Hello, hello. 👋🏻👋🏻
I usually start off each Tidbits with some overarching theme relative to what’s going on in the world in order to make sense of it all or themes that I believe people should spend more time thinking about…
But nothing I say can better encapsulate the disruptive (but rejuvenating?) chaos that is bubbling underneath all of society at the moment than Keith Gill’s (a.k.a. Roaring Kitty / DeepF**kingValue) Congressional testimony this past week:
A few things I am not. I am not a cat. I am not an institutional investor. Nor am I a hedge fund. I do not have clients, and I do not provide personalized investment advice for fees or commissions. I am an individual investor. My investment in GameStop and my posts on social media were entirely my own.
Source: Official Congressional testimony video via Youtube
Interestingly, “I am not a cat” was entirely expunged from the official transcript. “I am not a cat” has become a meme, but it’s more than a meme. Memes are now culture. It’s the culture of the modern digital world the same way that food or traditions or religion formed the culture of the old world. It means something to the people that are a part of it that is beyond the literal, physical sense, and it means nothing to the people on the outside. Because of that, I find it fascinating that perhaps the most culturally important statement of the whole Gill testimony was entirely removed from the official transcript.
But such is the divide in the world right now. There is and has been new culture forming. But the governments and institutions of the old world do not recognize it (and refuse to recognize it). It is viewed as frivolous. A lot of the tensions that happen between the people and institutions is simply because the existing institutions no longer understand the people they represent. And sometimes, they, like now, believe the people are frivolous.
But the reality is that Keith Gill, despite being an individual, represents an organic headless movement. Movements of the modern age are not driven by centralized power structures but by organic decentralized power structures living on organic, evolving meme-ic culture.
The real tragedy of the testimony is that it focused too narrowly on the plumbing of the financial universe (which is, to be very fair, highly important and something that more people should understand), but all too little on the meme-ic culture that gave rise to the whole GameStop saga. There is too much focus on GameStop, Keith Gill himself, Gabe Plotkin (of Melvin Capital), and Vlad Tenev (of Robinhood).
What we should be doing as a society is read between the lines and understand why this happened, not technically, but culturally. The existing institutions seem to be doing very little of that right now.
Keith Gill is a person, but he represents two things, which I think he hints at very well in his own words…
First – he’s ordinary like everyone is…but he’s shown that ordinary people can still achieve extraordinary outcomes but you cannot do this by following the “rules”…too many “normals” believe they no longer have any ability to improve their lives anymore because the system is designed to keep them down:
A little about my background: I grew up in Brockton, Massachusetts. My father was a truck driver, and my mom a registered nurse. I was one of three kids, and the first in my family to earn a four-year college degree when I graduated from Stonehill College in 2009, amid the Great Recession and without a long-term job. My first post-college job was in operations at W.B. Mason, an office supplies company headquartered in my home town of Brockton.
Between 2010 and 2014, I worked for a family friend at a start-up company in New Hampshire, trying to build a software program that would help investors analyze stocks and offer related research. We also tried to start an investment firm, which dissolved not long after it was created. My salary never exceeded $40,000, but I did learn something about investing. I learned how to do the tedious work of digging through a company’s financials and focusing on its real long-term value, not prevailing market sentiment or headlines.
I married my wife Caroline in 2016, and I found a job working operations and compliance at LexShares. I left that job in March 2017, and for the next two years I was effectively without a job. During that time, I began actively analyzing a wide array of stocks to try to keep and increase our limited savings. It was both a way to make money and an interest that I pursued passionately while I lacked a job.
Source: U.S. House of Representatives
He has a college degree, but college did not create the opportunities he was (likely) promised. He struggled. Like the vast majority of Americans despite hustling.
