The Geek’s Reading List – Week of November 20th 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) Don’t Fall For It: “Free Phones” Cost $360, and “$199 Phones” Cost $1040
This article looks at the fully of financing a mobile phone and uses many of the analogies I’ve used in the past. The commentary falls short on a number of levels: there is no physical law which says you have to replace your phone every two years so the payback off a purchased phone extends as long as you keep that phone. The discounts available to owners of phones are much greater than implied in the article and you have complete freedom to, for example, buy a SIM card when you travel to parts of the world with a competitive mobile market, stop or change your service whenever you want, etc. I doubt consumer behaviour will change any time soon but if it does it will rewrite the mobile phone marketplace.
“That “free phone” may be free on its own, but it will get you locked into a two-year-long contract. You’re not really getting a free phone — you’re getting a phone and two years of cell phone service paid for at $X a month for 24 months. If you want to terminate your contract, you’re forced to pay a cancellation fee — after all, the carrier has to recover the cost of that “free phone.” In other industries, this sort of advertising would be laughed at. How would you feel if someone offered you a “free television” that required you sign a two-year cable-TV contract that costs an extra $30 per month? You’d be trapped in a contract and end up paying $720 for that “free” $500 television over the course of your two-year contract. That’s what’s happening with cell phone contracts.”
2) Facebook Shifts Switch to 100G
The Open Compute Project threatens to move margins in the cloud infrastructure business from those enjoyed by Cisco (over 65%) to those enjoyed by Foxconn (less than 5%). Of course, I don’t expect Open Compute will get into “big iron” Internet gear but companies like Cisco and Juniper sell a lot more than that. Mind you, a 100 Gbps Ethernet switch is not exactly low tech either.
“Facebook announced it is working on a 100 Gbit/second top-of-rack Ethernet switch for its next-generation data centers. The news is another example of how big Internet companies are designing their own systems, chomping at the heels of leading-edge computing and semiconductor technology. The Wedge 100 is a 32 x 100G switch said to use Broadcom’s latest Tomahawk switch chip with a 3.2 Tbit/s aggregate maximum throughput. As with all its designs, Facebook will make the hardware open source for others to make and use. It is expected to run a variant of open source Linux-based software called FBOSS Facebook currently uses on a 40G switch.”
3) How A Driverless Car Sees The World (Not Always Clearly!)
This is an interesting demo of how LIDAR works, but it leaves out an important detail you can’t really show in a video: the important function of LIDAR is ranging information. In other words, LIDAR is not very good for making a picture but it is really good at telling you how far away an object it, which is pretty important for guidance.
“Much has been made about how the driverless car of the future will look to the world. A new video published online as part of the New York Times Magazine’s Future Issue shows how the world will look to a driverless car. The short answer? Not as clear as you’d hope.”
4) How Cisco is trying to keep NSA spies out of its gear
The Snowden revelations revealed the enthusiastic cooperation of large US tech companies in NSA global surveillance. As noted in item 5 this would not have come as a shock to anybody except honest people and companies. Cisco, Microsoft, Apple, and other have played the victim card and performed some interesting theater in an attempt to convince customers they are now trustworthy. This is an excellent example of that theater: source code can be hard to unravel and, in any event, backdoors rarely are commented with “this is the backdoor”. Even if you had the source code, you would have no idea what machine code the compiler would produce unless you somehow had access to that and complete understanding how it works. Furthermore, your security would last exactly as long as the next “security update” – a term which now has an Orwellian connotation.
“”I worry about manipulation, espionage and disruption,” said Edna Conway, chief security officer of Cisco’s global value chain, in a recent interview. “We worry about tainted solutions, counterfeit solutions and the misuse of intellectual property.” Cisco became perhaps an unintended casualty from secret documents leaked by former NSA contractor Edward Snowden in 2013. A now infamous photo showed NSA employees around a box labeled Cisco during a so-called “interdiction” operation, one of the spy agency’s most productive programs. Interdictions involve snatching high-tech equipment in transit and secretly modifying it before it arrives at a customer’s door.”
