The Geek’s Reading List – Week of June 24th 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) SolarCity stock soars 15% on $2.8 billion Tesla bid; TSLA plunges
This made my week: setting aside the fact it demonstrates a complete lack of anything resembling corporate governance at Tesla (being as Musk is a major shareholder of both companies and relatives also have major holdings of Solar City) not even the most powerful hallucinogen could suggest the two companies – both are prodigious destroyers of capital – have anything in common besides increasingly imaginative “non-GAAP” financial presentation and a firm attachment to the taxpayer’s teat. There is no significant intellectual property or barriers to entry to either business and no reasonable prospects they will survive once investors stop giving them money to burn. Perhaps the view is that somehow investment banks, recognizing that a combined company will require even larger and more frequent injections of capital will offer a volume discount for share issues.
“Tesla Motors said on Tuesday it would bid $2.8 billion to buy SolarCity, sending the solar energy company’s shares soaring. SolarCity shares popped more than 15 percent after-hours on the offer of $26.50 per share to $28.50 per share, while Tesla shares dropped as much as 10 percent, trading below $200 per share for the first time since March. SolarCity’s controlling shareholder, Elon Musk, is also the CEO of electric car company Tesla. The two sets of shareholders will vote on the merger independent of Musk after a due diligence process, the Tesla CEO said.”
2) Microsoft Corporation Offers ‘Refresh Windows 10 Tool’ To Remove Bloatware
If you want to buy a Windows based laptop a direct purchase from Microsoft has been a pretty good choice: the prices are competitive and the systems have much less bloatware, unlike if you buy a Pc near anywhere else. There are third party bloatware removers and you can do a clean reinstall of Windows 10, but this tool would be a welcome solution for everybody but the bloatware vendors and the PC vendors they pay to install their garbage.
“Microsoft Corporation has been developing and testing a new tool to effectively allow users to remove all unnecessary software and bloatware on a system with a touch of a button. It is known as the Refresh Windows 10 Tool, also known as Start Fresh, and is expected to make its way to the next build of Windows 10. It is currently already available to users using preview builds as part of Microsoft’s Windows 10 Insider Program. The tool, however, is essentially a one-stop shop that offers the option to users to keep key files and personal data on the computer when it is being scrubbed clean, much like an actual installation of Windows would in prior versions. The tool is not only expected to help in the case of malware infecting a system, but is also going to be a key aspect of users getting the “Vanilla” Windows 10 experience.”
3) FCC lays out its big 5G push
Note that this story is not so much about 5G wireless as it is about opening up new spectrum in the near millimeter to millimeter bands (18GHz and up). That is useful for 5G but 5G can work in lower bands as well. The thing with new spectrum is that there is a lot of it and new techniques such as MIMO and beamforming help get around a lot of the challenges of going to higher carrier frequencies. Regardless, there is no scarcity of spectrum, except as manufactured by governments and the companies they license to.
“The FCC plans to use 200 MHz-wide chunks of high-band spectrum because, unlike lower frequencies, it can offer the gigabit per second throughput and sub-millisecond latency that 5G applications demand. 5G will usher in an Internet of Everything, Wheeler told the Press Club. “If something can be connected, it will be connected in a 5G world.” Wheeler cited various remote operation scenarios, such as surgeons using VR to operate on patients hundreds of miles away, to illustrate the need for ultrafast wireless connectivity. He expects the commission’s research to be completed and the proposal ready for a vote by July 14th. Should it be adopted, America would become the first nation on Earth to actively reserve frequency for 5G development.”
4) Google Fiber is buying high-speed internet provider Webpass to expand its reach in cities
This seems significant but it is hard to say. Webpass seems to be a tiny play and it isn’t exactly clear they have any proprietary expertise (pretty much anybody can buy the same equipment from the same suppliers). So it could just being a cash rich company helping out a friend (it happens) or a sign that Google is stepping up its game as an ISP. One thing of note is that the North American wired Internet business is largely absent meaningful competition so there is lots of potential money to be made if you offer an alternative. Unfortunately, corrupt regulators have erected legal barriers to protect incumbents so success is not assured.
