The Geek’s Reading List – Week of August 14th 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 edition of the Geeks List, and all back issues, can be found at www.thegeeksreadinglist.com.
1) Tesla Motors Inc. (TSLA) Says Robots Are Holding Up Its 2015 Sales Growth
What a bizarre story. A company which is purportedly capacity constrained decided to reprogram the same robots it uses for its capacity constrained vehicle in order to make a new model, rather than starting a new assembly line for its new model. Since the new model will require different jigs and fixtures (which the nature of building a new model car) they will have to build up a complete separate assembly line, with its own robots, regardless. Are we to believe that only after they build 50 validation models only then will they start construction of the new line?
“Blame it on the robots. The sales-forecast downgrade that caused Tesla’s stock to nosedive Thursday isn’t an indication that fewer drivers want to own the company’s sexy electric vehicles. It’s just that Tesla needs more time to teach its robotic factory workers new tasks associated with producing the Model X sport utility vehicle”
2) The cost of ad blocking
I have been using ad-blocking since the day I first heard of it. I prefer uBlock (www.ublock.org), however most do a good job. Some websites only work with a Microsoft browsers (which do not support ad-blocking and I am always astounded by the number of ads when I use a Microsoft browser and how annoying and distracting they are. Not only that, but many adds are clearly fraudulent or even likely set to download malware. Websites lament “loss of revenue” to ad-blockers but they don’t seem to do much to clean up their own act. All things considered, I expect this trend to continue.
“The Findings: Globally, the number of people using ad blocking software grew by 41% year over year;16% of the US online population blocked ads during Q2 2015; Ad block usage in the United States grew 48% during the past year, increasing to 45 million monthly active users (MAUs) during Q2 2015; Ad block usage in Europe grew by 35% during the past year, increasing to 77 million monthly active users during Q2 2015; The estimated loss of global revenue due to blocked advertising during 2015 was $21.8B; With the ability to block ads becoming an option on the new iOS 9, mobile is starting to get into the ad blocking game. Currently Firefox and Chrome lead the mobile space with 93% share of mobile ad blocking.”
3) The Obscure Neuroscience Problem That’s Plaguing VR
Products such as Oculus Rift (bizarrely bought by Facebook at an appropriately stupid valuation) have restarted interest in VR glasses. VR Glasses are simply an optical assembly with two displays which simulate an immersive 3D display. They have been around for some time, although improvements in the cost and quality of small, lightweight displays means they may be cheap enough to become a consumer product despite the fact the barriers to entry and very low so pretty much any electronics company can make one. One peculiar side effect of VR glasses is described herein: your brain uses two systems to judge distance: focal distance and the angle of your eyeballs. VR glasses use the latter to simulate 3D but your eyes focus on the displays which are usually going to be at a different distance from what the angle of your eyes suggest. This conflicting information causes problems after a while.
“Despite virtual reality’s recent renaissance, the technology still has some obvious problems. One, you look like a dumbass using it. Two, the stomach-churning mismatch between what you see and what you feel contributes to “virtual reality sickness.” But there’s another, less obvious flaw that could add to that off-kilter sensation: an eye-focusing problem called vergence-accommodation conflict. It’s only less obvious because, well, you rarely experience it outside of virtual reality”
4) China becomes world’s largest robots market for second consecutive year
China is one of the largest economies in the world with a large manufacturing sector which has been built upon broadly available cheap labour (meaning more people and less capital), as that economy matures and capital spending increases, then demand for robots to fill up factories which were previously not that automated. Since there is a big hole to fill this suggests a robust demand for industrial robots for the next several years.
“China became the world’s largest consumer market of robots for the second consecutive year, according to statistics released by China Robot Industry Alliance (CRIA) lately. The sales of robots in China increased by 54.6 percent in 2014 to around 57,000 units, accounting for 25 percent of global total. Data shows that nearly 17,000 units were made in China with a value approaching 3 billion yuan (about 474 million U.S. dollars),or an increase of 60 percent from 2013. CRIA predicted that the total number of robots used in China’s manufacturing industry in 2015 will keep growing rapidly.”
