The Geek’s Reading List – Week of February 19th 2016
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.
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1) Suddenly, the Solar Boom Is Starting to Look like a Bubble
Just to be clear, solar power is nowhere “grid parity” and probably never will be unless they continue to fudge the numbers. There is more to the cost of producing solar power than the panels and even then the rated capacity is rarely achieved, except for one day of the year at the equator on a sunny day – if the panel is new. The reason the business has boomed is simply that there are massive subsidies and related support. The transition from coal fired to natural gas fired power production – helped by the impact of fracking on natural gas prices – has done far more for CO2 emissions than all those subsidies have. Its great if you are in the solar business, much less so if you are a taxpayer.
“In December, Congress extended the federal investment tax credit for solar installations through 2022, convincing analysts to project strong growth for the solar industry in coming years. Prices for solar panels continue to decline, even as emissions reduction targets reached under the Paris climate accord drive governments to seek more power from renewable energy sources. Several recent reports have shown that the cost of solar is often comparable or nearly comparable to the average price of power on the utility grid, a threshold known as grid parity. … Last month Nevada introduced sharp cutbacks in its program for net metering—the fees paid to homeowners with rooftop solar installations for excess power they send back to the grid. California and Hawaii, two of the biggest solar markets, have introduced changes to their net metering schemes as well. Across the country, as many as 20 other states are considering such changes, which would dramatically alter the economics of rooftop solar.”
2) Is Tesla About To Unleash A Black Swan On The Energy Industry?
No. No they are not. The article tries to suggest that the rumored specifications for a mass market EV are close, but not close enough. The reality is not nuanced: Tesla can’t manufacture a reliable, high priced vehicle at a profit despite massive subsidies. The manufacturing capacity and service infrastructure needed for a mass market vehicle are substantially greater than a niche car sold in low volumes. More to the point, there is no way taxpayers would subsidize a mass market car and the subsidies are designed to disappear in a few years. The only companies which can afford to make a mass market car are real manufacturers who can use the profits from pick-up trucks and SUVs to cover their losses on EVs.
“Today, there are over one billion ICE passenger vehicles on the roads compared to just over one million electric. Electric vehicles sales have increased almost 80% per annum since 2010 and were about 400,000 (equivalent to two weeks of VW’s current sales) of the 85 million vehicles sold globally in 2015. Driving range is important to compete with an ICE vehicle, which are fueled through a fully depreciated distribution system. For the alternative to be successful, it needs to avoid (or minimize) investments in a network of refueling infrastructure (e.g., charge stalls in store parking lots) to keep down the effective cost of operating the vehicle. Avoiding this infrastructure investment is critical for electric vehicles to compete in advanced economies.”
3) Apple CEO Tim Cook says company won’t build the FBI a backdoor for the iPhone
This was the tech story of the week. My view is that, almost certainly, Apple’s encryption has already been cracked by the NSA if for no other reason that it is impossible to believe that it is the only large US tech company not to have colluded. Therefore, Cook’s position is largely posturing for maximal commercial effect. Nevertheless, this is the phone of a known terrorist and the company is refusing to obey a court order. The case will, no doubt, be appealed, and most likely (see item 4) be upheld. We’ll see if management makes the correct choice between criminal contempt of court or continued posturing for market share.
“On Tuesday, a California judge ordered Apple to help break into an encrypted iPhone that was used by Syed Farook, one of the San Bernardino shooters. The highly technical order specified that Apple should create software that would turn off the phone’s auto-erase feature and make it easier for the FBI to brute-force the password, decrypting the data on the phone. Apple responded quickly to the request that it undermine one of its security promises to customers: that only they, and not Apple, can unlock the encrypted data on their iPhones. Apple CEO Tim Cook said the company refuses to build a “backdoor” for the iPhone in a customer letter posted to Apple’s site late Tuesday evening. He says Apple will oppose the order and accused the government of overreach.”
4) Apple is wrong. Your iPhone is not a black box.
