The Geek’s Reading List – Week of May 6th 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.
1) Apple Stole My Music. No, Seriously.
I’ll count this as reason number 413 why you want to avoid using any Apple product or service. No doubt they are granted permission in a EULA nobody reads or understand. Apple has decided you don’t need offline access to your music and that’s all you need to know. I would not be surprised if an enterprising copyright lawyer could not make a case that Apple is breaking the law unless they have explicit permission to download every piece of music you have before downloading it. Mind you, as we’ve seen in the past, Apple doesn’t seem to think the law applies to their actions.
“What Amber explained was exactly what I’d feared: through the Apple Music subscription, which I had, Apple now deletes files from its users’ computers. When I signed up for Apple Music, iTunes evaluated my massive collection of Mp3s and WAV files, scanned Apple’s database for what it considered matches, then removed the original files from my internal hard drive. REMOVED them. Deleted. If Apple Music saw a file it didn’t recognize—which came up often, since I’m a freelance composer and have many music files that I created myself—it would then download it to Apple’s database, delete it from my hard drive, and serve it back to me when I wanted to listen, just like it would with my other music files it had deleted.”
2) The Secret Culprit in the Theranos Mess
Like most Vanity Fair articles this one is pretty good. I don’t fault journalists in particular because it appears that skepticism in general is a lost art among both journalists and analysts. Commentators seem to take every utterance from CEOs and investors as gospel, especially if the speaker is a “billionaire”. Even when the claims fly in the face of what should be a basic knowledge of science, all they need to know is spoon fed by the companies and their shills. Eventually reality always intervenes.
“But if you peel back all of the layers of this tale, at the center you will find one of the more insidious culprits: the Silicon Valley tech press. They embraced Holmes and her start-up with a surprising paucity of questions about the technology she had supposedly developed. They praised her as “the next Steve Jobs,” over and over (the black turtleneck didn’t hurt), until it was no longer a question, but seemingly a fact. At TechCrunch Disrupt, blogger Jon Shieber had his blood drawn onstage as he interviewed her. There were no tough questions about whether Theranos’s technology actually worked; just praise. When it seemed that the tech press had vetted Holmes, she subsequently went mainstream. She got her New Yorker profile, and her face appeared on the cover of T: The New York Times Style Magazine, among others. (Holmes appeared on Vanity Fair’s New Establishment list and spoke at its 2015 New Establishment Summit.)”
3) YouTube Said to Plan ‘Unplugged’ Online TV Service for 2017
This could end up being a major threat to the likes of Netflix, or it could simply be a complimentary service. Google already has the infrastructure to deal with the distribution of such a service, but the challenge is getting rights from content providers. There is already a lot of good content on YouTube (I have recently been watching the Arizona State University Origins Project lectures (https://www.youtube.com/user/ASUORIGINS)) and I’m sure there is a lot more high quality stuff out there.
“YouTube is working on a paid subscription service called Unplugged that would offer customers a bundle of cable TV channels streamed over the Internet, people familiar with the plan said. The project, for which YouTube has already overhauled its technical architecture, is one of the online video giant’s biggest priorities and is slated to debut as soon as 2017, one of the people said. YouTube executives have discussed these plans with most major media companies, including Comcast Corp.’s NBCUniversal, Viacom Inc., Twenty-First Century Fox Inc. and CBS Corp., but have yet to secure any rights, said the people, who asked not to be identified because the talks are private.”
4) Tesla puts pedal to the metal, 500,000 cars planned in 2018
Tesla is very popular on Wall Street, probably because the company is a prodigious destroyer of capital and generates tens of millions of dollars in fees every year like clockwork. The firm is also a master of misdirection: after preannouncing poor quarterly results they trotted out the mythical Model 3 and convinced a few hundred thousand people to lend them money so they might have the privilege of buying a car with uncertain specifications and an uncertain price at some point in the indeterminate future. I can’t analyse their financial statements because of the extensive use of non-GAAP measures, including non-GAAP revenue and non-GAAP interest expense. They seem to show a deterioration in profitability (lower Gross Margin, much higher operating expense) which some ascribe to “spending for growth” even though R&D is flat and it is SG&A will has grown dramatically. Hence the need to excite bankers and investors by talking up an improbable production ramp.
