The Geek’s Reading List – Week of March 25th 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) On a charge As Tesla becomes more like a regular carmaker, it faces a bumpier ride
Manufacturing an EV is not as difficult as making a traditional automobile with an internal combustion engine. The key is batteries, which are expensive and short lived. Nonetheless, politicians have decided EVs are a good idea (at least for political purposes) and heaped all manner of subsidies on EVs, including things like lower taxes, free charging, and so on. It will be interesting to see whether Tesla can move into the main stream market where customers are actually more demanding. If they are successful, barriers to entry are low so major vendors will step up and, in either event, The issue may be moot as volume sales cannot coexist with massive sales and investors are bound to lose interest in a money losing venture.
“Tesla has hitherto thrived in a niche. Other carmakers crammed bulky and expensive batteries into petite “city” cars. Tesla put a bigger power-pack into large and expensive ones (prices start at $70,000), more readily absorbing the cost of the battery. This also gives the cars a decent range of more than 250 miles (400km) between charges, and lightning acceleration. In 2015, after just over ten years in business, Tesla’s sales surpassed 50,000 cars. By 2020 it hopes to sell 500,000 a year, mostly Model 3s. These will cost as little as $35,000 (before the generous subsidies many governments dish out). But it is entering a part of the market where competition is intense and profit margins slimmer.”
2) Apple is boring now
There were two big news items related to Apple this week: one was its product launch event and the other was news the FBI had found a 3rd party willing to unlock a terrorist’s iPhone. The launch even only went well if you locked at it through the rose colored glasses of an Apple fanatic – most of the tech industry coverage was less than overwhelming. This article summarized the banality of the mid-year launch.
“Apple now sells 55 different Apple Watch bands and watches made out of five different materials, in two sizes. (That’s not to mention the myriad Hermès and Edition versions it also sells.) Apple sells iPads in five sizes and three colors, and has five iPhones in three sizes and four colors. It has laptops with 11, 12, 13 and 15-inch screens, some of which are available in multiple colors.”
3) The Uber Model, It Turns Out, Doesn’t Translate
I’m not really sure the Uber model translates to Uber. After all, reports have the company losing money like it’s going out of style and – let’s face it – running a car service should not be a highly profitable business. Regardless, this article hints at something else, namely that investors are losing patience which money losing “unicorns” especially since they can’t fob them off on an unsuspecting public through an IPO in the current market environment.
“Other than Uber, the hypersuccessful granddaddy of on-demand apps, many of these companies have come under stress. Across a variety of on-demand apps, prices are rising, service is declining, business models are shifting, and in some cases, companies are closing down. Here is what we are witnessing: the end of the on-demand dream. That dream was about price and convenience. Like Luxe, many of these companies marketed themselves as clever hacks of the existing order. They weren’t just less headache than old-world services, but because they were using phones to eliminate inefficiencies, they argued that they could be cheaper, too — so cheap that as they grew, they could offer luxury-level service at mass-market prices.”
4) Once a Darling, Spanish Solar Company Abengoa Faces Reckoning
As I’ve said in the past, claims of a revolution associated with “alternative energy” would be more credible if not for the bankruptcies, massive subsidies, and outright hysteria when subsidy programs are altered. Very little reduction in CO2 emissions has been due to solar, etc., which actual make up a tiny fraction of overall energy production. The transition away from coal to natural gas (which is cheap mainly due to fracking) has been far more significant. Thanks to my friend Duncan Stewart for this item.
“Clean-energy technologies will play a crucial role as countries try to meet the ambitious targets set by the United Nations climate accord last December. But many of the technologies underpinning renewables are proving economically unsustainable in the short term, particularly with oil prices declining and governments reducing incentives. The financial reality is forcing companies globally to adjust. A big British utility, SSE, is rethinking its wind farms, as the country cuts subsidies. SolarCity and other American renewable companies left Nevada after the state withdrew its support of rooftop systems.”
5) Silicon Valley’s Tech Employees Are Getting Nervous
Silicon Valley has an extremely competitive market for high tech workers, who are notoriously fickle with respect to who they work for, as they should be. After all, while CEOs may be on a mission, the workers are there for the money. The past few years has seen wage rates steadily climb as large profitable firms such as Apple and Google bid against well-funded start-ups for the relatively modest talent pool. Alas, the easy money days seem to be coming to an end in the world of start-up as “down rounds” of financing are becoming more common.