And second – People are fed up with being classified and stereotyped until the end of days. What everyone wants (and what Gen Z is living up to) is the power to reinvent. What drew Gill (and likely many others to GameStop) is not just a sense of nostalgia for something that used to be great but has fallen by the wayside, but that there is still time and hope for reinvention [emphases are my own]:
Two important factors, based entirely on publicly available information, gave me and many others confidence that GameStop was undervalued in 2019 and 2020. First, the market was underestimating the prospects of GameStop’s legacy business and overestimating the likelihood of its going bankrupt. GameStop, the only major retailer dedicated to gaming, has over 60 million members in its loyalty program and continues to maintain a sizable market share within the gaming industry. Its legacy business, comprised primarily of selling physical video games and related equipment within their stores, was likely to generate meaningful cash flow following the release of new gaming consoles in late 2020. I grew up playing videogames and shopping at GameStop, and I’m looking forward to buying a new console at GameStop. I knew the company had an opportunity to reinvigorate this business by improving customer service for gamers, upgrading its online presence, and offering complementary product lines such as PC gaming and accessories.
Second, I believed – and I continue to believe – that GameStop has the potential to reinvent itself as the ultimate destination for gamers within the thriving $200 billion gaming industry.
Source: U.S. House of Representatives
His statements about GameStop could be read as much as a personal statement about much of America (or most of the world, frankly). Americans are looking for hope, and the will and internal strength to reinvent. What they aren’t looking for is permission.
As always, thanks for reading!
This stuff may seem very far from relevant for investing, but I’ve always believed that to invest well, we have to observe well. The world is made up of people. Businesses make money when they understand people. And investors make money when they understand which businesses understand people and which ones don’t.
Which businesses today understand the world? If we find those, we can build our financial future.
💬 Media
#1 Netflix to Debut Anime Series Based on Valve’s Popular Dota Game
Netflix Inc., which struck gold with its adaptation of “The Witcher” a year ago, is looking for another crossover hit from the games industry with the announcement of an anime series based on Valve Corp.’s Dota 2.
“Dota: Dragon’s Blood” will premiere on March 25 and feature characters from the multiplayer title such as the Dragon Knight Davion and Princess Mirana. The game, while free to play, is one of the biggest earners among PC titles, using some of the proceeds from players buying in-game cosmetics and upgrades to fund competitive-play prizes in excess of $150 million to date. Dota 2 had 7.7 million unique players over the last month.
The series will consist of eight episodes of “epic, emotional, and adult-oriented story about some of their favorite characters,” said Ashley Edward Miller, the showrunner and executive producer, who co-wrote the screenplay for 2011’s “Thor” movie.
Source: Bloomberg
The convergence between games and popular culture is a trend that will likely accelerate. Now instead of turning a book into a movie, it’s not that crazy to turn a game into a movie now. Many games already have followings that are 10x or 100x larger than book franchises. Game franchises are also larger than most movie franchises already except for perhaps the Marvel Cinematic Universe or a few other mega-franchises. And the positive reinforcement potential between games and movies are clear – Many people already love the universes and characters of their favorite games…movies allow them to further explore the stories and personalities of those characters and world.
#2 Diablo 2 Resurrected is almost completely unchanged from the original
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In our 30-minute chat, the pair couldn’t have made the philosophy for Diablo 2 Resurrected more clear. It is — because it needed to be — the game players remembered. Blizzard felt that most deviations, even important quality-of-life features, would be a step too far.
Blizzard wants to preserve Diablo 2 for Resurrected as much as it can, because even if the game is unchanged, the world it will be released into is completely different. As with World of Warcraft Classic, the wide variety of information available on the internet nowadays, and the advent of services like Discord, makes socializing while playing a very different experience. You don’t need the manual when an answer to “how do I complete this quest” is a Discord message or a Google search away. Blizzard is counting on that — the community — to help ease new players into the experience.
Source: Polygon
Game publishers / developers continue to be an area of fascination for me. While the Paper Portfolio no longer holds Activision or Tencent (though we still hold Sea / Garena), the best days for game developers are still ahead. We have barely scratched the (emotional) surface and potential for games.
