The Geek’s Reading List – Week of February 27th 2015
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 12 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 was a slow week for tech news – Probably the most significant development was the decision by the US FCC to regulate Internet services in a limited sense as a utility and to enforce net neutrality. Ultimately this is a political decision which will pit the well monied carriers and large Internet companies (some of whom gain if there is no net neutrality) against lowly consumers and businesses. This edition of the Geeks List, and all back issues, can be found at www.thegeeksreadinglist.com.
1) FCC votes for net neutrality, a ban on paid fast lanes, and Title II
This was, no doubt, the big tech story of the week. Certain countries, notably the US and Canada do not regulate Internet services. In a competitive market this might no be necessary, however, in North America, as in most places, there is no competition. As a consequence, carriers use their monopoly/duopoly position to maximize returns, which means higher costs and lower service. It is not coincidence that Internet service providers in Canada and the US are unusually profitable despite offering substandard service along with high prices relative to areas where regulation is in effect. A loss of Net Neutrality further restricts competition by establishing barriers against competition for Internet services since new entrants would lack the funds to pay off the carriers to carry their offering. I believe Internet services should be fully regulated as a utility such as electricity is. Unfortunately, this is not done yet: no doubt well funded lobbyists will make a sincere effort to reverse the move.
“The Federal Communications Commission today voted to enforce net neutrality rules that prevent Internet providers—including cellular carriers—from blocking or throttling traffic or giving priority to Web services in exchange for payment. The most controversial part of the FCC’s decision reclassifies fixed and mobile broadband as a telecommunications service, with providers to be regulated as common carriers under Title II of the Communications Act. This decision brings Internet service under the same type of regulatory regime faced by wireline telephone service and mobile voice, though the FCC is forbearing from stricter utility-style rules that it could also apply under Title II.”
2) Android Captures Tiny 11% Share of Global Smartphone Profit in Q4 2014
The way to make money in technology is to establish a closed, proprietary, standard. This explains the success of Apple, Microsoft, and Intel. It is not surprising that Apple earns most of the money from the smartphone market as they are the only company with significant market share to have established such a position. It is worthwhile noting that Apple’s position was gained when it was perceived as a technological leader, rather than the follower it currently is. Consumers will eventually get wise to the situation and prices (and thereby profits) will plunge. Needless to say, none of this will motivate vendors to move to Firefox, Microsoft, or some other OS vendor because those will neither be profitable nor have measurable market share.
“Global smartphone operating profit grew 31 percent annually from US$16.2 billion in Q4 2013 to US$21.2 billion in Q4 2014. Android hardware vendors combined took a record-low 11 percent global smartphone profit share, down from 29 percent one year ago. In contrast, Apple iOS captured a record-high 89 percent profit share, up from 71 percent in Q4 2013. Apple iOS continues to tighten its grip on the smartphone industry. Apple’s strategy of premium products and lean logistics is proving hugely profitable. Android’s weak profitability for its hardware partners will worry Google. If major smartphone manufacturers, like Samsung or Huawei, cannot make decent profits from the Android ecosystem, they may be tempted in the future to look at alternative platforms such as Microsoft, Tizen or Firefox.”
3) Kill the Wireless Contract! Buy Your Own Phone
I admit to being perplexed that so many consumers preferred to remain indentured to a mobile carrier rather than buying an unlocked phone. Most carriers will offer a discount if you “bring your own device” and you end up with significant bargaining power once you have the option of switching carriers at any time. Do not, however, pay the full shot for a phone from carrier: in Canada, for example, Rogers was charging 20% more for a “locked” Nexus 5 than what you would pay for an unlocked version directly from Google.
“I am an idiot. I signed a two-year contract to get my iPhone 6. Without much thought, I did what most Americans do every two years: I agreed to be locked in by a multibillion-dollar wireless company. With pricey contracts and confusing add-ons, they make it incredibly hard to leave, let alone take our phones with us. I deserve to walk around with “Property of Verizon” stamped on my forehead. We sign on the dotted line because we presume it will save us money on that new shiny phone and our monthly service. But here’s the thing they don’t want us to know: Neither is necessarily true anymore.”
4) Rogues Falsely Claim Copyright on YouTube Videos to Hijack Ad Dollars
Can there be no more vile crime than asserting copyright over another person’s cat video? Well, not so much crime because it is not clear they are doing anything illegal. After all, Google has no interest as to whether you or the Russian mob owns your cat video, so long as the advertising dollars keep spending. They set up an automated process for “take down” notices which essentially transfer the burden off proof to the original owner rather than the guy making the allegation. Nevertheless, this may be civil fraud and not criminal. I am surprised there hasn’t been a class action suit on the matter.