5) Foxconn to invest $5B to set up first of up to 12 factories in India
This ties in to item 4: one side effect of economic growth, as well as China’s “one child policy” is a reduction in the labour pool, at least at the low end of the market. There are plenty of places in the world where domestic demand is significant, or at least potentially so, and factory labour remains cheap. Electronics manufacturing is no different from the manufacture of cheap clothing: it goes where labour costs are lows and moves on when costs go up. It sounds brutal, but the net effect over time is a positive one as future generations of workers end up getting paid more and having better jobs as the economic improves.
“The maker of a variety of products for various companies, including the iPhone, already employs over a million workers in China, where it has factories across the country. But the company has faced labor shortages in China, as many workers are simply looking for the highest wages possible, and are happy to leave for better jobs. Gou has even said that he expects fewer young Chinese workers to enter his factories in the future. To expand its manufacturing base, Foxconn is developing robots, and looking at setting up factories in India and Indonesia.”
6) Industrial robots have boosted productivity and growth, but their effect on jobs remains an open question
This makes for an interesting read, however, I am somewhat sceptical of the metrics by which economists measure the impact of automation on productivity. Furthermore, one has to be cautious when using terms like “robot” and “capital”. While an industrial robot may look different from, say, a computer controlled milling machine they are both capital equipment, both replace human labour (or enhance productivity) and yet they are somehow considered different things. Assuming it could be done, it would take days for a human to assemble a smartphone without modern “pick and place” equipment (specialized robots), and the quality of the resulting product would be very low in comparison. Similarly, it takes a day for a human to cut an acre of hay, vs minutes with a haybine (a hay cutting robot). Separating the contribution of something that looks like an industrial robot from other forms of automation is meaningless
“When we use our index to capture differences in the increased use of robots, we again find that robots increased productivity, and we detect no significant effect on hours worked. As an important check on the validity of this exercise, we find no significant relationship between replaceability and productivity growth in the period before the adoption of robots. We conservatively calculate that on average, the increased use of robots contributed about 0.37 percentage points to annual GDP growth, which accounts for more than one tenth of total GDP growth over this period. The contribution to labour productivity growth was about 0.36 percentage points, accounting for one sixth of productivity growth. This makes robots’ contribution to the aggregate economy roughly on a par with previous important technologies, such as the railroads in the nineteenth century and the US highways in the twentieth century. The effects are also comparable to the recent contributions of information and communication technologies. But it is worth noting that robots make up just over 2 per cent of capital, which is less than previous technological drivers of growth.”
7) Among the States, Self-Driving Cars Have Ignited a Gold Rush
The auto industry have become masters of exploiting government help and playing one government off against the next to maximize profit. States and countries are positioning themselves to become “centres of excellence” with respect to self-driving cars, a position which will no doubt cost them in terms of subsidies and tax holidays in the future. Unlike manufacturing, which involves relatively high costs of moving a factory (though you can easily decide to put a new one almost anywhere) R&D is comparatively mobile and diffuse. It seems unlikely that any particular location will become a hub for this type of technology.
“Whether it is fuel savings, safer commutes or freed-up time behind the wheel, drivers have many reasons to embrace self-driving cars. But another group is just as eager to see these vehicles on the road: politicians. Lawmakers from California, Texas and Virginia are wooing the autonomous car industry, along with the jobs and tax revenue that come with it. They are financing research centers, building fake suburbs for testing the cars, and, perhaps most important, going light on regulation, all in an effort to attract a rapidly growing industry. The prize: A piece of the estimated $20 billion automakers and other companies will spend globally on development over the next five years, according to an analysis by Gartner.”