With all the excitement over Apple’s “principled” stand on refusing to obey a court order, this article provides a counterpoint based on – get this – the actual law concerning the question. Unsurprisingly, according to this analysis, there is nothing magical about smartphones or iPhones in particular with respect to a legal search and Apple doesn’t have a leg to stand on. Nevertheless since Apple is being asked to modify its OS in order to allow the search, it may be able to contest the order on the basis that the government can’t order you to write software.
“But bear in mind: at no period in American history has there ever been any personal information, let alone any whole class of information, that was ever considered wholly immune to government access. … In every liberal democracy, there is a balance between the need for strong civil liberties and the maintenance of safety and order. We inevitably give up some freedoms in the name of public safety: I cannot drive 100 mph on the highway, fire a howitzer in my backyard, or bring shovelfuls of tropical dirt home from overseas (at least without a lot of oversight). Forget terrorists. (But actually don’t, because that matters too.) When common criminals — drug dealers, pimps, gangs, and certainly their white collar counterparts — start using smartphones that keep all of their contacts, communications, networks and data inaccessible to law enforcement, where does that leave us as a society? The potential for public harm is obvious and irrefutable.”
5) Apple apologizes, issues fix for Error 53 that disables iPhones and iPads
You might recall this news item from the previous two weeks. Apple thought that bricking phones which had been repaired by non-approved shops was a good idea. This is not only a stupid position it is likely criminal behavior in many countries. Apple vigorously defended its decision on the basis of protecting security and, predictably, Apple fans agreed in unison (except, of course, the poor souls who had their phones destroyed). Sanity, and, doubtless a careful reading of the law, has forced Apple to backtrack on this appallingly stupid move. Predictably, Apple fans are, in unison, proclaiming the (revised) decision to be the correct one.
“Apple has released a software update for iPhone and iPad users who found that their devices stopped working after going to third-party technicians for repairs. The problem, known as Error 53, bricks your phone if any non-Apple source tampers with the newest version of the Touch ID fingerprint sensor, installed on the iPhone 5s, 6 and 6s and some models of the iPad. Apple has said it was designed as a security feature to prevent unauthorized access to the phone. But many users called the function a means to stifle independent repair shops that might charge less for repairs than those from an official Apple store.”
6) Seeing Beyond The Hubris Of Facebook’s Free Basics Fiasco
There is nothing unusual about a business strategy based upon a false premise, so Facebook shareholders should be happy the government of India shut them down before Facebook blew any more money on the scheme. The data in the article are a bit of an eye opener though.
“The Free Basics project originated from an idea that Zuckerberg had about connecting the next 5 billion people. He documented this in a paper titled Is Connectivity A Human Right? The paper’s thesis was that data access is more expensive than smartphones. He wrote that in the U.S. “an iPhone with a typical two-year data plan costs about $2,000, where about $500–600 of that is the phone and ~$1,500 is the data”. Therefore, the key was to make Internet access affordable by making it more efficient to deliver data and improving the efficiency of apps to less data. What Zuckerberg and his U.S. team didn’t understand was that in India you can buy computer tablets and smartphones for as little as $50, and that 100MB of data—which is more than a Free Basics user will consume in a month—costs much less than a dollar. So the entire basis of the paper was flawed. And then there was a complete lack of understanding of the language, and of the cultural issues, and of the distrust of foreign corporations bearing gifts.”
7) Here’s Why CBS Is The Future Of Television No One Saw Coming (Except Les Moonves)
The broadcast and cable TV businesses are undergoing a significant transformation as more and more consumers are dropping cable subscriptions and moving to streaming. Most of the articles on the subject are about failure but this one looks at CBS’s approach and why it should be successful.
“The result was CBS All Access, the $6-a-month service that does indeed include the ability to watch CBS live, thanks to deals with 125 local affiliates. (Not every market in America has this option yet, but DeBevoise says they’re closing in on 90 percent coverage.) It’s also ad-supported, which means it not only puts $6 per month per subscriber in CBS Corp.’s pocket, but also brings in some advertising dollars as well — about $4 a month per customer. “We believe in the ad-supported model, but we also believe in finding new business models as well,” CBS’ head of ad sales, Jo Ann Ross, says. “Now, if somebody wants to buy a digital package that’s going to amplify what they do on the channel, we’re able to facilitate that.””