5) Signs Point to Unencrypted Communications Between Terror Suspects
The natural reflex of police and national security fanatics after a terror attack is to press for more pernicious surveillance. People are afraid and its makes them vulnerable to stupid decisions such allowing that to happen. Time was citizens would look at the pervasive surveillance in places like East Germany and the USSR with disgust, but now they embrace a loss of basic rights for the illusion of security. I’ve never heard a police officer advocate in favor of search warrant against dirty tricks – the mindset of the Stasi or NSA are pretty much the same. Setting aside for a moment that any self-respect terrorist knows how to bypass surveillance it appears that, in this case, known Jihadists were communicating in plain text over a clear channel. So it isn’t lack of surveillance but an intelligence failure which led to the attacks.
“European media outlets are reporting that the location of a raid conducted on a suspected safe house Wednesday morning was extracted from a cellphone, apparently belonging to one of the attackers, found in the trash outside the Bataclan concert hall massacre. Le Monde reported that investigators were able to access the data on the phone, including a detailed map of the concert hall and an SMS messaging saying “we’re off; we’re starting.” Police were also able to trace the phone’s movements.”
6) Measuring the Impact of the Snowden Leaks on the Use of Encryption by Online Jihadists
As mentioned in item 5, security advisors use every terror attack to further erode our privacy. This article looks at the reality of Internet security from a terrorist perspective: long story short they aren’t as stupid as people paint them out to be. Backdoors and weak encryption advocated by the police and NSA may be wonderful for them but it is questionable whether terrorists will adopt “legal” encryption as they have used home brew versions since long before the Snowden disclosures. Either way, completely unbreakable and undetectable codes are Hardy Boy’s level stuff and encryption with NSA style backdoors, etc., only work on codes needed for large amounts of data.
“Asrar al-Mujahideen (Secrets of the Mujahideen) was first introduced by the administrators of a now-defunct top-tier Al-Qaida web forum known as “al-Ekhlaas” in late 2007. The software itself encrypts messages and files between users and is promoted as a trusted and secure avenue for terrorist groups, like AQAP, to receive messages from supporters, as well as for homegrown plotters to communicate with one another. The Asrar al-Mujahideen software was so well-trusted that a number of top Al-Qaida franchises officially endorsed it, including not only AQAP, but also Shabaab al-Mujahideen in Somalia. After the “al-Ekhlaas” web forum suddenly collapsed, a prominent online jihadi media unit known as the “Global Islamic Media Front” (GIMF) took the initiative and began retooling and enhancing the original Asrar al-Mujahideen software in an effort to enhance its encryption capabilities.”
7) EU clamps down on bitcoin, anonymous payments to curb terrorism funding
Clamping down on terrorist financing is probably a good thing, especially since money laundering is an important part of criminal operations as well. The nature of Bitcoin makes it excellent for money laundering and an easy target. Of course, when large banks actually set up money laundering operations (http://www.theguardian.com/world/2011/apr/03/us-bank-mexico-drug-gangs, http://www.wsj.com/articles/hsbc-money-laundering-case-yields-116-million-bounty-for-queens-d-a-1436891783, http://www.wsj.com/articles/french-magistrates-open-formal-probe-into-ubs-for-money-laundering-1406144781, and many, many other) and receiver token fines in punishment it is hard to believe that going after Bitcoin and pre-paid credit cards is going to have much on an impact.
“European Union countries plan a crackdown on virtual currencies and anonymous payments made online and via pre-paid cards in a bid to tackle terrorism financing after the Paris attacks, a draft document seen by Reuters said. EU interior and justice ministers will gather in Brussels on Friday for a crisis meeting called after the Paris carnage of last weekend. They will urge the European Commission, the EU executive arm, to propose measures to “strengthen controls of non-banking payment methods such as electronic/anonymous payments and virtual currencies and transfers of gold, precious metals, by pre-paid cards,” draft conclusions of the meeting said.”
8) Cloud Computing – The Game Changer
This is a rather superficial look at some of the projections regarding cloud computing. I don’t think Internet of Things will drive much in the way of traffic since that is mostly narrowband traffic and, in any event IoT is a ticking time bomb for Internet security. There are a lot of reasons people and companies should not hand over control of their data to the likes of Amazon, Microsoft, or Google, but it seems its going to happen regardless.