8) Samsung theorizes globally affordable 5G Internet using low Earth orbit satellites
What’s old is new again. The idea of delivering broadband via LEOSATs generated a lot of hype during the latter stages of the dot-com boom. Radio technology had advanced a lot since then so it could be that the idea suddenly makes sense, although the flaws in the business model remain the same. While these satellites might be characterized as “inexpensive” that is only true in comparison to large geostationary satellite, and a thousand or so “cheap” satellites makes for a large investment in birds and launches. Even though you’d have to launch all of the satellites before the system would work (these things are only in view for a few minutes) LEOSAT broadband would only have a market where no alternative exists. Plus, roughly two thirds of the planet is covered by water, and a lot of the remainder is uninhabited, so less than a third of your satellites would be over people at any given time. Add to that the challenges of communicating with a fast moving satellite as a distance of 1,500 km, and, well, I think you start to see the problem.
“Khan’s plan claims to offer up to one zetabyte of capacity per month. To achieve this goal, he hopes to deploy a large number of inexpensive Low Earth Orbit micro-satellites positioned about 1,500 kilometers from Earth’s surface, much lower than a typical geostationary satellite. The reason for forgoing standard geostationary satellites in favor of these smaller, close-range instruments is due to the latency produced at typical altitudes of up to 35,786km. With so much space (literally) to travel, it can take a quarter of a second for a signal to ping back and forth from the satellite. This delay is much slower than many of us are accustomed to in 2015, potentially causing even the most patient customers to lose their minds due to annoyances like interrupted Skype calls and Xbox Live disruptions.”
9) Your Doctor Can Now Examine an Exact 3D Replica of Your Heart in Virtual Reality
Despite being on Singularity Hub, which is a hotbed for futurism nonsense, this is a good article. The idea is a good one, though the author oversells (colonoscopies do not require “total sedation and a full day of recovery” and the purge procedure is by far the greatest inconvenience). Essentially the software takes in the results of medical scans and presents them in a manner which is more understandable to the physician – basically a virtual dissection. The article does not mention the time it takes to create these images or how much manual intervention is required. Nevertheless, one can imagine that increased computer performance would improve those metrics.
“Today, radiologists look through hundreds and hundreds of flat images, and then draw a diagram (yes, by hand) to show the surgeon how to approach a given procedure. Then the surgeon operates on the patient with no advance knowledge of his or her actual volumetric anatomy. One surgeon I spoke with summed it up perfectly: “I’ve never opened up a patient and seen a 2D view!” Another surgeon specializing in image-guided surgery told us that “half the time I am guessing” when navigating 3D anatomy using 2D images. Sounds a little scary, no? Never fear. It won’t be like this much longer. There’s a pretty powerful solution just now arriving—advanced image rendering through interactive virtual reality. EchoPixel (my company) uses virtual reality to help doctors visualize each patient’s unique anatomy and internal structure in a floating 3D image. The software uses DICOM data, which is already embedded in every MRI scan, CT scan, or ultrasound image.”
10) Will Hacking Into TV Sets And/Or Remotes Be Next?
As more and more things are connected to the Internet, it is worth noting that expertise in network security is a relatively scarce commodity. In other words, while pretty much anybody can make a WiFi connected thermostat, TV, or set top box, making that device secure against hackers is somewhat more complicated. It might smack of paranoia to consider that hackers might be listening to your conversations through your TV, but it is probably inevitable that ransomware scams (pay us or your TV will never work again) become the threat of the moment. Thanks to Nick Tang for this item.
“While we have been worried about personal information getting into the wrong hands — via hacking of laptops, mobile devices, or otherwise — we could start to worry about the sophisticated software inside other devices. Should we start to fear hacks into our TV sets? Perhaps not much of personal information would be in jeopardy here. No matter; lots of hacking is about nuisance and general disruption. New smart TV technology already points in this direction: Samsung TV sets have the ability to store viewers’ private conversations when they’re using voice-recognition remote controls. So what’s next?”