8) FCC Cable Box Vote: Here’s What New Rules Could Mean For Google, Comcast And Your TV
This might be a big deal, and not just for cable companies. The cable box is a bit like the old telephones people used to be forced to rent: expensive, clunky, obsolete, and designed for the vendor not the consumer. It should cost no more than $50 to purchase a cable box and there is a good chance that a competitive market will see prices drop well below that. More significantly, cable box functionality might be combined with other tech products such as TVs, Rokus, etc..
“Buried somewhere in your cable bill is a not-so-noticeable fee of $7.43. That’s how money much the Federal Communications Commission says the average American household pays each month to rent a piece of equipment that most people hate: the set-top box. And now, its days may be numbered. The commission on Thursday morning voted to start the process of formulating regulations that would require pay-TV companies to enable their video streams to pass through any set-top box, not just ones leased from the operator. “This issue is not really complex,” FCC Chairman Tom Wheeler said. “Congress has explicitly instructed us to assure that there are competitive information devices, be it a box or an app.””
9) Eternal 5D data storage could record the history of humankind
Most recording media – whether paper, film, magnetic, etc., deteriorate over time and for some media the technology to access the data gets lost. Try reading an 8” hard sectored floppy disk one day. This technology has an extremely long life expectancy, but the issue will be whether anybody knows how to read the discs, let alone has access to a reader, even 100 years from now.
“Using nanostructured glass, scientists from the University’s Optoelectronics Research Centre (ORC) have developed the recording and retrieval processes of five dimensional (5D) digital data by femtosecond laser writing. The storage allows unprecedented properties including 360 TB/disc data capacity, thermal stability up to 1,000°C and virtually unlimited lifetime at room temperature (13.8 billion years at 190°C ) opening a new era of eternal data archiving. As a very stable and safe form of portable memory, the technology could be highly useful for organisations with big archives, such as national archives, museums and libraries, to preserve their information and records.”
10) IBM has just open-sourced 44,000 lines of blockchain code on GitHub
There are all kinds of start-ups working on Bitcoin related technologies. Blockchain is an open source technology and it is unclear whether you can assert Intellectual Property rights on mathematics. Besides, since blockchain requires a distributed ledger it is hard to imagine a few hundred thousand independent computer owners running code to support a proprietary standard. Long story short, IBM’s decision is the only one which makes sense.
“Whether transparent, decentralized database technologies like blockchain become a tool for the masses or the few is still yet to be decided. In fact, a UN paper that looks at what blockchain is and what it could do just went live last week. But if you’re as excited as the tech giants are to start putting stuff like this to work, IBM has just announced it’s open-sourcing a whole load of code on GitHub. A blockchain is an online, public ledger where you can log just about any kind of transaction, rather than it being controlled by a central institution. Although much of the theory is yet to be tested, many believe it could transform everything from financial exchanges to legal contracts.”
11) Apple Pay will help China’s mammoth state banks crush Alibaba offline
Not all Apple news was about refusing to decrypt a terrorist’s phone. This was given a lot of play but it is not particularly important. In order for a pay system to work you need the devices to be in the hands of a significant number of consumers and while iPhones may be a great status symbol they are far from a mass market item in China.
“How many Chinese consumers, exactly, will be able to sign on to Apple Pay is something of a mystery though it is likely to be in the tens of millions. The company doesn’t break out total iPhone users in China, or total sales of iPhones there, although analysts estimate Chinese buyers bought three to four million iPhone 6S’s in the first weekend of sales. iPhones were the most-sold smartphone brand in urban China in 2015, with a 27% market share, a quarterly report from Kantar shows, and half of the iPhones in China will be Apple Pay-compatible by Q2 2016, according to research from TechPinions‘ Ben Bajarin. UnionPay has many other partners besides Apple. It announced a similar deal with Samsung Pay in December, and is also in talks with domestic smartphone brands including Xiaomi, Huawei, ZTE and Lenovo on mobile payment services, Chinese financial media outlet Caixin reported, citing unidentified sources.”
