while the medical team set about figuring out what to do. The area of weak tissue would somehow need to be repaired or replaced—a major and dangerous operation in so small a patient. The team consulted with the baby’s doctors at Akron Children’s Hospital, in Ohio, and they soon agreed that they had just the right tool for this delicate, lifesaving task: a 3-D printer.”
12) 3D LED printer makes a contact lens display possible
I remain skeptical that contact lenses with integral displays will be mass market, simply because people prefer not to have things sitting on their eyeball. Besides, as Google Glass appears to have shown there isn’t much demand for huge amounts of information while people are walking around. Nevertheless, there might be specialist applications for this sort of device. Of course, the article is not so much about the display and the system used to create a prototype. Long story short, you can do many interesting things with a 3D printer, even if mass production requires a different approach.
“When researchers from the University of Washington began constructing prototypes for contact lens displays, their biggest impediment was the fabrication of parts. On a theoretical level it’s not hard to build a display in a contact lens, but actually building and placing all the tiny, interrelated parts on a tiny polymer disk is difficult even today. It’s annoying to have to come up with an all-new fabrication process for every single part in a display, just because the display happens to be in the eye rather than in front of it. The most finicky part of all though, more than wireless power antennae or precise connective wiring, is the display itself. How do you fit a contact lens with something as complex as an LED display?”
13) Viewpoint: Trapped Ions Make Impeccable Qubits
This seems to be another step forward in quantum computing: a significant improvement in the reliability of qubit storage. Of course, this is still many orders of magnitude away from the sorts of reliability in a modern digital memory, but you don’t need that degree of reliability for quantum computing since you don’t need nearly as many bits. As interesting as quantum computing is, it is important to recognize that dazzling fast computation of the sorts of algorithms amenable to quantum computing is not likely to have an impact on mainstream computing. Nonetheless, there are likely scientific applications, such as protein folding, which may benefit enormously.
“The quality of qubit manipulation in a number of physical systems has dramatically improved in the past few years [3, 4], raising hopes that a quantum computer, at a large enough scale to carry out meaningful computations, might be within reach. Now, Thomas Harty at the University of Oxford, UK, and colleagues  are reporting an important contribution to this goal with the demonstration that qubits consisting of trapped 43Ca+ ions can be manipulated with record high fidelities (in quantum information theory, fidelity is a measure of the “closeness” of two quantum states). Their experiments suggest trapped-ion schemes could potentially provide the basic fundamental building blocks of a universal quantum computer.”
14) Solar panels pose power problem for firefighters, prompting new guidelines
Solar power is somewhat of a scared cow. Because I live on a 110 acre farm, I was initially attracted to the Ontario government’s solar program. A financial analysis determined it was a poor investment with returns of a fraction of the figures touted on the government’s website. Eventually I was able to determine the government figured counted return of capital as return on capital – an error which I attempted to bring to the attention of the media and the opposition parties to no avail. As a result, countless homeowners were separated from their money while solar installers prospered. One factor I did not consider in order to simplify the analysis was external costs such as insurance. As this article shows, if you have roof mounted solar panels, you stand a much greater risk of losing your home to fire than would be the case if you do not. No doubt insurers will eventually take notice.
“A year ago, fire trucks arrived on the scene of a blaze at a cheese and deli-meat distribution facility just outside of Philadelphia. But firefighters had to keep their distance because of worries that the thousands of solar panels on the roof were still generating power, putting them at risk of electrocution. The building was completely destroyed.”
15) BlackBerry will pay iPhone users up to $600 to switch phones
Every now and then you come across an announcement which really leaves an impression. Such as this one. Somebody actually said, aloud, in a marketing meeting, “I know, let’s pay people to use our phones instead of an iPhone!” And other people in that meeting thought this was a good idea. Perhaps somebody might have remarked “OK, but if people do switch, the story will be that we have to pay people to use our phones, and if they don’t switch, the story will be that people won’t switch even if they are paid to” but they would have been shouted down. How sad.
“BlackBerry is trying a new tactic to lure customers back — by paying them to switch phones. The Waterloo, Ont.-based smartphone maker says it will pay iPhone users as much as $600 to switch to a BlackBerry Passport phone. Canadian iPhone users with iPhone 4s or later makes are eligible for up to $400 in trade-in value, depending on the model of the iPhone, plus a $200 top-up from BlackBerry. U.S. users are eligible for up to the same amount, plus a $150 US top-up. Users with the newest iPhone models, the 6 or 6 Plus, are eligible for the highest trade-in value, up to $400.”
When is a “patent troll” not a patent troll? Well, when it is Apple, Microsoft, or any of a number of large publicly traded technology companies which use brute force and litigation to restrict competition by less well capitalized, but actually innovative, companies. I rather doubt Apple’s shenanigans are over over, or that Rockstar will be wound down because its much too much of a good thing. Nonetheless, those companies, such as Blackberry, which participated in the Nortel patent auction should be considering writing down the asset from their balance sheet.