“In October, Cisco released its Global Cloud Index (GCI) report for 2014-2019, projecting a near 3-fold growth of global data center traffic, with predictions that this traffic will reach 8.6 zettabytes (cloud data center traffic) and 10.4 zettabytes (total data center traffic) per year in 2019 and 80% of it will come from the Cloud. It’s predicted that the Middle East and Africa will show the highest Cloud traffic growth at 41% CAGR, followed closely by Eastern Europe (38% CAGR), and North America (33% CAGR). Cloud computing has already revolutionized the way we live and do business, but it’s evident the evolution has just begun.”
9) Can SolarCity Corp Survive Without Net Energy Metering Policy?
Long story short, despite what the article suggests, massive subsidies, net metering, and other government efforts to promote solar power are the only thing which keeps it going. Solar power is a political tool to make voters believe governments are doing something when more obvious (and effective) options are available. Solar advocates who claim subsidies and special treatment are not required should put their money where their mouth is and advocate that the subsides be stopped.
“The implementation of a 30% Federal Investment Tax Credit (ITC) has made things easier for the solar industry. The NEM policies when in place allowed the output of distributed solar systems to be sold at the retail electricity rate, well above what other generators receive. Such subsidies prompt companies to raise funds through equity financing while the ITC attracts tax equity investors willing to put up much of the upfront capital. The ITC is expected to drop from 30% to 10% in 2017. The state’s decision to reduce ITC has been partially accepted in the solar industry, which assures investors that solar companies can thrive without a 30% ITC. The discontinuation of NEM policy has picked up in California after Hawaii. If any amendments take place in the policy it will affect SolarCity’s revenues, and further move to states i.e. Arizona. SolarCity and other energy companies however believe that NEM is needed for the very survival of the industry in California and all other US states.”
10) Android adware can install itself even when users explicitly reject it
I can’t help but wonder what the point of this sort of app is: like any adware garbage (including those by many name brand companies during installation of unrelated applications) all it does is cause frustration. It is not clear to me that this adware takes advantage of an already compromised phone but that seems to be the case.
“The hijacking happens after a user has installed a trojanized app that masquerades as an official app available in Google Play and then is made available in third-party markets. During the installation, apps from an adware family known as Shedun try to trick people into granting the app control over the Android Accessibility Service, which is designed to provide vision-impaired users alternative ways to interact with their mobile devices. Ironically enough, Shedun apps try to gain such control by displaying dialogs such as this one, which promises to help weed out intrusive advertisements.”
11) The iPad Pro’s chip is not a big deal
Last week we carried an item which showed the power of Apple marketing was such that articles were written suggesting the company’s most recent system on a chip was some of stunning breakthrough in performance. Like articles which claim iPhone cameras are “as good as” a real camera these rely on the ignorance of the author and reader for best effect. As this item shows, our criticism was well-placed.
“The iPad Pro is here, and it comes with a lot of promises. The most-repeated is that its A9X chip is a desktop-class processor that fits inside a tablet. Initial benchmark results confirm that this is by far the most powerful chip Apple has ever put inside an iPad, leading some to suggest that Apple’s A9X is now at the same level as Intel’s laptop chips. This could change the PC and laptop industry forever, apparently, with popular Apple commentators suggesting that “the future belongs to ARM, and Apple’s A-series SoC’s are leading the way.” To put it lightly, that’s a bit premature.”
12) A Botnet Has Been Stealing Billions Through Digital Ads Aimed at Fake Audiences
I don’t feel so bad when the companies who paint the Internet with annoying and misleading ads get scammed, however, this is probably a major issue if you happen to be Google or Facebook, especially now that the scam has come to light. After all if you make money from ads you don’t really care whether the “impression” you are selling is real or a bot – either way, the check clears. The folks spending the money might have a different perspective but if they were paying attention they might have already concluded their ads aren’t of any value since bots don’t buy things.