“Cat videos are all the rage on YouTube, so much so that a Russian company hijacked a recent cute clip of a feline named “Pepper” in order to steal the ad revenue. Kidnapping YouTube videos, which anecdotal evidence suggests has happened thousands of times, is as easy as it gets. A Russian company called Netcom Partners and others are taking advantage of YouTube’s copyright-control filters, known as Content ID. It’s not clear how much money the scammers are stealing from YouTube videomakers. But if you judge by the volume of complaints about the hijacking on Google’s forums, it’s likely Netcom and others are doing pretty well making money for nothing.”
5) Strong legislation that will weaken the ability of the trolls to shake down innovators is likely to pass Congress, but more should be done
One man’s patent troll is another man’s inventor. Oddly enough, in media coverage titanic corporations such as Apple (which is notorious for appropriating technology) is characterized as a victim of trolls when sued and a victim when shamelessly using patented, albeit banal, technology to limit competition. Nevertheless, most tech company managers would tell you that being shaken down by a patent troll for a few tens, or hundreds, of thousands dollars, is normal course of business nowadays so it is a problem, unless you happen to be a lawyer. Calling for the abolition of patents is absurd: the root problem is the decision to allow patents on things like software, as well as poor quality patents in general.
“There’s finally light at the end of the dark, troll-invested tunnel, and it isn’t an oncoming train. Congress is likely to pass a bill that will take money out of the pockets of innovation-sucking patent trolls (aka “nonpracticing entities”) despite opposition from lawyers, the pharmaceutical industry, and a few tech companies that hold large numbers of patents.The Innovation Act isn’t an ideal fix for the program patent system. “It’s largely a measure to reform patent litigation, but it doesn’t do enough to improve the quality of patents,” says Daniel Nazer, an attorney with the Electronic Frontier Foundation, which would prefer to see software patents abolished. But provisions in the proposed law, like one that will make trolls pay legal costs if their claims are rejected, will remove a good deal of the risk that smaller companies face when they decide to resist a spurious lawsuit.”
6) After iPad initiative failure, school supe says LA can’t buy computers for all
You might recall my incredulity when this program was announced a while back. On its face, it was a dumb idea: give students expensive, fragile, first generation computing devices when you could have given them much more computing power at less than one third the cost in a cheap laptop. Not that a laptop would have been a good idea because those would have been damaged or destroyed in short order as well. Besides which, even if the program had been run at a fraction of the cost, the educational benefits would have been questionable. Something tells me a forensic audit of all concerned might be in order.
“Speaking to a group of reporters on Friday, the Los Angeles Unified School District (LAUSD) superintendent Ramon C. Cortines said that the city can’t afford to buy a computer for every student. The statement comes after intense controversy over a $1.3 billion initiative launched by Cortines’ predecessor, former superintendent John Deasy, in which every student was supposed to be given an iPad loaded with content from educational publisher Pearson.”
7) A New Physics Theory of Life
Its not really a theory as much as an hypothesis, and it is not necessarily the case that life in this context would be “life as we know it” as Dr. McCoy (Star Trek) might describe it. For example, the complexity of a system is bound to be related to the resources and environment of that system. It is hard to believe shining a light on sand is going to result in a long term transformation to a plant. No doubt abiogenesis obeys the laws of physics but proving it is an inherent outcome of very laws is another matter, even if the math works.
“From the standpoint of physics, there is one essential difference between living things and inanimate clumps of carbon atoms: The former tend to be much better at capturing energy from their environment and dissipating that energy as heat. Jeremy England, a 31-year-old assistant professor at the Massachusetts Institute of Technology, has derived a mathematical formula that he believes explains this capacity. The formula, based on established physics, indicates that when a group of atoms is driven by an external source of energy (like the sun or chemical fuel) and surrounded by a heat bath (like the ocean or atmosphere), it will often gradually restructure itself in order to dissipate increasingly more energy. This could mean that under certain conditions, matter inexorably acquires the key physical attribute associated with life.”
8) Why SSDs are obsolete
We have noted in the past that mass storage, notably Hard and Solid State Disk Drives (HDD and SSD) are deliciously primitive in the way they are used in modern computers. In summary, your modern solid state drive. They have an architectural and software legacy dating back over 30 years. This is particularly ludicrous because an SSD tries very hard to pretend it is a HDD at the cost of performance. All this is due to the nature of the operating systems, in particular Windows but including Apple and Linux. The time has come to rethink the OS’s relationship to mass storage and, perhaps, make HDDs pretend they are SSDs instead.