“To take on the big internet service providers, Google Fiber is scooping up a small one. On Wednesday, Google Fiber announced plans to acquire Webpass, a high-speed, fiber internet provider serving five cities. The deal, should regulators approve it, would be the first acquisition for the broadband unit under Alphabet and another signal of its ambition to become a competitive national player in the industry. Google Fiber also made the deal to boost its efforts to deliver broadband internet wirelessly, an experimental tech it hopes will expand coverage at cheaper costs. Financial terms were not disclosed. Webpass, a San Francisco-based company founded in 2003, is privately held. It only shares that it has customers in the “tens of thousands.””
5) Self-driving cars to disrupt auto insurance industry
Yes, there will be some level of disruption but the transition to self-driving cars will only start in 15 to 20 years so there is no need to panic. Meanwhile advanced safety systems such as auto-brake should lead to a significant reduction in the frequency and severity of accidents. Even so, the reduction will be relative to the proportion of the fleet thus equipped and it will take about a decade before the effects become that material.
“”It’s sort of an incremental development on the road to where cars can actually drive themselves,” said Robert Passmore, assistant vice-president of the Property Casualty Insurers Association of America. That means insurance issues may initially grow more complex — but possibly much simpler later on, when human-caused accidents mostly disappear. “This changes the basic assumptions under which insurance is written,” said Edward Cohen, vice-president of government and industry relations at Honda, which tests driverless cars at the Concord Naval Weapons Station site. “If you’re in a crashless world, or if the number of crashes is severely reduced through the use of technology … that model would need to be re-evaluated.””
6) Toyota to build artificial intelligence-based driving systems in five years
AI sounds sort of scary but pretty much AI is how any advanced safety system is likely to work. What is interesting is that Toyota seems to have joined the pack of companies working toward autonomous vehicle development even though they recognize that much of the payoff will come as safety systems continue to improve, with full autonomy about 20 years off.
“Toyota Motor Corp is targeting developing in the next five years driver assistance systems that integrate artificial intelligence (AI) to improve vehicle safety, the head of its advanced research division said. Gill Pratt, CEO of recently set up Toyota Research Institute (TRI), the Japanese automaker’s research and development company that focuses on AI, said it aims to improve car safety by enabling vehicles to anticipate and avoid potential accident situations. Toyota has said the institute will spend $1 billion over the next five years, as competition to develop self-driving cars intensifies.”
7) Self-driving tractors and data science: we visit a modern farm
Off-road autonomous vehicles in applications such as mining and farming are likely to become mainstream long before highway use as the payback is immediate. This article is more about GPS guidance and data accumulation than about “self-driving” tractors. It can be hard to exactly line up implements because they are so big so there is, by necessity, a lot of overlap when plowing, seeding, etc.. Simple GPS solutions can have a big impact on productivity and save fuel.
“”The combine has load sensors in it that sense the volume of crop coming in, recording that as you go across the field,” Rose said. That tells him how many bushels per acre each field is producing, data that gets fed into multi-year maps of each field that are color-coded to indicate different yields. “We take several years of data and make composite maps of a given field, then divide it into zones. You can manage those zones individually—taking soil samples to measure nutrient levels, and from there you know how much nutrients you need to apply in different areas,” he told Ars. The next big thing after yield monitors was AutoTrac, which companies like John Deere have had in the market for quite a bit longer than the semi-autonomous cars starting to drive our roads. “We were solving a different problem than the autonomous car problem,” explained Lane Arthur, Director of Information Solutions at John Deere. “Cars have to do with staying on the road and the right distance from other cars. In the John Deere world we focused on autonomous machines that are driving in a field. So the field has a boundary around it, and what path will it take in that field. We use GPS signals to drive the vehicle; the customer sets an A-B line which determines the path the vehicle takes.””
8) Why Uber Keeps Raising Billions
This article reads like it was written by their investment bankers but I think we can cut to the chase: Uber raises money because it is in an inherently unprofitable business with zero likelihood of providing a return on investment, let alone a return of investment. At the same time, the investors hope enough lipstick can be slathered over the pig to make it to an IPO where they can unload their shares to unsuspecting rubes. But the bankers wouldn’t put that in an article.