“Apple has decided to end a bitter legal war against Google and Android phone makers, and to turn away from patent tactics that have cost the smartphone industry billions of dollars, according to reports and new court filings. The news comes in part via a landmark court order in which a federal judge agrees to stay a series of lawsuits between Google and a patent consortium known as Rockstar, that is primarily owned by Apple.”
17) The global tablet market is slowing down, says IDC
My usual comments about the lack of value in industry research apply here. Tablets are relatively long lived devices with limited utility and it makes perfect sense the market would mature rapidly. Furthermore, as smartphones have got larger, there is less point having both a smartphone and a tablet. Of course, Apple fanboys point to the iPhone 6 as the cause of the slowdown in tablet sales, but large screen smartphones have been around for a few years now. I continue to forecast significant pricing pressure on both tablets and smartphones, which will have a profound impact on company profits.
“It’s been clear for a while that iPads and other tablets follow a much longer upgrade cycle than smartphones. A new report from IDC backs up this anecdotal trend with sales estimates. According to the report, the worldwide tablet market will only grow 7.2 percent this year, a huge drop from the 52.5 percent growth it saw in 2013.”
18) Cord-cutters shake up consumer electronics
This is a bit of a follow on to item 17, but the article covers some of the shifts going on in the Consumer Electronics (CE) space although the author seemed to have missed the memo about tablet sales. Its not so much cord cutting (which is an important trend) it is the fact that a personal mobile device can do pretty much everything you want. You can watch video, listen to audio streaming, recordings, or podcasts, browse the web, etc., without having to negotiate over who wields the remote control. Of course, this sort of flexibility is mainly available to those with access to affordable high speed Internet access. I don’t expect TV or even broadcast to disappear overnight – after all, there are still lots of FM radio stations out there. Or so I am told.
“Starting Thanksgiving Day, Americans will head out en masse to “door-buster” sales at the USA’s biggest retailers. Flat-screen televisions will be among the hottest items: Walmart stores are offering a 65-inch Vizio LED HDTV for $648, and Best Buy a Samsung 55-inch LED for $599. According to IHS, televisions will be on one-third of U.S. consumers’ shopping lists this holiday season. But Black Friday’s frenzied buying masks tectonic shifts in the $207-billion consumer electronics industry. Mobile devices are upstaging traditional TVs in what could be the biggest change in mass entertainment since television supplanted radio and the movies after World War II.”
19) The Rise and Fall and Rise of the Chemistry Set
A few weeks ago my son participated in chemistry lab experiment involving potassium nitrate. Unfortunately, the government, in its infinite wisdom, decided it wasn’t wise to let students have access to a few grams of KNO3 because it can be dangerous, so the “lab” was actually a website. I pointed out to him that I could buy KNO3 in large quantities as fertilizer or in smaller quantities from a drugstore if he was keen to blow anything up. This led me to pine for the olden days when all the kids had chemistry sets and actually learned a lot, even if the occasional chemical burn or lost eye resulted. Ah, the good old days.
“The chemistry set had clearly seen better days. Curator Ann Seeger pulls the mid-20th-century Gilbert kit out of a glass-fronted cabinet in the back of a cluttered storeroom at the National Museum of American History and opens the bright blue wooden box, revealing that several bottles of chemicals are missing and some vials have lost their labels. The previous owners hadn’t let a few missing pieces stop them, though; the kit was supplemented with a set of plastic measuring spoons that appear to have been stolen from a mother’s kitchen. One of the museum’s librarians donated the kit; he and his brother had played with it as children. “They weren’t very good with chemistry,” Seeger says, which may explain the donor’s career choice.”
20) New analysis of Antikythera Mechanism reveals clues to one of history’s greatest puzzles
The Antikythera mechanism was pulled from an ancient shipwreck and is the earliest known computer. It’s invention was attributed to Archimedes, however, this may have been as much due to wanting to have something actually made by Archimedes himself. Inventors rarely develop entirely original systems out of nothing, which suggests to me that high quality clockworks, gears, etc., existed well before this device was made. I am not sure the fact the device “predicted” an eclipse prior to Archimedes’ birth means he didn’t invent it – a known event could have been a sort of calibration point.
“A new study of the world famous Antikythera mechanism has revealed fascinating new information about the puzzling artifact, including that the maths used for its eclipse prediction appears to be based on Babylonian arithmetic rather than Greek trigonometry. A detailed analysis of the eclipse predictor has also enabled scientists to determine that the device’s astronomical calculations started in 205 BC, enabling the first accurate dating of the mechanism. If this is correct, it makes it highly unlikely that its creator was the renowned ancient Greek inventor Archimedes.”