“The tech labor market appears to be sizing up, as tech employees hunker down amid the cooling environment in Silicon Valley. They’re strategically planning their moves from company to company, according to The Wall Street Journal, avoiding start-ups that plan to raise more funding soon and asking recruiters questions about lowered stock prices and compensation in cash instead of equity. “I used to look at equity and think every company was going to be the next Facebook. Now when I see equity I’m like, ‘That’s nice but I want it in actual money,’” one designer told the Journal. Others are looking for “safe” jobs with tech companies sturdy enough to withstand the fallout from an imploding tech bubble. The mood still isn’t exactly austere— last year, the average salary in the San Jose and San Francisco metro areas was $197,411 —but the party in Silicon Valley seems to be ending, and tech employees aren’t oblivious to it. Gone are the days of hyperbolic language in tech recruitment and cheerleading when companies raise new rounds of funding or attain “unicorn” status.”
6) Dear Apple, there’s nothing ‘really sad’ about using a 5-year-old PC
One of the “new” products to come out of the recent Apple even is simply a smaller iPad Pro. It is baffling why Apple continues to position iPads against PC since the comparison is entirely inapt: unlike Microsoft Surface, which run a full up operating system, iPads run a mobile OS and so, for a lot more than you pay for any cheap Android tablet you get about the same functionality. Admittedly, Apple doesn’t target the average person with its marketing but they really stepped in with this one.
“While presenting the new 9.7-inch iPad Pro today, Phil Schiller, Apple’s vice president of worldwide marketing, said that most of the people who buy an iPad Pro are coming from a Windows PC. He then elaborated with this “amazing statistic” on why PC users are switching to the iPad Pro, which was met with chuckles and applause from the audience: ‘There are over 600 million PCs in use today that are over five years old. This is really sad, it really is.” He’s wrong.”
7) The next big thing in phones may not be a phone
The challenge for the mobile phone industry is something I call “feature saturation” which is when new features add declining marginal value to users. Almost any LTE smartphone has as much functionality as any user needs. Higher display resolutions, better cameras, and so on are nice but not enough to encourage the average consumer to upgrade an otherwise perfectly functional phone. The end of 2 year contracts in the US has also created an opportunity for consumers to hang on to their existing phone rather than paying full price for a new on. Apple’s problem is singular in that it sells its products at a remarkable premium relative to competitive product with near identical features. A discount phone, such as the “new” iPhone SE may result in a brief upgrade cycle but you can still buy better phones at lower prices elsewhere. Apple revenue and margins will come down.
“Nearly a decade after the iPhone broke the mould for mobile phones the question being asked is whether the evolution of the smartphone has finally come to an end, as even Apple now treats older, smaller 4-inch screens as something new. Industry experts believe innovation in smartphones is giving way to phone functions popping up as software or services in all manner of new devices from cars to fridges to watches and jewellery rather than remaining with handheld devices. And analysts and product designers said fresh breakthroughs are running up against the practical limits of what’s possible in current smartphone hardware in terms of screen size, battery life and network capacity.”
8) 10 more OEMs pledge to make auto-braking standard in new cars
A few months ago a group of auto manufacturers announced they intended to introduce auto-braking on their vehicles but the commitment was otherwise rather vague. More recently they committed to 2022 as a launch date and now we have substantially the entire auto-industry on board. Advanced safety features such as auto-brake but also lane change assist should significantly reduce collision rates and the severity of the collisions which occur. This will happen long before “self-driving” vehicles are commercially available.
“The number of car makers committed to making automatic emergency braking (AEB) a standard feature on all new cars has doubled this week. On Thursday, the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety announced that 20 manufacturers are now on board with the plan, which will see AEB systems installed throughout their model ranges by 2022. In September of last year, we reported that 10 OEMs had already made the pledge. In the past, government mandates were needed to spread advanced driver safety aids like airbags or electronic stability control systems beyond the luxury cars in which they first appeared. In this case, the auto industry has gotten ahead of possible NHTSA regulation and looks set to implement AEB itself.”
9) Vice Media Traffic Plummets, Underscoring Risky Web Strategy
I rarely go to their web page, but HBO’s Vice TV is one of the few places you’ll see actual journalism, let alone investigative journalism, practiced. This article is not so much about Vice as it about the strange world of manipulating web traffic.