“SSDs were built because there are billions of SATA and SAS disk ports available. Filling some of those ports with SSDs promised to be quite profitable – a promise fulfilled in the last 5 years. But now that non-volatile memory technology – flash today, plus RRAM tomorrow – has been widely accepted, it is time to build systems that use flash directly instead of through our antique storage stacks. The various efforts to decrease latency – SATA 3, NVMe, and others – still add layers of software between our applications and our data, creating complexity and wasting CPU cycles. A recent PhD thesis got me to thinking about this.”
9) The China Smartphone Market Picks Up Slightly in 2014Q4, IDC Reports
We continue to believe smartphone pricing is under pressure, a situation which will significantly impact high end vendors such as Apple. Concurrently, growth in the developing world will be mitigated by the emergence of low end Chinese vendors as well as the spreading presence of Xiaomi, a company which has managed to establish itself through adept marketing. Apple investors may wish to hedge their downside risk.
“Xiaomi’s focus on selling low-cost phones with decent specifications, as well as the hype that it created through its flash sales, helped it to obtain the top position in both 2014Q4 and 2014. Apple had a jump to the second position in 2014Q4 as its iPhone 6 and 6 Plus models were only launched in China in the last quarter of the year. Huawei was ranked third in terms of smartphone shipments as it had a wide range of models in the low-end and mid-range segment that did well in 2014Q4. Lenovo finished off as the fourth in 2014Q4 with its strong focus on <US$150 phones while Samsung dropped to the fifth position in 2014Q4 as it faced immense competition from Xiaomi and the other Chinese vendors in the low to mid-end segment of the market.”
10) Augmented and Virtual Reality Devices to Explode from 3 Million Units in 2015 to 55 Million in 2020
I repeat my usual caveats regarding the value of industry research, in particular with respect to forecasts. Nevertheless, it seems credible to me that Head Mounted Displays, which can provide an immersive experience are cheap enough to make that they will become popular among gamers. Unfortunately, as per 3D movies, the experience is not a visually comfortable one, and this may limit game play. After all, two displays in front of your face is not reality and even though it can look pretty good for a while the human brain is not used to this sort of visual experience.
“The augmented (AR) and virtual reality (VR) markets are seeing much action, from new devices and new content, to existing content adapting to make use of the new medium. Head Mounted Displays (HMDs) will be the prevailing form-factor for both AR and VR devices, but AR will see varied form-factors as the technology progresses into more applications. “Among the three categories of devices defined by ABI Research—standalone, mobile-reliant, and tethered—mobile-reliant devices like the Samsung Gear VR will see the most success early, while tethered devices like the Oculus Rift and standalone devices like those manufactured by ODG for industrial applications will need more time to mature before establishing a large user base,” comments Eric Abbruzzese, Research Analyst. Virtual reality will be most popular in the gaming market, because of the high level of immersion possible in VR, as well as the high demand for interactive experiences. Augmented reality will be most successful in the enterprise market, for applications in logistics, engineering, and automotive. Applications such as education, travel, and design are served well by both AR and VR, and success depends more on specific needs than general application.”
11) China removes top U.S. tech firms from government purchasing list
The Snowden/NSA revelations simply confirmed what could be extrapolated from the US Patriot Act, namely that large tech firms were vigorously colluding with intelligence agencies. Of course, the cat is out of the bag, and people are actually looking for evidence of such programs – and finding the. Meanwhile the large tech firms have gone past damage control mode to active theater to make it look like they actually care about privacy. This should work for friendly governments, consumers and businesses, however, unfriendly governments are, logically, looking for alternatives. This is bound to result in lesser growth than would otherwise have been the case and lead to strengthened competitors.
“China has dropped several top U.S. technology companies, including Cisco and Apple, from a list of brands that are approved for state purchases, amid a widening rift with the United States about cyberspace. The move, reported by the Reuters news agency Thursday, comes in the aftermath of Edward Snowden’s revelations about a massive U.S. cyber-espionage program code-named PRISM. It also comes as China is energetically bolstering what it calls its “cyber-sovereignty.””
12) Keeping Atherosclerosis In-Check with Novel Targeted Inflammation-Resolving Nanomedicines
Despite the dreadful reference to drones (they are not drones and have nothing to do with drones) this is an intriguing development. Most drugs circulate freely meaning diseased tissue only receives gets a dose by coincidence while healthy tissue is exposed to all the risks and side effects which come from any drug. If a delivery system such as this can specifically target diseased tissues, the dose delivered to the target area can be higher while avoiding exposure to healthy tissue. Most likely, this approach can be extended to other drugs such as chemotherapy.