11) The Beginning of the End of the TV Industrial Complex
I have no idea what the “TV Industrial Complex” is, except it is an evil sounding name for media production companies and their partners in crime the Cable TV industry. While there are pay TV producers who seem to have at least some interest in quality (HBO immediately comes to mind) these are vastly outnumbered by the likes of Discovery, TLC, “History”, and the cable news outlets in the race to the bottom. There are probably two forces at play: technology, which provides an outlet for distraction which is not TV, and a demographic shift as a greater portion of the population grew up spending time on the Internet rather than sitting in front of the family TV. Companies which can deliver a quality product are advised to plan streaming services (such as the somewhat overpriced HBO Now service). One challenge is the producer extricating themselves from distribution agreements based upon the cable TV model as “over the top” distribution become more important.
“To spell it out: Pay TV subscriber growth has been tailing off for years, and now it has vanished altogether — the number of people who pay for cable TV, satellite TV or telco TV is shrinking. Per analysts Craig Moffett and Michael Nathanson: “A year ago, the Pay TV sector was shrinking at an annual rate of 0.1 percent. A year later, the rate at which the Pay TV sector is declining has quickened to 0.7 percent year-over-year. That may not seem like a mass exodus, but it is a big change in a short period of time. And the rate of decline is still accelerating.””
12) Artificial Intelligence is Already Weirdly Human
I have a lot of interest in neural networks, though I recognize they have their own limitations and benefits. This article provides an update on some of the challenges associated with current neural network architectures. Ultimately, I suspect the challenges will be overcome and neural networks will eventually be constructed using analog memories such as memristors, rather than simulations.
“At the moment, humans can’t find out what that computer-created rule is. In a typical neural net, the only layers whose workings people can readily discern are the input layer, where data is fed to the system, and the output layer, where the work of the other layers is reported out to the human world. In between, in the hidden layers, virtual neurons process information and share their work by forming connections among themselves. As in the human brain, the sheer number of operations makes it impossible, as a practical matter, to pinpoint the contribution of any single neuron to the final result. “If you knew everything about each person in a 6-billion-person economy, you would not know what is going to happen, or even why something happened in the past,” Clune says. “The complexity is ‘emergent’ and depends on complex interactions between millions of parts, and we as humans don’t know how to make sense of that.””
13) CAUGHT: Lenovo crams unremovable crapware into Windows laptops – by hiding it in the BIOS
Lenovo used to be IBM’s PC division and IBM laptops tended to be favoured by corporate buyers despite often being premium priced and lagging technologically. I believe Lenovo still occupies a favoured position in that niche, though their recent shenanigans should bring their reputation into question. Besides this revelation what their Windows 10 laptops come with crapware built into the BIOS, they were also recently discovered distributing malware (http://www.makeuseof.com/tag/lenovo-pc-owners-beware-computer-preinstalled-malware/) so you’d think they would have realized people might notice these things.
“Lenovo has sold laptops bundled with unremovable software that features a bonus exploitable security vulnerability. If the crapware is deleted, or the hard drive wiped and Windows reinstalled from scratch, the laptop’s firmware will quietly and automatically reinstall Lenovo’s software on the next boot-up. Built into the firmware on the laptops’ motherboard is a piece of code called the Lenovo Service Engine (LSE). If Windows is installed, the LSE is executed before the Microsoft operating system is launched. The LSE makes sure C:\Windows\system32\autochk.exe is Lenovo’s variant of the autochk.exe file; if Microsoft’s official version is there, it is moved out of the way and replaced. The executable is run during startup, and is supposed to check the computer’s file system to make sure it’s free of any corruption. Lenovo’s variant of this system file ensures LenovoUpdate.exe and LenovoCheck.exe are present in the operating system’s system32 directory, and if not, it will copy the executables into that directory during boot up. So if you uninstall or delete these programs, the LSE in the firmware will bring them back during the next power-on or reboot.”