12) Uber losing $1 billion a year to compete in China
Somehow Uber has become the prototype of a “unicorn” tech company with a massive valuation, disruptive business model, and so on. The thing is, while they may disrupt the taxi business, they have no sustainable competitive advantage: they run a car service with an integrated dispatch and billing platform. This is not rocket science and car services are not an inherently profitable business. Regardless, the company is “investing” (i.e. burning through) vast quantities of cash in order to buy market share. That share will persist as long as they are willing to pay money for it. Watch for the company to crash and burn.
“Uber Technologies Inc is burning through more than a billion dollars a year in China as it wages a fierce price war against local rival Didi Kuaidi, its chief executive said. The company’s Chinese business boosted its valuation last month to more than $8 billion after raising more than $1 billion in its latest funding round, but the U.S. ride-hailing app is not yet profitable in mainland China because of the intense competition. “We’re profitable in the USA, but we’re losing over $1 billion a year in China,” Uber CEO Travis Kalanick told Canadian technology platform Betakit. “We have a fierce competitor that’s unprofitable in every city they exist in, but they’re buying up market share. I wish the world wasn’t that way.””
13) Hospital paid 17K ransom to hackers of its computer network
Ransomware is a relatively new form of hack which encrypts user data and demands a payment (typically in cyber currency) to decrypt the data. It is a bit surprising that the ransom in this case is such a trifling amount, given the size of the institution. Perhaps the hospital will allocate some resources to cyber security and secure backups in the future.
“A Los Angeles hospital paid a ransom of about $17,000 to hackers who infiltrated and disabled its computer network because paying was in the best interest of the hospital and the most efficient way to solve the problem, the medical center’s chief executive said Wednesday. Hollywood Presbyterian Medical Center paid the demanded ransom of 40 bitcoins — currently worth $16,664 dollars — after the network infiltration that began Feb. 5, CEO Allen Stefanek said in a statement. The FBI is investigating the attack, often called “ransomware,” where hackers encrypt a computer network’s data to hold it “hostage,” providing a digital decryption key to unlock it for a price. “The quickest and most efficient way to restore our systems and administrative functions was to pay the ransom and obtain the decryption key,” Stefanek said. “In the best interest of restoring normal operations, we did this.””
14) Hard-coded password exposes up to 46,000 video surveillance DVRs to hacking
This was of great interest to me as my home surveillance system a Lorex. I tried logging in using these credentials and failed. Perhaps the particular weakness only applies to non-IP security systems rather than the state of the art system I have. Still it shows that security exists more in the imagination than in many products.
“”If these credentials are supplied, full access is granted to the web interface,” the RBS researchers said a report scheduled to be published Wednesday. RaySharp claims on its website that it ships over 60,000 DVRs globally every month, but what makes things worse is that it’s not only RaySharp branded products that are affected. The Chinese company also creates digital video recorders and firmware for other companies which then sell those devices around the world under their own brands. The RBS researchers confirmed that at least some of the DVR products from König, Swann Communications, COP-USA, KGUARD Security, Defender (a brand of Circus World Displays) and LOREX Technology, a division of FLIR Systems, contain the same hard-coded root password.”
15) Over 100 banks hit by sophisticated cyberattack
This seems to be an expanded report on the hack which we reported on recently. At the time it seemed the victims were confined to Russia and one could conclude that perhaps Russian banking systems were not up to par. It turns out that the attack was not confined to Russia and it appears likely that it isn’t just Russian banking systems which are not up to snuff. Either way, a few hundred million in cash is a pretty good payday.
“A sophisticated global cyberattack struck more than 100 banks in 30 countries stealing hundreds of millions of dollars, The New York Times reported Saturday. Citing a soon to be released report from computer security company Kaspersky Lab, the newspaper said the attack involved malicious software that gave hackers long-term access to banking systems. A group of Russians, Chinese and Europeans was able to siphon off around $300 million in one of the world’s largest bank robberies, the report said. The money was transferred to bank accounts around the world in small-value amounts to avoid detection.”