“In mouse models with advanced atherosclerosis, researchers administered nanomedicines and relevant controls. Following five weeks of treatment with the nanomedicines, damage to the arteries was significantly repaired and plaque was stabilized. Specifically, researchers observed a reduction of reactive oxygen species; increase in collagen, which strengthens the fibrous cap; and reduction of the plaque necrotic core, and these changes were not observed in comparison with the free peptide or empty nanoparticles.”
13) US regulators try to tame ‘wild west’ of DNA testing
This is probably a good thing for the industry as it will limit the number of charlatans. DNA testing is a powerful, albeit imperfect, tool, however, it the results are probabilistic, not deterministic, which confounds interpretation. It is remarkable the FDA is interested in taking action on this science based service while homeopathy, chiropractic, naturopathy, vitamin supplements, and other fraudulent practices are more or less unfettered.
“So far, the US Food and Drug Administration (FDA) has approved genetic tests only for specific conditions. This includes the approval on 19 February of a test developed by 23andMe of Mountain View, California, to determine whether people carry a gene variant that could lead to their offspring developing Bloom syndrome, a rare disorder characterized by small stature and multiple health problems. With the massive number of genome-based diagnostics that are possible, the agency cannot practically continue with the painstaking approach it has taken in approving these tests. So on 20 February, the FDA is running a workshop at which scientists, doctors and regulators will discuss a strategy put forward by the agency in December that aims to allow the technology to flourish but clamp down on a ‘wild west’ atmosphere in which some companies are making unproven claims about how well the tests can predict health patterns.”
14) Men have hands amputated and replaced with bionic ones
This is an interesting approach for those who have lost the use of a limb but still have it: train a bionic replacement then have the useless appendage amputated. Of course, this would only work for certain types of injuries but it is impressive. Needless to say there is the risk a mechanism for repairing nerve damage might be developed which would call into question the decision to amputate. For those who refuse to install Flash, here is a link to an HTML 5 version of the video https://www.youtube.com/watch?v=lgu6ajeiwnk.
“The procedure, dubbed “bionic reconstruction”, was carried out by Oskar Aszmann at the Medical University of Vienna, Austria. The men had all suffered accidents which damaged the brachial plexus – the bundle of nerve fibres that runs from the spine to the hand. Despite attempted repairs to those nerves, the arm and hand remained paralysed. “But still there are some nerve fibres present,” 0says Aszmann. “The injury is so massive that there are only a few. This is just not enough to make the hand alive. They will never drive a hand, but they might drive a prosthetic hand.””
15) New research signals big future for quantum radar
As with anything else concerning quantum physics I only have a vague understanding of what they are talking about here. It seems they are using quantum entanglement to derive an optical signal from a microwave scan, which could lead to a completely non-invasive imagining system. In other words MRI without the enormously powerful (and expensive) magnets and there respective complications or, alternatively, CA scans without the ionizing radiation. Before dismissing this as science fiction, recall that MRI is itself a quantum imaging technique.
“A prototype quantum radar that has the potential to detect objects which are invisible to conventional systems has been developed by an international research team led by a quantum information scientist at the University of York. The new breed of radar is a hybrid system that uses quantum correlation between microwave and optical beams to detect objects of low reflectivity such as cancer cells or aircraft with a stealth capability. Because the quantum radar operates at much lower energies than conventional systems, it has the long-term potential for a range of applications in biomedicine including non-invasive NMR scans.”
16) Cable Channels Speed Up TV Shows To Cram In More Ads
I rarely watch anything that I do not record first so I rarely see advertizing. Nevertheless, you can typically notice the amount of advertizing on some channels is much greater than others because of number of times you hit the ‘skip forward’ button. There is nothing particularly novel about editing out content and adding commercials but this approach can be fully automated, meaning it will probably become more common. Ultimately this will lead to more ‘cable cutting’, however, in the interim it will make quarterly results look a bit better.
“Anyone who’s watched a syndicated TV show on basic cable is already familiar with some methods of trimming the fat off of shows — shorter opening credits, sped-up closing credits that may overlap on-screen ads or the next show — but what you may not have noticed is that some cable networks are actually speeding up shows and movies to squeeze in more commercials. This is according to the Wall Street Journal, which reports that TBS and others are using compression technology to play content back at a slightly faster clip in order to get a few more seconds of air time for ads.”
