Tidbits #46 – Laws in a Digital World, Sneaky Fronts, Digital Reality + More

Hello, hello! 👋🏻👋🏻

Summer is officially upon us. And we’re almost halfway through the year. Moving fast!

As always, thanks for reading. Hopefully this doesn’t take too much time away from the summer festivities. 🍋🍹🏖😎

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Laws in a Digital World

Before diving into our usual fare, let’s talk about Law.

One of the most under-discussed topics when it comes to technology and its impact and intersection with society is the implementation of laws. The lack of broad discourse is surprising because western societies are mostly rules- (i.e. law-) based…to have so little discourse around laws and technology – the primary transformation driver of society today – seems suboptimal.

Of course, this is starting to change at the margin. For example, Congress is currently debating a number of bills that will primarily affect the operations of Big Tech. And governments around the world including US, China, Europe, Japan, Russia, etc are all investigating the powers and operations of Big Tech in some form or manner.

But all of these investigations and actions are still about “what” and not about “how”.

Governments are increasingly recognizing (as a problem) the massive transfer of societal power away from government / people and towards (private) tech and are taking steps to address it (the “what” part), but none of these actions even begin to suggest that governments recognize the “how” problem…

What’s the “how” problem?

The “how” problem is how laws are implemented…and how laws have been implemented no longer work in a digital world.

Most people probably don’t spend any time thinking about the machinery that makes things work and take the implementation of Law as a given, but the philosophical underpinnings of Law and its implementation is becoming more and more important than ever. Even if there are laws, unless you can implement and enforce them, laws are nothing more than words on paper.

This is what many Americans discovered during the Capital Insurrection in January 2021 where a sitting President quite likely violated his sworn duties in order to try to change an election outcome he did not agree with. And while the Laws of the Land are very and unambiguously explicit that this is not legal (with death as one prescribed punishment), without an apparatus in place that can and wants to enforce the Laws of the Land, the law will be revealed as nothing more than words on paper.

This brings me to tech and the philosophy of law.

So how are laws generally implemented?

Yes, you have courts, and you have authorities that ensure compliance like the police.

But an implicit assumption that underpins the entirety of the law system we have today (and have ever had) is access to the person(s) that must obey the laws.

You can quickly see how laws have no power when it cannot locate / take possession of the accused person. The most base assumption underlying everyone’s compliance with the law is the power of the authorities to inflict physical harm when we do not obey.

Unfortunately this assumption is increasingly untenable when it comes to our growing digital world.

Many foreign countries already see and feel this. Whenever they disagree with what US Big Tech does, they have limited power to enforce their own laws. This is because the people that run US Big Tech live safely out of reach of foreign government hands. There is no power to actually enforce. Of course, there are other ways to demand compliance such as threatening to block a service / block a company from operating in the country, but sooner or later these threats will ring hollow. While countries can still operate today if they block a key tech provider (like Google), it’s not hard to imagine somewhere in the future where every country’s entire economy runs on Big Tech…and in such a future, threatening to block them would be nothing short of economic suicide.

In such a future, blocking a service would be (and should be) seen as an empty threat. This was recently tested in Australia where the Australian government passed laws that would require Google and Facebook to pay for news articles that are linked / posted on their services. Neither felt like complying and decided to shut down their services in Australia, throwing the whole country into chaos. While the situation was eventually resolved in a somewhat acceptable way for all parties involved, the situation (and power) cannot be unseen: Without ability to take possession of people, governments have no power. The only power is to block market access, but this is likely to do more harm than good.

While the US is in a superior position because many tech executives still live here, this may not always be the case. This is especially true since many rising tech stars are not American firms…some of the most prominent ones are Chinese. In such a situation, blocking market access is the only power we have for enforcement of laws. Banning TikTok might not be disruptive, but what happens when we are talking about something more critical and integral to the operation of society?

And at the user level, users can come from anywhere in the world. When they violate US laws, there is clearly no capability for the US to take possession of the persons in order to compel compliance with US laws (except for those cases that may entail national security risks).

Another such area for concern is crypto. Because of America’s ambivalent stance towards crypto, many crypto exchanges and various parts of the value chain operate out of foreign jurisdictions like China, Hong Kong, Singapore, etc. It’s safe to say that there is probably some scam-ish behavior going on that eventually will need to be investigated. In the old world of bond and equity markets, scams exist but at least there can be closure because usually the perpetrators are still on American soil (or their money is). If they do something bad, the consequences can be enforced (or at least enforced against the money held in the American financial system).

The same cannot be said in a purely digital world.

In some future date, many Americans may discover they have been scammed by foreign hucksters. But the US government will have no power to pursue those persons. And since crypto money does not really exist on “American” soil, there is no power to freeze those assets either.