“If you add up all the money Uber has raised since it started in 2009 — the idea was born when its founders became annoyed that they could not get a cab in Paris — the ride-hailing app company is on its way to amassing a colossal $15 billion. That’s real cash, not some funny-money, paper-based valuation. (That figure is $68 billion.) It has done all this while still managing to remain a private company, and its chief executive, Travis Kalanick, has insisted that a public offering is not coming soon. “I’m going to make sure it happens as late as possible,” he has repeatedly said.”
9) World’s Fastest Supercomputer Now Has Chinese Chip Technology
It seems quite clear that the Chinese government is keen on going upmarket in technology, much as the Japanese did in the 1970s and the Koreans in the 1980s. Their efforts to buy semiconductor companies has mostly been frustrated by US national security concerns but that should not be a major problem for them as they can build the industry up over a decade regardless. Since their near term objective is probably not profitability this could put pressure on pricing across the industry.
“In a threat to U.S. technology dominance, the world’s fastest supercomputer is powered by Chinese-designed semiconductors for the first time. It’s a breakthrough for China’s attempts to reduce dependence on imported technology. The Sunway TaihuLight supercomputer, located at the state-funded Chinese Supercomputing Center in Wuxi, Jiangsu province, is more than twice as powerful as the previous winner, according to TOP500, a research organization that compiles the rankings twice a year. The machine is powered by a SW26010 processor designed by Shanghai High Performance IC Design Center, TOP500 said Monday.”
10) Siemens says it can power unlimited-range electric trucks using a 150-year-old technology
Diesel engines are pretty efficient but they don’t do well in stop/start type traffic. That’s why it would make much better environmental sense to reserve HEV lanes for diesel trucks rather than cars with 2 or more people in them, but that would also be political suicide. In any event, unlike battery powered EVs this would probably make a lot of environmental sense and have a decent payback on the investment. Streetcars stop when they lose contact with the grid but these trucks would have relatively small batteries and could keep going until another connection could be established.
“The world’s cargo fleet is moving from fossil fuels to electrons. But powering them won’t be simple. With today’s technology, driving a semi-truck 500 miles (804 kilometers) would require a 23-ton lithium-ion battery, half the weight of the truck itself. Fuel cells would need a massive, $2 million hydrogen fuel tank to go the distance. Embedding wireless charging coils in roadbed would be expensive and inefficient. But an invention first deployed in 1870 to power trains and streetcars might be the perfect fit: catenary, overhead electrical wires commonly found around the world. The German engineering company Siemens, presenting at an electric vehicle conference in Montreal this month, argues it can power unlimited-distance electric trucks with intermittent overhead wires that provide enough energy for fast-moving, long-haul highway journeys.”
11) Creepy? Facebook now tracking you in stores
It’s only a matter of time before Facebook users are required to submit DNA samples and have a tracker implanted in their heads. I’ve never been a member and was only on LinkedIn long enough to figure out how to close my account, but I don’t see the attraction of the service, so that must make me biased. As for anonymity, well, good luck with that: assuming Facebook follows its usual pattern that will be removed and disabling it will be of such complexity nobody will be able to do it without a precise step by step guide.
“”Hello, welcome back to The Gap! How did those assorted tank tops work out for you?,” an animated hologram shouts to Cruise’s character as he enters. It sounded far-fetched … until now. Ad exec Lauren Doyle, of Cincinnati’s Wordsworth Communications, says Facebook’s new tracking feature called “Local Awareness” is not sitting well with some people, especially older people. “For some generations, that’s really uncomfortable,” she said. Using your phone’s location services, it targets users near a store, then tracks to see if you visit that business.”
12) Ad Blocking to Grow 34% This Year to Nearly 70 Million U.S. Web Users
You can’t do much to protect yourself from Facebook if you are a member but you can do something about the distraction, fraud, and malware associated with most online advertising as more and more people are figuring out. The root of this problem is not ad blocking but the fact the online advertising industry is the “Wild West”. Eventually they’ll figure out that they have to have some standards or people will simply block ads. Some web sites have responded by blocking access to ad block users but that is not much of a burden since even most media is derivative and somebody out there has the exact same content without an ad blocker.
“Publishers would love internet users to decide that, actually, they don’t need to install an ad-blocker on their browser of choice. But a new report from research firm eMarketer suggested on Tuesday that there’s no such hope on the horizon. U.S. internet users running ad blockers will grow this year to 69.8 million, or 26.3% of web users in the U.S., from 51.9 million, or 20%, last year, eMarketer said. In 2017, ad-blocking web surfers in the U.S. will total 86.6 million, or 32%.”
