#1 The Number of New Businesses in America is Booming
The government regularly releases figures on new-business formation, derived from applications for tax registrations. And “high-propensity” business applications—those displaying characteristics typically associated with firm-creation and the employment of staff—recently reached their highest quarterly level on record (see chart).
All this has surprised economists. In the last recession the number of “high-propensity” business applications sharply declined. And over the past four decades the rate of new-business creation had been drifting downwards (researchers pointed to declining population growth as one cause, as well as the growing power of large firms, which may have dissuaded new ones from entering the market). The fact that America has suddenly recovered its entrepreneurial mojo is particularly intriguing, since nothing comparable seems to be happening elsewhere in the rich world.Source: Economist
The economy is starting to heal. And this cycle should prove to be healthier than the last cycle because this cycle is leading to creative destruction. Bad businesses are leaving the market and being replaced by something new. Not all of these new businesses will survive, but the world needs continuous experimentation and continuous evolution in order to get better.
Unemployment remains high, but Capital Flywheels continues to believe that pessimists will be proven wrong.
(We could be doing better…if we acted sooner we could be back to positive GDP growth like China…but sadly no.)
This is a challenging cycle, but this is definitely a cycle for the optimists. The severity of this cycle has forced everyone to rethink their world and throw away all their prior assumptions and start from scratch. The result will be a world that makes much more sense relative to the actual reality of culture and technology today.
#2 Not Only Are We Finally Trying New Things, Americans Are Finally Saving Again
“Covid and the fear of the future has created probably a higher savings rate — we have people focusing on the long term a little more,” Fink said in an interview Tuesday after BlackRock reported third-quarter results. “It’s leading to more savings and more investing for the long term.”Source: Bloomberg
Savings drive investments. And investments (into the right things and assets) drive long-term economic growth. Americans stopped saving sometime in the 80s and hence became dependent on foreign capital. First the Japanese, and then the Chinese. And rather than invest, Americans largely consumed the borrowings. Maybe now we are seeing structural change?
Too bad there are no low risk instruments with decent returns, though…bond coupons are now effectively zero and housing is increasingly out of reach of the ordinary American. It might just be stocks all the way for a very long time.
🌎 Global Affairs
#3 Why China Prioritizes Applied Science vs Basic Science
There are two key parts: The first is that we’re in this globalized environment where information is largely open and flows across borders, and because of that the advances in science and technology are easier than they have ever been for a country to claim or access internationally. That lowers both the cost and the time necessary to get what’s at the cutting edge. And the corollary here is that it is very expensive to invest in basic R&D, and is very risky because you don’t know what’s going to work. Whereas if you obtain something that’s already developed or really close to reaching maturity, it’s cheaper and low risk, but that there’s a lag. In a typical science and technology contest, that doesn’t let you win the race. It lets you get to the end more cheaply, but someone else is going to beat you.
Which is what distinguishes today’s context, is what matters in terms of the end goal. The argument is that what matters today is the applications of science and technology––the sort of networks you build with it.
For example, your ability to deploy telecommunications … it’s not that you got the patent; it’s that you’ve got its application internationally. To do that, what matters is capturing scale and being able to build and deploy. If that’s what you’re going for, it’s okay to have a slight lag in when you get the patent and when you get the really cutting edge, as long as you can apply it to scale to the most people efficiently. The Chinese orientation appears to be focusing on that rather than on basic R&D, which creates this tremendous asymmetry vis-à-vis the U.S. and really vis-à-vis the entire global system because there’s just a different competition underway. And that absolutely changes how the U.S. can or should respond to the extent that this is a scientific and technological contest because it’s not a matter of just pouring resources into basic research: it’s about competing for applications.Source: ChinaTalk
Thought-provoking discussion around how the current “tech war” between US and China might be missing the forest for the trees. The US assumes that it is losing the tech war because it is falling behind on basic science. The interviewee, Emily De La Bruyere, argues the context has changed. What matters today is innovating on applications because scale and network effects accrue to the application layer.
It’s an interesting argument, but I’m sure China feels at least a little vulnerable at the moment for not having any control over the underlying technologies on which their applications are built.
#4 Pew Survey: Unfavorable Views of China Reach Historic Highs in Many Countries
Source: Pew Research
Other than Japan, the rise in negative sentiment across most of the western world is a direct result of COVID-19. Perhaps unfair to China because disease is not predictable and the global spread has been exacerbated by poor government response pretty much everywhere, but the uncomfortable reality is that it takes years to build up a good reputation and only a minute to incinerate it. It will take a very long time for China to repair this.