14) U.S. Identifies Insider Trading Ring With Ukraine Hackers
It appears this racket has been going on for at least 5 years, though I would bet longer than that. The news services, three of them no less, appear oblivious to the hack, suggesting their own network security is not exactly up to snuff. If I understand the scam correctly, companies filed news releases with the wire services well in advance of distribution and the hackers simply front ran the information. Of course, if companies were required to only release after the markets closed, and all trading halted (including aftermarket) prior to distribution to the new services, none of this would have happened. Unfortunately disclosure practices appear firmly entrenched in the era of ticker tape, and that provides a window for such scams.
“The suspected hackers, who are thought to be in Ukraine, allegedly infiltrated the computer servers of PRNewswire Association LLC, Marketwired and Business Wire, a unit of Warren Buffett’s Berkshire Hathaway Inc., over a five-year period. They siphoned more than 150,000 press releases including corporate data on earnings that could be used to anticipate stock market moves and make profitable trades, the U.S. said. The hackers passed the information to associates in America and Ukraine, who allegedly used it to buy and sell shares of dozens of companies, including Panera Bread Co., Boeing Co., Hewlett-Packard Co., Caterpillar Inc. and Oracle Corp., through retail brokerage accounts.”
15) Oracle to ‘sinner’ customers: Reverse engineering is a sin and we know best
I have never dealt directly with Oracle or used their software, but to an outside observer it seems to me the company has become pathological. This blog post by the company’s “Chief Security Officer” is a case in point: evidently, customers come across security flaws from time to time and Oracle’s response seems to be to shoot the messenger – or at least denounce them. If the person in charge of security has that attitude towards security, you can just imagine the overall culture within the firm.
“When I first read an online rant by Oracle chief security officer Mary Ann Davidson, I pinged the software provider’s PR, asking if the blog post was legitimate. While I’m yet to receive a response, the CSO’s apparent commentary does make for an eyebrow-raising read. Taking a cursory look at social media, I do not appear to be the only one this afternoon absorbing her words of wisdom while switching between copious amounts of eye-rolling and outrage and laughter. Yesterday, Davidson took to the Oracle corporate blog to pen her thoughts on security. Titled, ” No, You Really Can’t,” the essay [Editor: Oracle has unpublished the post, but the full text is available below.] — or perhaps interpreted as a wine-fuelled ramble — waxes less-than-eloquently on the uphill battle Oracle has between maintaining decent security (-cough-) and battling against their nefarious customers who insist on making the job harder by reverse-engineering. Those meddling kids.”
16) The Evolving Role of News on Twitter and Facebook
I have neither a Facebook nor a Twitter account but I can see where this is coming from. Besides the face that fewer people are reading newspapers, listening to radio, or watching TV, the quality of news production has gone own the tubes as fast as most other media content has. I PVR the 60 minute CBC National News so I can skip through the fluff, sports/celebrity coverage disguised as news, etc., and get through it in about 10 minutes. Thanks again to Nick Tang for this item.
“The new study, conducted by Pew Research Center in association with the John S. and James L. Knight Foundation, finds that clear majorities of Twitter (63%) and Facebook users (63%) now say each platform serves as a source for news about events and issues outside the realm of friends and family. That share has increased substantially from 2013, when about half of users (52% of Twitter users, 47% of Facebook users) said they got news from the social platforms. Although both social networks have the same portion of users getting news on these sites, there are significant differences in their potential news distribution strengths. The proportion of users who say they follow breaking news on Twitter, for example, is nearly twice as high as those who say they do so on Facebook (59% vs. 31%) – lending support, perhaps, to the view that Twitter’s great strength is providing as-it-happens coverage and commentary on live events.”
17) Gazan medico team 3D-prints world-leading stethoscope for 30c
This is an article about two things, namely production of a good quality stethoscope with a 3D printer and an effort to open source (and thus cost reduce) basic medical instruments to increase their availability in the developing world. Frankly I am a bit puzzled by the comment a stethoscope costs $200 – this is a simple product made of low cost materials. Somebody should be able to make a knock off for $15 or less.