13) Computer science grads are playing it safe instead of trying to help build the next big thing
There is absolutely no reason why computer science graduates should be concerned about anything else but their own income. Building “the next big thing” is mostly an illusion entrepreneurs dangle in front of young developers to get them to work harder for less money. Less than 10% of startups survive for more than a few years and a tiny fraction of employees of those which do survive end up rich. The little money that ends up in the pockets of hardworking employees at successful startups is there only because the investors couldn’t contrive a scheme to keep that money for themselves.
“Harj Taggar, CEO of tech recruiting startup Triplebyte, says that taking risks is the only way for aspiring programmers to make it big. He asks all graduates one question: Do you want a 90% chance of earning $1.1 million at big tech firms or a 10% chance of earning $10 million at a smaller startup? “As a software engineer, you’ll always have the opportunity to make $1.1 million because there’ll always be a big company willing to hire you and pay a big salary,” Taggar told Quartz. “What you might not always have is the 10% opportunity, because it becomes harder to join an early stage startup—now we’re talking more like 1999 Google—as you become older.” Some to-be mammoths on Taggar’s list are Airbnb, Dropbox, Uber, and Stripe.”
14) Cryptocurrency raider takes $60 million in digital cash
What a shock! A new cryptocurrency, a new “theft”, except it isn’t really theft because there is no legal basis to prove ownership of cryptocurrency, let alone a legal basis to charge anybody. The idea that the currency will be modified so the “thief” won’t be able to use his ill-gotten gains is a sign of how arbitrary the whole this is to begin with.
“The kicker? People were convinced that the bug posed no risk to DAO funds just a few days prior. Clearly, that wasn’t true. While the invader didn’t get away scot-free, the breach has caused a lot of chaos. And while one person’s claims that they legitimately took the funds is sketchy, Bloomberg notes that the code defining the smart contracts may have explicitly allowed this attack even if that’s not what the DAO wanted. This may not be so much a hack as exploitation of poorly-defined terms, and there may not be a legal recourse. In short: basing an investment framework around code instead of human-made contracts may have been too optimistic.”
15) Taking the headphone jack off phones is user-hostile and stupid
Hey, if you want to pay 2 to 3x the going rate for a smart phone you aren’t going to get my sympathy when Apple decides you need an expensive adapter or expensive headphones to use it. Apple is in the business of fleecing its customers for whatever it can and a proprietary headphone is pretty much what you would expect. Whether or not it is good for the customers is the least of Apple’s concerns.
“Look, I know you’re going to tell me that the traditional TRS headphone jack is a billion years old and prone to failure and that life is about progress and whatever else you need to repeat deliriously into your bed of old HTC extUSB dongles and insane magnetic Palm adapters to sleep at night. But just face facts: ditching the headphone jack on phones makes them worse, in extremely obvious ways. Let’s count them!”
16) WSJ: iPhone 7 w/ similar design and removed headphone jack this fall, major changes next year
The first story I saw about this claimed Apple is going to a 3 year major product release cycle and I though “wow – so their phones will now be 2 – 3 years out of date rather than 1-2 years out of date”. This move is a good money saver for Apple as it means a lower R&D budget and it can continue selling out of date hardware for longer so its margins will stay high. The wild card will be customer loyalty: while there are true believers who won’t buy anything else, a lot of consumers are going to find it hard to justify paying a premium for an obsolete product. Time will tell whether loyalty wins out over rational economic behavior.
“iPhone 7 rumors have been notably tame this year, and that’s because the next-generation iPhone is widely expected to be a further revision to the iPhone 6 series and not a radically different design. The Wall Street Journal is the latest to report on Apple’s expected plans for the iPhone 7, describing a situation where the iPhone 7 closely resembles the iPhone 6s minus the headphone jack. WSJ reports that this will result in a thinner design that’s more water-resistant than current models.”