“According to a recent report from ad-fraud prevention firm Pixalate, a sophisticated botnet has been leeching money from digital advertisers by serving up real ads to faked, highly-prized audiences. The botnet, nicknamed Xindi after some Star Trek bad guys, has, by Pixalate’s calculations, rung up something like 78 billion ad impressions so far. According to George Slefo of Adweek, Xindi “could cost advertisers nearly $3 billion by the end of 2016.” The ingenious thing about the Xindi botnet is who it targeted. The infection was aimed at Fortune 500 companies, university computer networks, and other groups whose users are usually very sought-after by advertisers. Because the advertisers thought that they were reaching such a valuable audience, they were willing to pay much more, $200 per thousand impressions for some, which compounded the cost of the fraud and made things much more lucrative for the fraudsters.”
13) Hasbro Thinks Robot Pets Make Great Companions for Lonely Old People
This is a little bit silly and kind of sad. I think there would be many advantages to a robot cat however this is more like a doll for adults. Robot pets seem to have made an impact in the Japanese market but lots of things from Japan do not seem to translate well.
“Named Joy For All, the new robot pet line is pitched as a way to keep the elderly company. The robotic cats come in three color patterns, have “realistic” fur and make kitty noises and “familiar, cat-like actions” — which presumably don’t include climbing the curtains or leaving “gifts” on the front steps. Billed as companion animals for seniors rather than toys, Hasbro’s site refers to the animatronic animals as “companion pets.” The retail price is $99.99.”
14) Oracle insider: We’re not walking the cloud talk
A host of large companies (Microsoft, Google, IBM, and Oracle) are trying hard to catch up with Amazon in market share for cloud services. I believe most of the gains are likely to come from putting smaller datacenter players out of business, either way I figure neither IBM or Oracle stands a chance in this market as both are used to dealing with large, captive customers with few options. Oracle’s stock has been on a bit of a tear recently as analysts in particular have drunk the Kool-Aid and accepted the company’s party line that cloud sales are doing well. The reality seems to be somewhat different.
“Last week, I wrote a post entitled “Yes, Oracle is finally serious about the cloud.” Cloud was clearly the theme of Oracle OpenWorld, as a flurry of SaaS, PaaS, and IaaS announcements indicated. In my interview with Amit Chaudhry, vice president of public cloud, he stated that cloud computing was “very, very serious business” for Oracle and the company planned to fight “tooth and nail” against Amazon Web Services. I got pushback in response to last week’s post from an unexpected quarter: inside Oracle itself. This individual, who asked to remain anonymous but has been with the company for nearly a decade, opened with a zinger: “We’ll be serious about the cloud when Safra [Catz, co-CEO of Oracle] lets us hire some developers to work on it.” I checked the identity of this source and can confirm this person is well placed and not in a low-ranking position.”
15) GoFundMe Gone Wild
This is a rather lighthearted look at the spread or crowd funding. For those who are not aware, crowdfunding uses websites like GoFundMe whereby people promoting purported worthy causes essentially beg for money. Not surprisingly, the worthiness of a cause is somewhat elastic and people milk the system for all it is worth. In other words it operates pretty much like any registered charity except with full disclosure.
““I woke up to four new people today asking me for money on four different donation platforms,” one friend said. “One was my ex-babysitter announcing her wedding and where I could send cash. No invitation to the wedding. Just cash.” “I’m a believer in giving to real charities: medical research, school drives, the Red Cross, et cetera,” said Heidi Knodle, owner of a picture framing store in San Francisco. “I’m tired of people asking for a vacation, funds for a wedding or their college tuition.” The crime writer Mark Ebner, whose mailboxes have been increasingly filled with monetary requests, has a theory about it all. “I think online begging has become the new economy.””
16) When crowdfunding projects go wrong
Like GoFundMe, Kickstarter and Indiegogo had great promise as a mechanism for financing legitimate projects and yet have devolved into a cesspool of scams and other get rich quick schemes. After all, if you take a percentage off the top what do you care whether solar roadways has even the slightest chance of success? The sad reality of engineering is that a relatively high percentage of development projects undertaken by competent engineers with lots of experience in bring products to market ultimately see the light of day. Therefore, it is not at all surprising that poorly funded amateurs have an even less impressive track record.