16) Iranian app helps users avoid morality police
The app is essentially an Iranian version of Waze except targeting “morality police” instead of traffic cops. Last I heard the app had been taken off line but it would be pretty easy to replace it, even with messaging applications. Hopefully Iranian youth will make the “morality police” an even greater parody than they currently are.
“Gershad, a new smartphone application rapidly gaining popularity in Iran, helps users avoid checkpoints set up by Iranian morality police. The app, which is trending on social media (although download statistics are not currently available), allows users to tag the location of morality police checkpoints on a map and share the locations with other users. The morality police enforce Islamic dress and behavior codes with random checkpoints which can be difficult to avoid. Gershad helps users to avoid encounters with morality police by publishing locations of checkpoints.”
17) Build your own action figures with the new ThingMaker 3D printer
I remain pretty skeptical there is a consumer market for 3D printers. Besides price, what makes this one interesting is that it is to be sold by Mattel and apparently supported by Autodesk. Mind you, Mattel’s track record with respect to selling technology, is not without blemishes.
“The ThingMaker won’t ship until this fall, but the app is already available and can provide plenty of entertainment value in the meantime. You’re given a selection of stock figures (and creatures) to choose from, but once you hit the edit screen any part can be swapped out thanks to the ball-and-socket construction that all the pieces follow. Your samurai warrior doesn’t need a pair of fairy wings but they certainly couldn’t hurt, right? And there’s nothing to stop you from giving your fighter a dinosaur arm. The app doesn’t judge. Pick whatever color you want, and even the texture. When you’re done designing you can pose your creations and set them against stock backgrounds like a desert, ancient ruins or an underwater scene with a sunken ship.”
18) Tapping the Brakes on the Virtual-Reality Hype Machine
2016 is supposed to be the year VR headsets become mainstream and, as this article show, the hype might be getting ahead of itself. It remains to be seen if the devices live up to expectations, let alone whether there are enough high performance PCs out there capable of running the required software. Frankly, the gizmos make me nauseous but I may be in the minority.
“Unity Technologies hosted the event, and during the keynote, the company’s CEO, John Riccitiello, said something remarkable. He said there is too much hype around AR/VR today. He said that unrealistic expectations threaten the enormous long-term potential he sees for the technologies and the market. I couldn’t agree more. Riccitiello went on to cite a January 2015 forecast that showed a VR-hardware installed base of nearly 40 million units by the end of 2016. I’m not going to cast stones regarding that forecast, as it is more than a year old. Also, as anyone who has attempted to predict a market where devices haven’t started shipping yet knows, it’s a messy business of slipped launched dates and broken assumptions. Suffice to say, this number is simply too high.”
19) Potentially deadly drug interactions found mining FDA complaint bin
There is good reason to be skeptical of a lot of proposed “big data” type applications but this particular one makes sense. It is interesting to consider whether anonymized prescription data and medical records might be mined to find far more dangerous interactions. After all, not all such problems would result in a complaint even when the outcome was very bad for the patient.
“To get around the problem, a team of researchers (working with journalists at The Chicago Tribune) created a computer model to create side-effect profiles for prescription drugs. Then, they mined a massive database of drug-reaction complaints sent to the Food and Drug Administration, as well as 380,000 electronic health records. The results of the analysis so far suggest that four drug combinations—including the combination of the common antibiotic, ceftriaxone, with the over-the-counter heartburn medication, Prevacid (lansoprazole)—may cause a potentially fatal heart rhythm. The findings were published Wednesday in the journal Drug Safety.”
20) Mitsubishi’s Display Projects ‘Passable’ Image in Midair
It’s a bit of a trick but a clever one. The image is formed by having special optic on either side so you can, in fact walk between them. I am sure the quality of the image will improve but it is questionable whether this will ever be more than novelty.
“Mitsubishi Electric Corp developed a display capable of projecting a 56-inch image (886 x 1,120mm (H)) in midair and exhibited it at a meeting that it organized to announce its R&D results Feb 17, 2016. Viewers can freely pass through an image (video) that the display projects in midair. Mitsubishi Electric expects that the new display will be used for digital signage, amusements, guide signs, etc. The company has been developing the display in the aim of commercializing it in or after fiscal 2020.”