“Tesla Motors Inc (TSLA.O) said it was stepping up production plans for its upcoming Model 3 mass-market sedan and would build a total of 500,000 all-electric vehicles in 2018, two years ahead of schedule, but warned that spending will ramp up in tandem. The company, which three months ago aimed to make a net profit in the final quarter of this year, gave no profit target on Wednesday and said capital spending would rise about 50 percent more than previously forecast this year, to around $2.25 billion. New shares and debt will likely be issued at some point, Chief Executive Elon Musk added”
5) Ford Working on 200-Mile EV to Fight Tesla Model 3, Chevy Bolt
With all the hype and hysteria over Tesla people lose sight of the fact that building an EV is actually easier than building a traditional car. The major challenge is batteries and, despite what you read, nobody has a leg up there: its basic chemistry and low tech manufacturing. Real car manufacturers can benefit from massive economies of scale since they share parts among various models and unlike Tesla they can afford to lose money on specific models in order to meet fuel economy standards, etc., because they actually have profitable products.
“With the recent unveiling of the Tesla Model 3 being greeted like the advent of a perpetual-motion machine that also cures cancer and can do your taxes, and General Motors fielding a counterpoint in the Chevrolet Bolt that will be in showrooms later this year, the question for Ford has been: Where’s your 200-mile-range EV? In a conference call with analysts today, Ford CEO Mark Fields had an answer: “We’re working on it.”What Fields actually said, as reported by Automotive News, is: “Clearly, that’s something we’re developing for.” From there, the Automotive News report speculates that Ford’s Tesla/Bolt fighter will be offered not only as an EV, but also as plug-in and a traditional hybrid variants (kind of like Hyundai’s recently unveiled Ioniq), and will be called the Model E—Ford has applied for a trademark on that name. It’s also expected that the vehicle will be built at a recently announced new plant in Mexico, and arrive in the 2019 time frame.”
6) Upgrading to Windows 10 will cost $119 starting July 29th
I continue to think Windows 10 is their best Operating System: it is stable, fast, and you don’t have to use the crazy Windows 8 user interface. The free upgrade is a bargain, especially since Microsoft will probably discontinue support of Windows 7 sooner rather than later. I strongly suspect the suggested cost is more of a threat than anything else, especially since you can buy a Chromebook for about twice that price.
“When Microsoft launched Windows 10 last summer, the company promised that users would be able to upgrade from Windows 7 or Windows 8.1 free of charge for the first year that the new operating system was available. Now that the 1-year anniversary is approaching, Microsoft is explaining what happens next. You’ll still be able to upgrade after July 29th… but it’ll cost you $119.”
7) Intel cuts Atom chips, basically giving up on the smartphone and tablet markets
Intel spent billions of dollars on a variety of initiatives to establish a beachhead in mobile devices and they all failed. The company still seems to harbor a belief it can establish itself in the Internet of Things market, though that is an even less likely strategy than mobile: IoT devices are extremely cheap and an ability to run Windows is pretty much irrelevant. Even ARM might find itself challenged in IoT as there are open-source or extremely cheap alternatives to their architecture. I can buy a full up IoT platform module, complete with Wi-Fi, 4M of Flash and 100K of RAM for under $1 retail.
“Intel could be on the verge of exiting the market for smartphones and standalone tablets, wasting billions of dollars it spent trying to expand in those markets. The company is immediately canceling Atom chips, code-named Sofia and Broxton, for mobile devices, an Intel spokeswoman confirmed. These are the first products on the chopping block as part of Intel’s plan to reshape operations after announcing plans this month to cut 12,000 jobs.”