“Vice has been one of the more aggressive practitioners of traffic assignment in recent years, with Vice.com actually accounting for less than half of the traffic total the company has represented as “Vice Media” on Comscore. The addition of select publishers has driven some of Vice’s biggest audience gains in recent years, allowing the company to position itself as the kind of high-growth media darling that has helped CEO Shane Smith attract millions of dollars in well-heeled investors like Disney, A&E Networks and 21st Century Fox. But the strategy apparently backfired last month when the biggest booster of Vice Media’s traffic, Distractify.com, suddenly experienced a meltdown after months of fairly consistent growth. Distractify went into free fall in February vs. the prior month, dropping a whopping 68%, from 15.7 million to just under 5 million.”
10) FBI says it might be able to break into seized iPhone, judge cancels order to aid decryption
Some weeks ago the FBI got a court order to force Apple to help it unlock an iPhone used by one of the San Bernardino terrorists. Whatever the backstory, Apple refused and elected transform the case into a fight for freedom, liberty, and the pursuit of cat videos. It is improbable that Apple is the only large US tech company which does not collude with the US national security establishment so I figure this is all marketing. In either event, nothing is uncrackable, especially if you’ve got the device in your hands.
“The Federal Bureau of Investigation said Monday that it might be able to break into the seized iPhone at the center of an encryption battle with Apple. That is why it wants a federal judge overseeing the litigation to vacate Tuesday’s hearing on whether Apple should assist the authorities in bypassing the four-digit passcode on the iPhone used by San Bernardino terrorist Syed Farook, according to court documents filed Monday. “On Sunday, March 20, 2016, an outside party demonstrated to the FBI a possible method for unlocking Farook’s iPhone. Testing is required to determine whether it is a viable method that will not compromise data on Farook’s iPhone,” the government said.”
11) Apple Policy on Bugs May Explain Why Hackers Would Help F.B.I.
The article really doesn’t explain why hackers would not help the FBI if Apple’s bug bounty were any different, except that, perhaps, hackers already know how to hack the phone and don’t tell Apple because Apple won’t pay them for the information. A bug bounty should mean there is a financial incentive for anybody (even somebody who didn’t discover the bug but buys it off the open market) to bring it to the attention of Microsoft or Google but there is no incentive to do the same for Apple.
“Google, Microsoft, Facebook, Twitter, Mozilla and many other tech companies all pay outside hackers who turn over bugs in their products and systems. Uber began a new bug bounty program on Tuesday. Google has paid outside hackers more than $6 million since it announced a bug bounty program in 2010, and the company last week doubled its top reward to $100,000 for anyone who can break into its Chromebook. Apple, which has had relatively strong security over the years, has been open about how security is a never-ending cat-and-mouse game and how it is unwilling to engage in a financial arms race to pay for code exploits. The company has yet to give hackers anything more than a gold star. When hackers do turn over serious flaws in its products, they may see their name listed on the company’s website — but that is it. That is a far cry from what hackers can expect if they sell an Apple flaw on the thriving underground market where a growing number of companies and government agencies are willing to pay hackers handsomely.”
12) French Police Report On Paris Attacks Shows No Evidence Of Encryption… So NY Times Invents Evidence Itself
After the recent terror attacks in Belgium I saw a couple of security experts on TV railing against, among other things, the use of “technology” (in particular encryption) in these attacks. While encryption may be convenient for a terrorist is can just complicate things, especially when you can get cheap mobile phones to coordinate the assault and then get rid of the phone. Security officials seem to confuse planning an attack with the invasion of Normandy: you don’t need to coordinate thousands of people to pull one off. Even if encryption were an issue it is relatively trivial to adopt codes which are highly secure but easy to use for a small group of people.
“But, amazingly, the NY Times takes evidence of a lack of encryption… to mean there must be encryption: “According to the police report and interviews with officials, none of the attackers’ emails or other electronic communications have been found, prompting the authorities to conclude that the group used encryption. What kind of encryption remains unknown, and is among the details that Mr. Abdeslam’s capture could help reveal.” But… that’s not how encryption works. If they’re using encrypted emails, the emails don’t disappear. You still can see that they exist, and the metadata of who sent messages to whom remains. It’s just that you can’t read the contents of the emails. This is bogeyman thinking about encryption, where people think it does something it doesn’t actually do. Sure, it’s possible that the attackers used some sort of secretive way to communicate, but then the issue isn’t encryption, but rather that they figured out how to hide the method by which they communicated. Or, you know, they just talked about stuff in person.”