“What happens when a crowdfunded project goes wrong? And do those who back ideas on platforms such as Kickstarter and Indiegogo have any rights when they do not deliver on their promises? That is what the more than 12,000 people who backed the Zano mini-drone project are asking as their hopes recede of ever getting a working product.”
17) China’s Tsinghua Unigroup to invest $47 billion to build chip empire
The government of China appears to have decided it wants to move upmarket in the semiconductor space and actually have significant IP. The good news for them is that most all smaller semiconductor companies are on the auction block, but the bad news is most of those companies are significantly overvalued. Tech acquisitions rarely end well and it is hard to believe creative engineers would flourish if their employer was acquired by Chinese state interests once removed. Of course, if you are a shareholder of a target company you could care less.
“China’s Tsinghua Unigroup Ltd plans to invest 300 billion yuan ($47 billion) over the next five years in a bid to become the world’s third-biggest chipmaker, the chairman of the state-backed technology conglomerate said on Monday. Chairman Zhao Weiguo also told Reuters in an interview in Beijing that the company controlled by Tsinghua University, which counts President Xi Jinping among its alumni, was in talks with a U.S.-based company involved in the chip industry. A deal could be finalized as early as the end of this month, he said. He declined to give more details but said buying a majority stake was unlikely as it was too “sensitive” for the U.S. government.”
18) Overstock.com Has A Bunker Full Of Gold, Silver, And Food In Case Of Financial Collapse
I had a good chuckle when I read this. There is no reason to believe the CEO of a company is any less loopy than the average man of the street so this is probably not the only one preparing for the apocalypse. It takes a special sort of imagination to think of a world where society has collapsed and we have reverted to using gold and silver as currency and yet Overstock.com would still be a going concern. You have to wonder what the board of directors is doing if they believe allocating shareholder wealth towards a survivalist fantasy is a good idea.
“When the global financial system collapses, don’t fret: you’ll still be able to shop on Overstock.com. We’re not quite sure how that will happen, but the company’s early adoption of Bitcoin as a method of payment could be one clue. What you need to know, though, is that the company will keep paying its employees thanks to its bunker of silver, gold, and food. No, CEO Patrick Byrne is not kidding when he says that the company is prepared for banks to shut down. It happened in 1933, and almost happened during the economic meltdown of 2008. What would you do without access to your bank accounts for a week? Today, when some people rarely even carry cash, we might be in a lot of trouble collectively as a society when it comes to paying for things like fuel and food if banking systems were down for even a week or two.”
19) USC Eye Institute Patient Becomes First Blind Patient to Have Two Retinal Implants – One in Each Eye – Helping Restore Sight
This is still rudimentary vision but it probably makes a big difference to the quality of life for patients. Chances are the retinal implant devices themselves will be significantly improved over time and the quality of vision will improve significantly.
“The Argus II helps patients recognize large letters, locate the position of objects and more. It restores some visual capabilities for patients whose blindness is caused by Retinitis pigmentosa (RP), an inherited retinal degenerative disease that affects about 100,000 people nationwide. The system includes a small video camera mounted on a pair of eyeglasses, a video processing unit that transforms images from the camera into wirelessly-transmitted electronic signals, and an implanted retinal prosthesis (artificial retina) to stimulate visual neurons. The receiver sends signals to the retina that travel through the optic nerve to the brain, where they can be interpreted as a visual picture.”
20) ‘Super natural killer cells’ destroy lymph node tumors
Cancer treatments have moved a long way in the past couple decades. Many of the most promising research activities are in the realm of immunotherapy where the immune system is modified or stimulated to actively seek out malignant cells and destroy them. This article is pretty light on the details and it is quite clear it has not been tested in humans yet. Still it is pretty cool stuff.
“For tumor cells, the lymph nodes are a staging area and play a key role in advancing metastasis throughout the body. In the study, the biomedical engineers killed the cancerous tumor cells within days, by injecting liposomes armed with TRAIL (Tumor necrosis factor Related Apoptosis-Inducing Ligand) that attach to “natural killer” cells (a type of white blood cell) residing in the lymph nodes. These natural killer cells became the “super natural killer cells” that find the cancerous cells and induce apoptosis, where the cancer cells self-destruct and disintegrate, preventing the lymphatic spread of cancer any further, said King.”