What makes the Diablo 2 remake so fascinating is that this is now starting to be a trend. First it was Warcraft 3 Reforged. Then Blizzard brought back World of Warcraft Classic. And now Diablo 2 Resurrected. Game publishers are starting to feel a lot like that old Charlie Munger quote about Disney: “an oil company that can put the oil back in the ground after it is done drilling so it can drill it again.”Have top quality game franchises gained the same ability like Disney to remake their games / universes every generation to tap new audiences and reinforce relationships with original fans?
🛍 Commerce
#3 Amazon acquires Selz, a Shopify competitor that helps small businesses build online stores
Amazon has bought Selz, a company that makes tools to help businesses launch their own online stores.
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Amazon previously operated a service similar to Shopify, called Amazon Webstore, that allowed small businesses to run online stores built on Amazon’s technology. However, the company shut down Amazon Webstore in 2015.
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Founded in 2013, Selz is based in Sydney, Australia, and provides small- and medium-sized businesses with a platform to launch their own online stores and add online payment options to existing websites, among other tools. The company employs less than 50 people, according to LinkedIn.
Source: CNBC
You know you are relevant when your competitors start to acknowledge you.
Interestingly, Amazon used to have an internal effort but shut it down. What can or will they do now that will lead to a different outcome?
This is a particularly important problem for Amazon to solve because 3rd party merchants have now overtaken Amazon 1st party as the largest mix within GMV. This means that Amazon is as much a platform for 3rd party merchants as Shopify is. That’s a problem if Amazon fails at pleasing these 3rd party merchants. For now, Amazon still aggregates the largest customer base, but if others like Shopify in partnership with Facebook / Instagram, Pinterest, Snap, and TikTok can bring together an equivalent customer base, then Amazon’s hold will continue to whittle down to the core competitive advantage of logistics.
#4 Shopee is set to enter the Indonesian food delivery battle, but can it win?
Andini Karunia (not her real name) is a GrabFood driver-partner who has been working with the firm for nearly a year. In the last few months, her friends in the driver community have been talking a lot about a new delivery platform, ShopeeFood, so Karunia decided to sign up in January. By joining ShopeeFood, she is looking for an additional income source, although she’s not sure if the company will allow driver-partners to work for multiple apps at once.
“Shopee is very famous and many people use it, including me, so I believe their existing customers will want to order food from it too,” Karunia said. “It also offers an attractive commission scheme and we can get a bonus if we meet certain targets.”
Source: KrAsia
I think the answer to the question in the title is “yes”.
👨💻 Technology
#5 Google Waymo: Expanding our testing in San Francisco
We’re now accelerating the development and testing of our technology in cities, so we can one day bring the benefits of fully autonomous driving to more people.
Well before we deploy a commercial service, our team provides feedback on the product experience, allowing us to validate the progress we’re making and continue improving the rider experience. We’ve now started limited rider testing in San Francisco with Waymo employee volunteers to gather feedback and continue to improve our technology. We’re conducting this testing with enhanced COVID-19 protocols to ensure the safety of everyone involved.
Over the next few months, we’ll share further details about how we’re optimizing our technologies to tackle driving in San Francisco.
Source: Waymo
Is Waymo ready / close to commercializing their tech?
For ride hailing companies, this will be something to watch. The current assumption is that autonomous tech companies like Waymo will still want to partner with the ride hailing companies rather than launch a direct consumer service.
We’ll have to see.
Waymo also provided some interesting color on how sophisticated the tech has become [emphases are my own]:
We’ve also designed our software to reason about the context, which is essential for driving safely in busy cities. Our perception system lets our Driver know how to handle a pedestrian, a tree – and a pedestrian carrying a Christmas tree. If we pull up next to a bus by a crosswalk on Beach Street in Fisherman’s Wharf, our Driver can reason that hidden passengers may be getting off, and that they may soon cross the street.
We’re also building greater flexibility into our driving software to handle unexpected changes to the road. If we’re driving on 19th Avenue during road work and our sensors spot traffic cones and road work signs, our perception system understands that they are guiding us out of the usual lane, and our planning and routing systems can automatically update the vehicle’s route to navigate the new layout.