Even more ironic is this:
Most countries think China is doing a bad job on COVID-19. Maybe this is referring more to the early handling of the disease…but, objectively, China has done probably the best job out of the major economies. There are smaller nations that have done very good jobs as well, but China has done an incredibly good job for a place with 1.3 billion people.
🥠 Chips / Semiconductors
#5 AMD to Acquire Xilinx for $30 Billion?
Advanced Micro Devices Inc. is in advanced talks to buy rival chip maker Xilinx Inc., XLNX -0.18% according to people familiar with the matter, in a deal that could be valued at more than $30 billion and mark the latest big tie-up in the rapidly consolidating semiconductor industry.
Xilinx makes microchips called field-programmable gate arrays, or FPGAs. Unlike standard chips, they can be reprogrammed after they are produced. That makes them valuable in rapid prototyping and in fast-emerging technologies where there isn’t enough time to go through a yearslong development process necessary for other chips.Source: WSJ
Nvidia’s acquisition of ARM (if it goes through) has the potential to dramatically transform the semiconductor landscape, especially in the datacenter. Seems a bit defensive on AMD’s part to acquire Xilinx. FPGAs are interesting because it allows the chip user to reprogram them in a way that is more flexible than other types of chips. This comes in handy in rapidly evolving areas like AI, but the list of areas where this type of flexibility is useful is not particularly long.
#6 Apple A14
Another year, another chip. Even while Apple’s A13 from last year remains the fastest chip in any commercially available smartphone (and faster that even most PCs), the A14 continues to push the envelope.
In any case, the shift to 5nm meant Apple had far more transistors to devote to all the systems on the chip. Think: 11.8 billion, up from the 8.5 billion the company had to work with in last year’s A13 Bionic. As you’d expect, that huge uptick in transistor count gave Apple the extra processing bits needed to build significantly faster, more efficient CPU and GPU cores. But it also gave Apple the latitude to make more subtle improvements to a device’s overall experience.
The best example is the company’s Neural Engine, a component that debuted in the iPhone X’s A11 chipset to accelerate the sorts of neural networks needed for features like secure face unlocking, voice recognition for Siri and augmented reality, among other things. Apple was among the first to integrate a dedicated neural accelerator into its chips — Huawei announced the Kirin 970 and its neural processing unit a week before Apple revealed its own Neural Engine, and Samsung and Qualcomm only caught up later.
Unsurprisingly, this year’s Neural Engine is a far cry from the first one we saw in 2017. While that original co-processor could perform 600 billion operations per second, last year’s A13 raised the bar to 6 trillion operations in the same amount of time. Meanwhile, the A14 generally obliterates the bar by performing a claimed 11 trillion operations per second.Source: Engadget
Friendly reminder that Apple lost the PC wars because they lost the performance game to Intel. And the tightly coupled development of Intel and Windows continues to impact the scale and desirability of the Mac platform today. Apple clearly not letting that happen, again. And it’s not just smartphones. Apple’s silicon edge likely enables them to be first in everything next, whether it is wearables (watches and headphones now and glasses later) or cars. Everyone else needs to hope that whatever is next has a good 5G connection so that the computation can be crunched in supercomputers in the datacenter (powered by Nvidia).
📱 Consumer Tech
#7 All Major US Carriers Giving Away New iPhones
Despite the iPhone now having >50% share in the US (something that seemed impossible a decade ago when Android rapidly overtook the iPhone) and practically sells itself, the US carriers are gearing up for a major subsidy fight not seen in many years.
Apple Inc.’s iPhone 12 5G, the most anticipated phone in years, will be given away for free by AT&T Inc. and Verizon Communications Inc., showing the carriers are gearing up to fight hard for new subscribers during a potentially huge upgrade cycle.Source: Bloomberg
Nice to be an Apple shareholder this holiday season. Santa will be delivering many iPhones.
#8 Tinder Moving Beyond Dating? Dating as the Gateway to More of Your Social Life?
“Gen Z has lived their social lives in a digital sense for their whole lives,” says Jenny McCabe, chief communications officer at Tinder. “This idea of the physical world and digital world being two different lives for Gen Z has not been the case. We’re all starting to understand that.”
“We’ve been evolving to make Tinder a place where you can come and hang out and meet people, not just the place you come meet somebody and leave,” McCabe says.
To help facilitate that mission, Tinder has rolled out several new features in the last few months, including its video chat feature Face to Face, and it removed the paywall for Tinder Passport, allowing users to connect with people around the world.