17) Talking drone offers aviation safety boost
I have never used a voice recognition system I didn’t want to smash so I can imaging the frustration this would cause air traffic controllers. Regardless, voice is a rather inefficient means to communicate, even if it is what humans are good at. If drones become more common, an automated or at least digitally controlled system is what would be required. Alternatively, banning drones from commercial airspace is a safer option.
“In a world first, RMIT University researchers have developed a talking drone that can converse with air traffic controllers just like a normal pilot. The development is a critical step towards the full integration of unmanned aircraft systems – or drones – into civil airspace. The project, part of a larger research initiative that aims to address safety and efficiency issues related to drones and air traffic management, is the result of a partnership between RMIT, Thales Australia and the company’s Centre for Advanced Studies in Air Traffic Management (CASIA), and UFA Inc. View and embed a video of the system in action: bit.ly/talkingdrone.”
18) Ad Company Reportedly Utilizing Drones Across SFV As Part Of Experiment
Drones are in the news a lot lately. If you think about it, this approach is not really any different than using a drone to violate privacy by taking pictures or having Google photograph your neighborhood. Most people do not appreciate being spied upon, especially if they do not realize that they are being spied upon. I am frankly surprised nobody offers a surface to air anti-drone missile yet. After all, drones are pretty fragile and it wouldn’t take much to bring them down (a net, for instance) and a guidance system could probably be made for a couple dollars.
“An advertising company has been utilizing drones experimentally to monitor cellular and Wi-Fi signals across the San Fernando Valley, according to a new report. As CBS2’s Erica Nochlin reports, the small drones are apparently buzzing around the Valley and have reportedly been monitoring signals all month long to pinpoint the location of mobile devices and their owners, according to VentureBeat. “The idea that there are drones flying around, that’s kinda terrifying,” said one resident in reacting to this report. “Invasion. Invasion of privacy.” According to Nochlin, AdNear is the marketing company that’s responsible and says it’s only an experiment for now, but one day those drones could be used to send out location-based ads faster.”
19) The best—and worst—places to drive your electric car
The excitement over Electric Vehicles (EVs) is an intriguing phenomenon as most consumers have direct experience with the limitations of batteries: they have short lives, are expensive, and do not perform well at extreme temperatures. All this is true, regardless of the misrepresentations of company executives and their marketing shills. It is, after all, a matter of chemistry. Batteries do not function well when cold and they die an early death when hot. As is generally the case, people will figure this out, eventually. Just don’t be the guy who spends his own money to learn. Thanks to my friend Humphrey Brown for this item.
“In terms of driving range, electric cars in California and the Deep South travel the farthest, as the balmy temperatures yield the best energy efficiency and therefore longer trips before they must be plugged in again. (That’s a lucky break for Golden Staters, who also purchase the most green vehicles in the nation.) Vehicles in cold places, in contrast, have less battery capacity and thus shorter range. The average range of a Nissan Leaf on the coldest day drops from 112 km in San Francisco to less than 72 km in Minneapolis, according to the study, published online this month in Environmental Science & Technology.”
20) Toyota unveils hydrogen-powered electric car Toyota Mirai that charges in just 180 seconds
Needless to say, you fuel Fuel Cell Vehicles (FCVs) you don’t charge them. The massive subsidies which have propelled demand for Electric Vehicles (EVs) have provided an opportunity for FCVs, which at least do not have the battery problems of EVs. The Achilles Heal of FCVs is hydrogen, which is inherently expensive to make and transport. For example, a tube-truck (a mid-sized tractor trailor) carries enough hydrogen for about 25 ‘fill-ups’ and the gas is very expensive to make on site. Nonetheless, you feed the ducks while the ducks are quacking and if governments are willing to give away money so people can pretend they are driving a Zero Emission Vehicle, so be it. The good news is EVs could become viable if and when battery technology advances while the bad news is, hydrogen isn’t going to get any easier to make or transport.
“Toyota Mirai which can travel for about 300 miles is cinched to be the first ever mass-market car that uses electrical energy extracted from compressed hydrogen. This would imply that it will exhaust fume that is actually water vapor. With the help of the hydrogen fuel cells technology, the sleek car need not long hours of charging, as it can be charged in about 180 seconds (3 minutes). The founder of Tesla Motors and the one who opened up the floodgate for electric-cars, Elon Musk, had just hurled brickbats on Toyota Mirai. Musk commented that hydrogen is not a very reliable source of energy for cars and even called the hydrogen fuel cells “extremely silly.” He said that hydrogen is too hard to store, generate and transform into fuel and this technology turn away the attention from better sources of clean energy.”