#6 Facebook Meets Apple in Clash of the Tech Titans—‘We Need to Inflict Pain’
Facebook Inc. FB -2.91% Chief Executive Mark Zuckerberg has groused for years that Apple Inc. AAPL 0.12% and its leader, Tim Cook, have too much sway over the social-media giant’s business. In 2018, his anger boiled over.
Facebook was embroiled in controversy over its data-collection practices. Mr. Cook piled on in a national television interview, saying his own company would never have found itself in such a jam. Mr. Zuckerberg shot back that Mr. Cook’s comments were “extremely glib” and “not at all aligned with the truth.”
In private, Mr. Zuckerberg was even harsher. “We need to inflict pain,” he told his team, for treating the company so poorly, according to people familiar with the exchange.
Source: WSJ
If it wasn’t obvious already, Apple and Facebook are on major collision course. Except Zuckerberg seems to take it a lot more personally than Tim Cook does.
This obsession with Apple is possibly distracting Facebook from what they should be focusing on near-term: transforming into a digital commerce platform.
#7 Samsung Develops Industry’s First High Bandwidth Memory with AI Processing Power
Samsung Electronics, the world leader in advanced memory technology, today announced that it has developed the industry’s first High Bandwidth Memory (HBM) integrated with artificial intelligence (AI) processing power — the HBM-PIM. The new processing-in-memory (PIM) architecture brings powerful AI computing capabilities inside high-performance memory, to accelerate large-scale processing in data centers, high performance computing (HPC) systems and AI-enabled mobile applications.
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Most of today’s computing systems are based on the von Neumann architecture, which uses separate processor and memory units to carry out millions of intricate data processing tasks. This sequential processing approach requires data to constantly move back and forth, resulting in a system-slowing bottleneck especially when handling ever-increasing volumes of data.
Instead, the HBM-PIM brings processing power directly to where the data is stored by placing a DRAM-optimized AI engine inside each memory bank — a storage sub-unit — enabling parallel processing and minimizing data movement. When applied to Samsung’s existing HBM2 Aquabolt solution, the new architecture is able to deliver over twice the system performance while reducing energy consumption by more than 70%. The HBM-PIM also does not require any hardware or software changes, allowing faster integration into existing systems.
Source: Samsung
This is a bit technical, but there’s a lot of different efforts going on to redefine the computer.
Players like Nvidia and the public cloud players believe the datacenter is now the “computer”.
Players like Cloudflare believe the whole network (meaning all of the datacenters that make up a network) is now the “computer”.
And now Samsung is showing us a new type of computing paradigm. Instead of moving data to the CPU, you bring the computing to the data. In this instance, it means bringing the compute to the memory where data is stored. This makes sense because increasingly it’s becoming untenable to move so much data around.
#8 Microsoft officially launches ‘Autofill’ password manager for iOS and other platforms
Today, we are excited to introduce autofill capabilities across devices and platforms, which will solve the hassle of remembering and typing your passwords. Autofill is currently being rolled out on iOS and Android as part of the Microsoft Authenticator app, and on Google Chrome as an Autofill extension.
Source: Microsoft
Similar to Apple’s recent efforts to extend iCloud Keychain to Android and Windows, Microsoft is now doing the same. Password managers used to be about improving user experience within an ecosystem. But as Capital Flywheels flagged in Tidbits #31, managing and controlling identities is going to become an increasingly valuable and powerful capability going forward. Multiple ecosystems and platforms are now likely brainstorming different ways in which they can extend that identity management and control function across ecosystems (as well as into the offline world).
Capital Flywheels continues to believe payment players have a very powerful role to play when it comes to identity management and control both online AND offline.
🚀 Software
#9 VentureBeat Unity CFO Kim Jabal interview
Lots of fascinating bits here and there. Unity now powers well over 50% of mobile games, and close to 100% of AR / VR content. Unity-powered content touches 2.7 billion monthly average users now (i.e. vying with Facebook for world’s widest reach…).