13) Ford CTO outlines main hurdles on the road to offering self-driving cars
One problem with a discussion of autonomous vehicles is that there is a yawning gap between what the auto industry is talking about and what consumers think they are talking about. It is not a coincidence that AV trials are done in places with excellent infrastructure and good weather. At best, 5 years from now “semi-autonomous” vehicles will allow drivers to take their hands off the wheel, under ideal conditions, in well maintained roads. Better maps might help, but maps become obsolete very quickly – that boy who is not a fire hydrant might be a garbage can or a cardboard box. Full autonomy will require vision systems which can see in all weather conditions and software which can figure out where a car should be on a roadway with no lane markings.
“From Level 4 in a protected environment to a car that can go from one city center to another city how much more time do you need, another five years? I think it depends. The reason we say a geo-fenced area, and let’s put the weather aside for now, is for some of the advanced aspects. We really need exact positioning of the vehicle and to have the vehicle reference itself to a known map. That makes some of the sensing a little bit easier. If you know that an image, based on previous mapping, is a fire hydrant then you don’t need to consider whether it is a fire hydrant or a small boy. The reason we need a geo-fenced area is because that type of laser mapping is very intensive. It can be done for a big urban environment, but it is an intensive effort. If you were to provide laser mapping for a highway connecting two cities as you mentioned, then even Level 4 would be capable of that. But if you want to go out on a dirt road or somewhere not previously mapped and expect the vehicle to be able to deal with all the possibilities that could happen – a cow running across the road for example – that’s a challenge for Level 5.”
14) Rolls-Royce Reveals Vision of Shore-based Control Centers for Unmanned Cargo Ships
Autonomous operation of ships is likely to occur well before autonomous cars. Like large trucks (see item 15) an autonomous ship might be cheaper to operate and the relatively low precision of GPS is more than enough for maritime application. Nonetheless, while the video is really cool it is highly speculative.
“Rolls-Royce on Tuesday offered another glimpse into the future of unmanned shipping, revealing for the first time its vision for a land-based control center for the operation of autonomous ‘drone’ cargo ships. In photos and film released Tuesday, Rolls-Royce offers a vision in which a small crew of 7 to 14 people monitor and control the operation of a fleet of vessels across the world using interactive smart screens, voice recognition systems, holograms and surveillance drones to monitor what is happening both on board and around the ship.”
15) Daimler connected trucks highway pilot for autonomous platoon driving
There is good reason to suspect autonomous capability will be launched on heavy trucks before it enters the consumer market. Heavy trucks are expensive so self-driving technology will be a smaller percentage of the cost of the vehicle. Plus, most trucking happens on relatively well marked and maintained roadways so the feature will be more useable. Finally, although it will be impossible to do away with the driver until challenges like dealing with weather and other poor conditions, the system will likely improve productivity, fuel efficiency, and safety. Here is a fairly lengthy video which is a demonstration of Daimler’s self-driving technology for heavy trucks.
16) The creators of the first ‘synthetic life’ made a cell with just enough genes to survive
It is worth noting that “life” isn’t a result of just the genome because you need all the machinery of the cell to read and use that genetic code. Still, this is a remarkable experiment, especially since they have no idea what the function of so many of those genes is. That in itself is an important puzzle to solve
“It’s not science fiction — or even a recent breakthrough. Scientists created the first synthetic bacterium back in 2010 using this method. But in a new study published Thursday in Science, they’ve taken this proof of concept a step further. Their latest single-cell creation has what they’re calling a “minimal genome.” They’ve created an organism that has just 473 genes, the smallest known genome of any living organism. With fewer, it wouldn’t be able to sustain itself. Their hope is that bringing a genome down to its minimum components will help scientists figure out the most basic building blocks of life. As it stands, even this minimal genome has many genes with unknown purposes.”
17) How the Dodgers’ $8.3B TV deal turned into an unmitigated disaster
I don’t pay any attention to spots at all, except to get annoyed at the coverage (basically free advertising) it receives. Admission to sporting events has increased to stratospheric levels as have broadcast rights, as this article outlines. Los Angeles (which Google tells me is where the Dodgers are based) is a large market and it seems the team has priced itself out of the broadcast market. The figures referenced in the article are interesting, especially with respect to only 66% of young adults having cable TV service and that proportion will likely drop over time as younger demographics are used to streaming. Content providers have to make their content affordable and available via streaming if they expect to retain an audience.