8) Samsung Smart Home flaws let hackers make keys to front door
Another week, another IoT security problem. This one is from Samsung, a company with the resources and technological expertise to know better. You can imagine what the security is like in the numerous products produced by small IoT start-ups. Thanks to my friend Humphrey Brown for this item.
“Computer scientists have discovered vulnerabilities in Samsung’s Smart Home automation system that allowed them to carry out a host of remote attacks, including digitally picking connected door locks from anywhere in the world. The attack, one of several proof-of-concept exploits devised by researchers from the University of Michigan, worked against Samsung’s SmartThings, one of the leading Internet of Things (IoT) platforms for connecting electronic locks, thermostats, ovens, and security systems in homes. The researchers said the attacks were made possible by two intrinsic design flaws in the SmartThings framework that aren’t easily fixed. They went on to say that consumers should think twice before using the system to connect door locks and other security-critical components.”
9) How filmmakers are inventing the language of VR
Early movies were shot such that the film showed what an audience member at a play would see. Pioneers like Charlie Chaplain developed all kinds of angles, shots, special effects, and so on, so that movies no longer looked like plays. The same thing will be needed if VR becomes a mainstream medium in that the way the story is told will change significantly.
Imagine you’re a filmmaker. Cinema is your craft, an art honed by more than a hundred years of brilliant ideas and happy mistakes. With it, you can do something that probably once felt like magic: capture any moment, idea, or feeling so anyone can relive it. Now picture something new. It’s a lot like film, only it puts the audience inside your story — and it feels like magic, when it works. With it, you can create entire worlds for your audience, but none of the original rules of cinema apply. How do you create your art when all of your tools have changed? This is how some filmmakers see virtual reality. And at least one director, Penrose Studios‘ Eugene Chung, likens virtual reality to the invention of the moving picture — and how it usurped the stage.”
10) Oculus Rift CV1 Teardown
Oculus Rift is a Virtual Reality (VR) headset which has generated a fair bit of excitement over the past few years. The product is finally shipping so we will soon see if sales match predictions. Despite the hype these are not overly complex devices as these teardowns show. There are probably a few proprietary ICs in the unit but otherwise it’s a pretty simple thing.
“We’ve had our eyes on Oculus since the beginning, having dismantled (and successfully re-mantled) both development versions of their VR headset. But today, we’ve got the real deal: the final, consumer-ready, OMG-it’s-finally-here Oculus Rift. After four long years of development, what changed? What stayed the same? And can we put it down long enough to actually take it apart and find out? Grab your tools and join us around the teardown table, because the future is now. We’re tearing down the Oculus Rift.”
11) Tech world eyes digital life beyond the smartphone
This article sums up what I have been saying for quite a while is a major problem for technology: there are very few actual potential growth markets and that means that as a growth market such as IoT arises, it will quickly be commoditized. The smartphone industry is going to be transformed into the same sort of tech business as the PC industry as prices drop to around $100 to $200 and revenues collapse as replacement cycles increase.
“The smartphone revolutionized how people live and work, but the technology world is now struggling to see what comes next. As smartphone sales have peaked in most major markets, Apple, Samsung and others are being forced to rethink their business models to keep growing and connecting with consumers. The trend in smartphones appears to follow similar peaks in tablet sales and personal computers, said Bob O’Donnell, chief analyst at Technalysis Research. “We are clearly entering a new era where growth of traditional devices has ended and you have to think differently,” O’Donnell said. It’s not clear what will be the “next big thing” in technology or even if there is one, and that is troubling for an industry that has been living off growth from smartphones and their ecosystems of Android and Apple iOS applications.”
12) Android does not seem to be closer to solving its biggest problem
The problem they are referring to is the fact that there are many Android devices out there with outdated versions of the OS, meaning all sorts of security issues. However that is a testament to the success of the product: not only are there thousands of different devices but many cost a small fraction of the cost of a typical Apple product. Android leaves it to the manufacturer to prepare an updated OS for their hardware and makers of $50 smartphones don’t have the resources to do so.