But perhaps one of Tinder’s most ambitious endeavors to create more engagement in the app has been Swipe Night. The choose-your-own adventure dating series originally premiered last October in the United States and, after COVID-19 forced its postponement, relaunched this month, with an international rollout as well.Source: Fast Company
I’m not in the dating market at the moment, but I’ve always been intrigued by what Tinder and Match are building. Match, along with Snapchat, seem to be doing really interesting Gen-Z-ish things. And the best part is that it looks fun. Maybe eventually I can partake as they move beyond dating.
And Tinder isn’t the only exciting thing about Match…
#9 Hinge is on Track to Triple its Revenue this Year
After turning Tinder into its main financial engine, Match Group Inc. is looking to repeat that success with Hinge.
Since Match MTCH, +0.93% made its first investment in Hinge back in 2017, the dating app has seen its user base grow 20 times, the company shared exclusively with MarketWatch. Now Match fully owns Hinge, and its goal is a more serious revenue push that draws from some of Tinder’s lessons without losing sight of what gives Hinge its core appeal with an audience of mostly urban millennials.Source: Market Watch
Speaking of Snapchat…
#10 Snapchat has Turned London into an Augmented Reality Experiment
The dream of graffiti artists everywhere is now a reality – vandals have daubed the whole of Carnaby Street in red and blue paint.
Luckily, this vandalism is easy to clean and totally invisible. Today, Snapchat has launched Local Lenses – a new feature that is one of the first persistent, large scale, collaborative uses of augmented reality.
Local Lenses are the latest app from Snap’s camera engineering team based in London, who also created Landmarkers. Landmarkers was the company’s first foray into AR at scale, allowing people to place user-created lenes onto famous landmarks – the Eiffel Tower shot rainbows, for instance, and cute characters appeared above Buckingham Palace.Source: Wired
A few months ago, Capital Flywheels seriously considered Snap. They get Gen Z. They get AR. And they get fun. Also helps that Evan Spiegel (Snap co-founder) is married to Miranda Kerr. Snap understands culture in a way that few tech companies do. For example Google and Facebook don’t really understand culture. Understanding culture is a huge advantage, especially as newer vintages of technology are increasingly less obviously useful to consumers. But alas, not really clear to me whether Snap has long-term defensive advantages. I think they do well when AR comes about (probably with Apple as the underlying hardware and OS platform), though.
#11 Google Waymo Launches Ridehailing Service
Waymo said Thursday that it is opening its fully driverless ride-hailing service in suburban Phoenix to the public. Alphabet Inc.’s self-driving car unit began ferrying a select group of a few hundred customers, known as “early riders,” in vehicles without safety drivers in the summer of 2019. After receiving feedback from those riders, who were bound by non-disclosure agreements not to discuss their experiences publicly, the company is making driverless rides in its Chrysler Pacifica minivans available to all users in the Phoenix area. “It’s a really, really big deal, we think, for us, and for the world,” said Waymo Chief Executive Officer John Krafcik in a conference call with reporters on Wednesday.Source: Bloomberg
One of the long-term uncertainties for Uber is what happens when cars become driverless. Uber currently has a two-sided network that brings together riders and drivers. Without a need for drivers, Uber’s network might become more vulnerable to attacks. An aggressive competitor (that has a fleet of driverless cars, for example) could aggressively offer promotions to lure away riders. Waymo is clearly ahead of the pack in terms of driverless cars. Not yet clear how soon it is ready for commercialization and when this moves out of R&D into widespread real world usage.
🛍 Commerce + Media
#12 Youtube Shopping
Every toy, gadget and good you see on YouTube could soon be for sale online — not on Amazon, but right on YouTube itself.
The world’s largest video site recently started asking creators to use YouTube software to tag and track products featured in their clips. The data will then be linked to analytics and shopping tools from parent Google.Source: Bloomberg
#13 Instagram Reels Already Integrating Shopping Features
Instagram will also add shopping to its IGTV, where users can watch longer videos, starting Monday.
Monday’s move will appeal to creators and brands who routinely look to monetize their efforts on the app. They will be able to add shopping tags to their posts, so users can tap on the item and shop either through the Instagram app or a retailer’s site.Source: CNBC
Facebook is moving fast. I like that. The faster they pivot away from news and politics, the better. Facebook seems to be moving fast on both shopping and payments. Although Reels is a very poor imitation of TikTok, if Facebook can move fast to build up the ecosystem of value around Reels, it may change the dynamics. Ultimately, creators go where the money is.
And Facebook needs to move fast because TikTok is a real threat…
#14 TikTok Overtakes Instagram as #2 Social App for US Teens
TikTok has surpassed Instagram as U.S. teenagers’ second-favorite social media app, according to a report published Tuesday.