“While those 83 percent of those 50 and older have cable or satellite and same goes for 73 percent ages 30 to 49, less than two-thirds of adults 18 to 29 have cable or satellite service, according to the Pew study. A large portion of the younger generation – the one baseball so desperately covets – is outright rejecting the model by which the sport distributes its most valuable product: day-after-day game coverage. And thus the sabre-rattling Wednesday. Time Warner offering a one-year deal to other providers at a 30 percent discount from its previous asking price was enough to prompt commissioner Rob Manfred to release a statement: “The distribution dispute involving DirecTV, AT&T, COX and Verizon has gone on too long. The Dodgers’ massive fan base deserves to be able to watch Dodger games regardless of their choice of provider. The situation is particularly acute given that this is Hall of Fame broadcaster Vin Scully’s final season. Time Warner has made a significant economic move that I hope will be accepted by the providers.””
18) Cable Still Has Plenty of Ways to Stay Ahead of Bandwidth Curve
This article looks at emerging cable modem standards and the potential impact on the amount of bandwidth which can be delivered over existing infrastructure. Unfortunately, the uncompetitive market structure in much of North America means there is little incentive for carriers to improve their infrastructure since a large portion of consumers has no choice of broadband supplier.
“While the obvious answer to this dilemma is to boost the spectrum range, there are many other tools in the toolbox to keep cable ahead of the curve before it comes to that. Among them are DOCSIS 3.1, which is expected to be 50% more bandwidth-efficient than DOCSIS 3.0, new distributed access architectures, new codecs like H.265/HEVC, the possibility of a proposed “Full Duplex” technique that could enable cable to offer symmetrical speeds on DOCSIS, higher density equipment, and new “virtual” architectures. And, longer term, it’s possible that MSOs could raise the ceiling well above 860 MHz or even 1 GHz. One of the proposals Arris is working on is pushing spectrum to 2 GHz or even 6 GHz or higher – enough to enable DOCSIS plant to support capacities of 50 Gbps or more.”
19) How a simple SIM card makes farmers more efficient—and possibly saves lives
Telecommunications technology can make a big difference to the efficient operation of an economy – a fact ignored by North American policy makers. Like many things a little bit of technology can bring you along way, as this item shows. The idea is to give small farmers information that helps them run their operations more efficiently. Mobile phones are probably not the best way to send out voice messages about the weather, etc.: radio broadcasts could probably do the job much more cost effectively.
“Based on its initial field work with the agrarian community in India, ICRISAT made further tweaks. The organization determined that farmers would respond most keenly to these alerts if they heard them from other farmers. The GreenSIM setup now dictates that message text is verbally translated to the local languages of farmers, who record and e-mail the files to ICRISAT. “Agriculture is really an industry that’s based on trust. If I was to give you a seed, you’d have to trust me that it had these certain characteristics, that, based on my own experience, I’m telling you what it’ll be like when you grow it in your field,” ICRISAT General Director David Bergvinson told Ars. “It’s the same as getting information associated with agriculture. Farmers tend to trust other farmers more than they do extension agents, agri-dealers, or scientists.” The approach has shown potential. Vimalamma Jawadi, a farmer from the Telangana village of Janampet, said her profits have increased from 5,000 to 20,000 rupees ($80 to $310) since she began to use the GreenSIM in 2012. Previously, she had raised only one crop. After GreenSIM messages alerted her to the benefits of crop rotation, however, she incorporated rice, corn, millet, and peanuts into her three-acre plot, increasing her chances of a successful harvest.”
20) Angola’s Wikipedia Pirates Are Exposing the Problems With Digital Colonialism
The title might be a bit of an overstatement, but I suspect that “digital colonialism” is a spot on description of Facebook Free Basics ultimate intent – after all, it has been banned in a number of countries. This article shows how imaginative people can be in exploiting a communications resource: they use free Wikipedia entries to upload files and use free Facebook to direct people to those files. The root problem is the outrageous cost of broadband in Angola: in India you can get 30MB for $0.45 for 1 day or pay $1.54 for 300MB for a month (http://www.icompare.in/MobileBroadband/Devices/SIM?circle=Andhra-Pradesh)
“Wikimedia and Facebook have given Angolans free access to their websites, but not to the rest of the internet. So, naturally, Angolans have started hiding pirated movies and music in Wikipedia articles and linking to them on closed Facebook groups, creating a totally free and clandestine file sharing network in a country where mobile internet data is extremely expensive. It’s an undeniably creative use of two services that were designed to give people in the developing world some access to the internet. But now that Angolans are causing headaches for Wikipedia editors and the Wikimedia Foundation, no one is sure what to do about it.”