On advertising:
GamesBeat: When you talk about preparing for years, do you think there was a certain writing on the wall that everyone could see? People caring more about privacy. There’s targeted advertising, there’s privacy, and there’s this tug of war between them. It feels that targeted advertising may have gone too far.
Jabal: Maybe? It’s hard to say. What will be interesting, and we saw this with GDPR, is that sometimes users opt out, and then they realize they’re still getting ads. This will not reduce the number of ads you see. And now they’re just completely irrelevant. Particularly when you think about gaming. Gaming, you want to see a game you might want to play. If you enjoy games, as an end user, if you have to look at an ad anyway, it may as well be one for a game you might want to play. It’ll be interesting to see — in GDPR we did see some users opt out and then come back in.
On serving developers and keeping the peace with the platforms:
GamesBeat: Perhaps the question here is, your mission is to work on behalf of gamers, but in some ways — how does that mission affect your relationships with the platforms? You enable games to cross so many platforms. Sometimes that’s not in the interests of the platforms themselves. It’s an interesting relationship, where to serve gamers and serve game developers, you have to balance that against the interests of the platforms, which are not necessarily identical.
Jabal: First and foremost, our focus is mostly developers, not end users, although we’re starting to think about opportunities on the consumer side for consumer creators. But our primary focus is creators, people who create interesting content. All of the platform players I think acknowledge that developers — there aren’t many developers that are only going to develop for one platform. If you have a mobile game, you can’t say, “I’m going to only be an Android game.” Even PC and console, as you see, there’s such a proliferation and a want from consumers to be able to play games on different platforms. You can play with friends on mobile and console. That trend, I cannot imagine that’s going away. The platform players, whether it’s Google or Apple or Xbox, I think they acknowledge that this is a multiplatform world.
That’s where our position is unique in that they trust us. They trust that Unity is that agnostic player in the middle that isn’t going to align with one platform over another. That’s a trust we’ve built up over many years.
GamesBeat: And you’ve managed to keep the peace, whereas Epic has not.
Jabal: So far I think we have, yes.
On their future as a general 3D tool even beyond games:
GamesBeat: The other thought I had about competition is that it looks like you view non-game designers, people who don’t make games, as competition as well. You want everyone to be able to make games.
Jabal: We’re thinking a lot about consumer creators. You see what Roblox has done. We have a long tail of users that don’t pay us creating on Unity. It’s absolutely something we’re increasingly thinking about. If our mission is to make the world better for creators — well, one thing we’ve always said is that the world is a better place with more creators in it.
There’s a heck of a lot of consumers who are becoming creators. Streamers on Twitch and all these things, they’re now creating. Even just posting to Instagram, it’s a new way for people to create. And we believe all content is going to become real-time 3D, so therefore it makes sense that over the long term, that’s an interesting opportunity for us. As the tools become more available, it will be more common. Look at modding. Once that becomes easier to do, we’ll see it more and more.
On Unity as the next Google?
GamesBeat: Do you see a parallel to something like the early years of Facebook, communicating it that way?
Jabal: I was at Google for eight years, so I see a parallel to Google. It’s very similar. It’s one of the reasons I came to Unity. It’s a technology-driven company. Innovation is paramount. It’s a great culture in terms of engaging employees, making it a great place to work, and encouraging employees to be innovative. That’s core to any business. I don’t care what business you’re in. Being able to innovate and change with the times — I just saw a huge parallel here to Google.
John wants us to be a company of long-term consequence. He’s not in this for, “Oh great, I did my part and I’m out of here.” He’s in it for the long term. The company is in it for the long term. I saw that parallel with Google.
Source: VentureBeat
🤔 Hmm…
#10 NASA Perseverance Rover Mars Video
Humanity continues to amaze. Not only are we making vaccines that can tackle new diseases (e.g. COVID-19) in just a few months, we have landed a rover on a different planet that is sending back video that can go straight into social media.
Amazing.