“Compared to its counterpart iOS, Android updates tend to roll slowly, if at all, to the devices. The latest statistics from the page of the developers of the platform shows how the latest version of Android, Marshmallow (6.0), is on 7.5% of devices around the world. The previous version Lollipop is 16.2% for version 5.0 and 19.4% for version 5.1. Still, the most popular version is one older than that. KitKat, which was released back in 2013, is currently running 32.5% of all devices.”
13) Hold on a sec. When did HDDs get SSD-style workload rate limits?
This was news to me and it is understandable that HDD manufacturers don’t advertise the fact. It turns out that there appear to be wear issues with HDDs as well as SSDs and the wear limits seem lower than with SSDs. Of course, HDDs are much cheaper per GB and therefore the drives are much larger. Nevertheless, SSD prices are dropping, wear issues are improving, and you have to wonder what all that means for the HDD industry (hint: in 5 years it will be a shadow of what it is today).
“Unless we achieve some magical breakthrough, it looks like increasing HDD capacity is hitting problems. I do wonder, with the release of 16TB flash drives such as the Samsung PM1633a, whether there’s an appetite to invest millions of dollars into trying to extend HDD capacities further – especially considering the time it would take to RAID rebuild an entire 10TB drive from scratch.”
14) New way found to grow rare life-saving blood stem cells
This sounds like a significant breakthrough but I’m not exactly an expert in stem cell research. I think the idea is that they have figured out a way to multiply the production of stem cells which could make up for shortages, especially if the overproduction stops once the cells are implanted.
“Researchers at McMaster University’s Stem Cell and Cancer Research Institute (SCC-RI) have made significant steps forward in understanding the stem cells of the human blood system after discovering how a key protein allows for better control and regeneration of these cells. This discovery, published today in the scientific journal Nature, illustrates how a protein called Musashi-2 regulates the function and development of important blood stem cells. This knowledge provides new strategies that can be used to control the growth of these cells — cells that can be used as therapeutics for a range of life-threatening diseases but are, in general, in very short supply.”
15) Surgical robot stitches tissue by itself, step to more automated OR
Surgery is the sort of high value added application which can justify the creation of robots. About 30 years ago robotic welding was at more or less the same state this stitching robot appears to be now it is commonly used in a wide array of applications. I doubt I’ll see robots doing complex surgeries but this sort of rote precision work is right up their ally.
“Getting stitched up by Dr. Robot may one day be reality: Scientists have created a robotic system that did just that in living animals without a real doctor pulling the strings. Much like engineers are designing self-driving cars, Wednesday’s research is part of a move toward autonomous surgical robots, removing the surgeon’s hands from certain tasks that a machine might perform all by itself. No, doctors wouldn’t leave the bedside — they’re supposed to supervise, plus they’d handle the rest of the surgery. Nor is the device ready for operating rooms. But in small tests using pigs, the robotic arm performed at least as well, and in some cases a bit better, as some competing surgeons in stitching together intestinal tissue, researchers reported in the journal Science Translational Medicine.”
16) Medical Equipment Crashes During Heart Procedure Because of Antivirus Scan
You can’t really fault the medical equipment for this: it is downright crazy that a doctor’s consumer grade PC was used for the procedure. Fortunately nobody died but it should be a sort of warning shot about the sort of equipment allowed to be used in medical situations.
“According to one such report filed by Merge Healthcare in February, Merge Hemo suffered a mysterious crash right in the middle of a heart procedure when the screen went black and doctors had to reboot their computer. Fortunately, the patient was sedated, and the doctors had five minutes at their disposal to wait for the computer to finish rebooting, start the Merge Hemo application again, and complete their procedure without any health risks for the patient. Merge investigated the issue and later reported to the FDA that the problem occurred because of the antivirus software running on the doctors’ computer. The antivirus was configured to scan for viruses every hour, and the scan started right in the middle of the procedure.”