“”This stethoscope is as good as any stethoscope out there in the world and we have the data to prove it,” Loubani says. He is so confident of the device that he expects the peer-review process to be a “cake walk”. The device was tested using a the standard practice of pressing it against a balloon filled with water – a test dubbed the Hello Kitty protocol given the availability of cat-branded balloons at the time. Loubani says sterilization is not a problem with the devices, and metal can be used if necessary. The team is now developing cheap but effective 3D-printed medical devices including a pulse oximeter which monitors blood oxygen levels in the blood and is at a stage ready for calibration. They are also working on an electrocardiogram for cardiac patients and will work on haemodialysis machines.”
18) Healing Injuries Could Be Better Thanks To This 3-D Printed Cast
This sounds like another medical use for 3D printing, but I really doubt it will catch on. Fibreglass casts have their issues but they only take a few minutes to make, they are cheap, and they get the job done. A minimalistic 3D printed plastic cast would take some time to make (3D printers are slow), cost a lot more, and likely be less rigid than a fibreglass cast. So, perhaps some wealthy patients with certain classes of injuries (likely not broken bones) would return after a few days to get a replacement 3D printed cast, but it is hard to imagine many hospitals would invest in the equipment to provide that service.
“When Scott Summit tore a ligament in his arm he knew there was a better way to heal than spending six months trapped in a fiberglass cast from his biceps to his knuckles. The senior director of functional design at 3D Systems—a 3-D printing behemoth—and founder of Bespoke, a company that developed prosthetics and braces, Summit naturally turned to technology to find a better way.”
19) Surgeons Smash Records with Pig-to-Primate Organ Transplants
This is a promising line of research: use genetic engineering to produce pigs whose organs are similar enough to humans that a human body won’t reject them. This would provide an abundant supply of organs for human transplant which would mean that transplant patients would be getting “known good” organs from animals raised in a sterile environment. This would also mean that people would get transplants as soon as they need them rather than waiting months or years with deteriorating health for a matching organ. Plus, the rest of the pig could be eaten.
“With the financial aid of a biotechnology executive whose daughter may need a lung transplant, U.S. researchers have been shattering records in xenotransplantation, or between-species organ transplants. The researchers say they have kept a pig heart alive in a baboon for 945 days and also reported the longest-ever kidney swap between these species, lasting 136 days. The experiments used organs from pigs “humanized” with the addition of as many as five human genes, a strategy designed to stop organ rejection.”
20) Biotech Report: Will Gene Therapy Go Mainstream?
This article would have us believe that safe, effective gene therapies are pretty much ready for prime time. I don’t know enough about the state of the science to comment on whether or not that is true, though I believe that if it isn’t true it probably will be eventually. The cost argument is a two-way street: lower cost might fuel adoption, but costs which are too low might make a case for R&D to be shelved. Drug companies are in the business to make money, not to cure people, especially if treating them is more profitable than curing them.
“Within the healthcare marketing community, gene therapy is an object of intense fascination. In understanding the potential curative promise of such drugs, marketers have fallen over themselves to tout their virtues and rip off list after list of “best practices” for promoting them—even though it’s hard to codify best practices when so few of the products have actually reached the market. Nonetheless, you’d be hard-pressed to find even a C-list pharma marketer who hasn’t long since awakened to the eventual virtues of gene therapy. Enthusiasm within the scientific and investment communities couldn’t be higher. And yet within patient populations and many provider circles, gene therapy remains an object of interest for different reasons. The moniker gene therapy is one of them, given how in certain uneducated circles it conjures images of mad scientists attempting to, say, create a superhuman being or performance-enhance their livestock. So with gene therapy targeting any number of conditions on its way, the question needs to be asked: Is the US market ready for gene therapy and everything that comes with it?”