17) Supreme Court sends off patent troll that challenged review rules with an 8-0 slapdown
The case is pretty esoteric but the observation that patent trolls set bad precedent for patent licensing companies when they get to the Supreme Court is an important one. First, it shows that the pendulum has been swinging away from patent licensing companies and towards their targets (not all patent licensing companies are bad, and many targets are IP thieves). Second it is a signal to lower courts what will likely happen if a case gets to the Supreme Court. Most likely you’ll see fewer lower courts cases in favor of IP licensors and fewer appeals by licensors.
“Patent trolls don’t fare well at the Supreme Court. When they show up, their cases tend to result in decisions that are ruinous for the profit margins of their industry. Two prominent examples: the 2006 eBay v. MercExchange case effectively ended trolls’ abilities to get injunctions, and the 2014 Alice Corp. case made it far easier for patent defendants to invalidate abstract software patents. And yet, the cases keep coming. The most recent example is Cuozzo Speed Technologies LLC v. Lee, a case that was resolved earlier this week with an 8-0 opinion dismantling arguments presented by Cuozzo, a patent-holding entity controlled by two New York patent lawyers, Daniel Mitry and Timothy Salmon. The two attorneys own dozens of other patent shell companies through their consultancy, Empire IP.”
18) FAA Announces Commercial Drone Rules
These seem like pretty reasonable rules especially since a 55 pound drone falling from any height will kill or seriously injure somebody. Unless the FAA comes out with a special rule which allows delivery drones to kill people it should be clear that these rules make drone delivery service almost impossible since each drone would have to remain in sight of an operator.
“This week, the U.S. Federal Aviation Administration announced new safety regulations for unmanned aircraft weighing less than 55 pounds (25 kilograms) that are conducting non-hobbyist operations. In other words, the pilots and drones shooting your wedding video, trailing a snowboarder to catch the best trick as seen from above, or taking aerial footage of the horse ranch for sale in the next county now have dictates to follow. … The FAA promised that sometime in the spring of this year, they’d announce a streamlined registration process for commercial sUAS. Technically, they missed spring by a couple days, but the new commercial drone rules are finally here. In short, if you’re making money with your drone—by taking pictures or videos with it or whatever—and it weighs less than 25 kg but more than 0.25 kg, these are the rules that with apply to you. They’re slightly different from the rules for recreational hobby drones, so it’s worth browsing what’s new …”
19) Gartner: Cloud will be the “default option” for software deployment by 2020
I find Gartner’s forecasts to be pretty useless but they are probably directionally correct on this one even if the time horizon is a bit optimistic. Many software vendors are going to “Software as a Service” which pretty much locks customers in to a perpetual license and that generally works off cloud based hardware. It also means things stop working once you lose Internet access. Similarly a lot of IT departments are going to be downsized as all their servers, etc., are pushed into the cloud. I don’t think it’s a good thing but it is the way things are headed.
“Researchers at Gartner are out this week with new predictions on what the infrastructure computing market will look like in the coming years. And they’re very bullish on the cloud. The combination of end users gaining comfort with using cloud services combined with vendors shifting to primarily offering software from the cloud means that cloud will be the dominate software deployment model within three and a half years. “Cloud will increasingly be the default option for software deployment,” says Jeffrey Mann, research vice president at Gartner, who adds that even custom-designed software that once used to be housed primarily on customers’ premises is moving to the cloud.”
20) Jake Dyson invents light bulb that lasts 37 years
I associate the brand name Dyson with expensive, unreliable, and overhyped garbage. That is not being fair to the son, I admit, however what we have here is a slightly improved heatsink where a cheaper solution would simply be to replace the LED every 10 to 20 years. After all an LED lamp is likely to go out of style long before the LED stops working.
“Well, it takes just one engineer to change a light bulb. Jake Dyson is on a mission to revolutionise the lighting industry in the way his father, James Dyson, turned the vacuum cleaner sector on his head. The apple did not fall far from the tree, and Jake Dyson too is putting innovation and superior engineering at the heart of his new lighting product line. LEDs are theoretically built to deliver impressive life spans but in typical lighting fixtures, inadequate cooling takes the junction temperature to 130 degC. This damages the phosphorous coating thus delivering progressively poorer light over time – and the hotter they run, the faster they die. To solve this problem, Dyson looked beyond heatsinks and traditional cooling systems and at the way heatpipes are used to cool microprocessors and components in satellites.”