17) Software is dead. Long live software!
I don’t agree with most of the conclusions but the essay itself is interesting. High multiples are only justified if there is a reasonable prospect a company’s earning can grow at a fast enough rate that the real earnings payback is much shorter than it appears. The tenure of tech companies is very short so the odds of pulling that off are pretty slim. Plus, founder control is wonderful and exciting until the company starts heading into the toilet, after which you are stuck with inept management.
“Bill Gates’s argument for not jumping on open-source was that open-source just wasn’t profitable. If you ‘gave away’ your code, you’re giving away your intellectual property. Gates was profiting off of his intellectual property. If he gave it away by open-sourcing his technologies, it would be simply anti-capitalistic! He would be destroying jobs! This is the Winklevi defense : “We came up with this idea! If we give it away to someone else, I wouldn’t profit off of it! Whoever would, would be stealing our profits from our idea!”¹ It’s the same defense Larry Ellison uses when he complains that Google is “stealing Java in Android to profit without permission”. In the post-Internet age, the Winklevi defense is fundamentally flawed.”
18) Elsevier Complaint Shuts Down Sci-Hub Domain Name
Unsurprisingly, Elsevier has struck out at the website which is “pirating” scientific papers (i.e. those scientific papers mostly funded by public money and which Elsevier doesn’t pay for). They seem to be unaware as to how the Internet works or the Streisand Effect. No doubt the repository has been cloned thousands of times and will be around long after Elsevier’s dominance in the scientific paper market is a distant memory.
“Hoping to stop the unauthorized distribution of millions of academic papers, academic publisher Elsevier filed a complaint against Sci-Hub and several related sites last year. While Sci-Hub is nothing like the average pirate site, it is just as illegal according to Elsevier’s legal team, which obtained a preliminary injunction from a New York District Court last fall. The injunction ordered Sci-Hub’s operator to quit offering access to any Elsevier content, but this didn’t happen. Instead of taking Sci-Hub down, the lawsuit and the associated media attention only helped the site grow.”
19) Toronto Gets Its Own Free, Encrypted Mesh Network
Mesh networks have their advantages but we should not get carried away with their potential as substitutes for commercial broadband access. Unlicensed bands tend to be low power so you need a lot of participants in order that the system works properly and governments are keen to make sure their spectrum licenses sell for top dollar so that is not likely to change.
“Lau had spent the previous summer chatting with other meshnet enthusiasts in Europe, trying to figure out the best way to set up routers across the city. He suggested it was time to give it a try in Toronto. What grew out of Lau and Iantorno’s meeting, four months ago now, was a plan to build a meshnet in this city—one where users wouldn’t need to worry about eavesdroppers, because it would be encrypted. When it’s finished, Toronto’s first free-to-use meshnet should provide an accessible and secure internet community, maintained by locals keen on becoming digitally self-sufficient. Those early adopters could reshape our relationship to internet providers, and cut monthly rates out of the picture.”
20) Quantum Computing: Recent Breakthroughs
This is a sort of a summary of the state of the art of quantum computing, which is nowhere near as developed as people seem to think it is. Of course, this is not an academic all-inclusive survey but I do find it interesting D-Wave is not mentioned. My view is that QCs will be astounding good at solving certain classes of problems but otherwise not generally useful.
“What is Quantum Computing, after all? Though it may sound like a term all grand and complex, quoted only by super-smart people and physicists, it is really a very interesting field that will possibly define our future. There are many tutorials and guides on the internet that can give you a pretty solid idea of what Quantum Computing is all about. Some good ones are by Science Alert, Explain That Stuff and The Guardian. The lecture below on Quantum Algorithms is particularly riveting and is a must-watch for all enthusiasts …”