The short-video app is now favored among teens second only to Snap’s Snapchat, according to Piper Sandler. The report found that 34% of teens list Snapchat as their favorite social app followed with 29% picking TikTok. Trailing Snapchat and TikTok was Facebook’s Instagram, with only 25% of teens picking it as their favorite social app. TikTok placed No. 3 in the spring 2020 version of the Piper Sandler report.Source: CNBC
While I make fun of Facebook being less culturally aware than newer vintages of companies like Snapchat and TikTok, Google is even worse…
#15 Google Adding Stories to Search App
Google announced today it’s introducing a Stories feature to its Google app for iOS and Android, which now reaches more than 800 million people per month. In a new carousel within the app, users in supported markets will be presented with a row of tappable visual Stories from participating publishers. These Stories can include full-screen video, photos and audio, and can link out to the publisher’s other content, if desired.
This has to be a spaghetti-on-the-wall approach right? Baidu in China tried this already from multiple different angles. It never worked. No matter how hard they tried to increase user time spend within their search app, search just ended up not being the right entry point. I will be very surprised if this goes anywhere.
What Gen Z is increasingly interested in is digital worlds:
#16 Roblox Has Big Plans for Virtual Music Events
On a Friday night in September, more than a million people showed up to an album launch party inside the virtual world of Roblox. American pop star Ava Max held a “virtual fan meetup” in the game to celebrate the launch of her new album Heaven & Hell. It was a relatively simple affair. Max first appeared on a huge screen in front of a colorful dance floor floating in the sky, talking about her inspirations behind the album. Later, she performed a few songs while players ran around amid flashing lights, fireworks, and, eventually, a backdrop that transformed into a cartoonish vision of hell.
Despite its straightforward nature, 1.156 million unique players showed up for the event, with a peak concurrent total of 166,620 people — and it’s just the start of a plan to make music an integral part of Roblox. “The stretch goal is to go to the non-obvious places, where we can make the virtual experience even better than the real-world experience,” says Jon Vlassopulos, Roblox’s head of music.
Source: The Verge
Speaking of games…
#17 Former Blizzard Boss Mike Morhaime Launches Dreamhaven, Which Sounds Like Blizzard 2.0
Blizzard co-founder and bass guitarist Mike Morhaime stepped down from his position as company president in 2018. Now’s he’s back with a whole new game company, Dreamhaven, overseeing two new game development studios packed with former Blizzard talent.
We’ve seen a lot of new studios popping up over the years boasting former Blizzard devs, but with Mike Morhaime at the helm and names like Starcraft IIlead designer Dustin Browder, Warcraft III producer Chris Sigaty, Hearthstoneproduction director Jason Chayes, and original Hearthstone game director Eric Dodds on the team, Dreamhaven is a straight-up Blizzard reunion.Source: Kotaku
Having been ousted from Blizzard a few years ago, good to see what he’s up to next. I continue to think Blizzard has some of the most interesting IP for an AR / VR world. Dreamhaven could have some interesting IP, too.
Although I’ve historically only written about US and Chinese tech, I’ve also found the Indian tech space to be incredibly interesting. For a while, it looked like Indian tech was going to be a sphere of influence of either US or China tech, but increasingly it looks like Indian tech may come into its own.
I hope to write more about Indian tech in the future.
For now, I found this piece to be quite interesting as PayTM (and a host of other domestic Indian companies) aim to wrest power back from US and Chinese tech companies even while being funded by them.
#18 Paytm Mini App Store Targets a Million Apps by Q1 2021 to Take on Google
Alibaba-backed Indian fintech firm Paytm is aiming for a million apps on its “mini app store” by the first quarter of 2021, it said on Thursday, seeking to challenge the dominance of Alphabet’s Google in India’s mobile web economy.
Paytm founder Vijay Shekhar Sharma called Google “judge, jury and executioner” after his app was temporarily removed from the Android app store last month for a policy violation. On Thursday, he kicked off his company’s “Mini App Developer Conference” by calling Google a “toll collector”.
Google, whose Android operating system powers nearly 99 percent of India’s roughly 500 million smartphones, has faced criticism from several startups in the country over a move to enforce its global policy more strictly and charge a 30 percent commission for in-app purchases.
Paytm’s Sharma is trying to use the discontent to attract business to his newly launched mini app store, which is hosted within the Paytm app. He has vowed not charge domestic app developers any fees.
“Neither a company from the East, nor a company from the West, if someone will rule India it will be an Indian company,” Sharma said in the virtual conference.Source: Gadgets 360