Crypto people will say this is a feature, not a bug.

Maybe!

But I think what’s more interesting to consider is not the implications / benefits of being resistant to government seizure (which I admit can be a very valuable proposition in many countries), but what it means to live increasingly in a world where Laws cannot be enforced.

Congress can write all the laws they want. They still have some power today. But there’s only two possible paths into this future: Tech accepts the spirit of the laws of the land, or it will continue to evolve until it is completely out of reach. The only way to avoid the latter is if all tech becomes domesticated. That all persons responsible for the tech is squarely within the borders of the Laws of the Land. Cross-border and borderless tech, in a way, is increasingly above Law.

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🗺 Geopolitics

#1 Biden Opens Sneaky New Front in Trade War Against China

Want to understand the Biden administration’s China strategy? Set aside the South China Sea and the Quad. A more useful marker of the administration’s thinking may come from a South Korean company that few in Washington have ever heard of. Magnachip, based in South Korea, produces a type of semiconductor needed in the most advanced screens, such as those for the newest smartphones. It’s a small company, with revenues of around $500 million last year, a tiny fraction of chip industry behemoths like Intel or Taiwan’s TSMC. But the Biden administration is now blocking its purchase by a Chinese private equity fund. The fate of the deal will send a major message about how Washington is thinking about the United States’ economic relationship with China.

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Magnachip, however, is different from all these deals. It is a small company. It focuses on technology that is not a U.S. core competency. Moreover, it has little if any U.S. presence. The company has stated that “[a]ll manufacturing and research and development activities take place in South Korea.” Most sales are outside the United States, as are all the employees, IT systems, and intellectual property. Unless the company’s disclosures are hiding something, the only substantive connection Magnachip has to the United States is that its shares trade on the New York Stock Exchange.

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What does this tell us about the Biden administration’s strategy toward economic relations with China? It says nothing at all about supply chains because Magnachip supplies little if any of its technology to U.S. firms. A small player, Magnachip has little to do with the semiconductor shortage that has been making headlines. There’s no direct military ramification of its technology either. Magnachip doesn’t sell much to firms in the United States, so there’s no impact on American workers and no obvious effect on U.S. intellectual property, either.

The only plausible interpretation is that, apparently in conjunction with the South Korean government, the Biden administration has de facto decided that all chip firms—even if small, seemingly innocuous, and barely linked to the United States—are off limits to Chinese buyers. If Magnachip isn’t allowed to couple up with a Chinese private equity fund, it is hard to imagine anyone else will be allowed to, either. This is bad news for China’s efforts to acquire chip expertise by buying foreign companies. Just don’t expect anyone in the White House to call it decoupling.

Source: Foreign Policy

This is a very interesting case. It’s interesting because it suggests the tech war with China has not ended. In a way, it even suggests the tech war has expanded.

But this is also a very interesting case because it is also about Laws. This is effectively an extension of American Law and policy into South Korea. Magnachip has almost no linkages to the US at all.

In a way, this is an extension of American Law through the capital / financial system rather than domicile (e.g. physical presence and operations of the firm).

Is this the new normal / new era? Or is this the last demonstration of power by an empire that is slowly seeing its power slip away?

#2 Combat Drones Made in China Are Coming to a Conflict Near You

A dozen years into its fight with the Islamic insurgent group Boko Haram, Nigeria is getting some new weapons: a pair of Wing Loong II drones from China. The deal is one of a growing number of sales by state-owned Aviation Industry Corp. of China (AVIC), which has exported scores of the aircraft. The United Arab Emirates has used AVIC drones in Libya’s civil war, Egypt has attacked rebels in Sinai with them, and Saudi-led troops have deployed them in Yemen. The company’s drones “are now battle-tested,” says Heather Penney, a fellow at the Mitchell Institute for Aerospace Studies, a think tank in Arlington, Va. “They’ve been able to feed lessons learned back into their manufacturing.”

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AVIC’s drones have two big selling points: They’re cheaper than comparable aircraft from producers in the U.S. or Israel—the other primary manufacturers—and China doesn’t much care how they’re used, says Ulrike Franke, policy fellow at the European Council on Foreign Relations. “China is willing to export armed drones to almost anyone,” she says. AVIC didn’t respond to requests for comment.

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AVIC’s growing expertise is paying off in improved quality, says Pawel Paszak, director of the China Monitor program at the Warsaw Institute, a think tank in the Polish capital. Although its drones don’t match the best offerings from American and Israeli companies, they’re increasingly competitive—and the price differential is significant: AVIC’s top drones run $1 million to $2 million apiece, vs. more than $15 million for a comparable American model. “Maybe Chinese drones aren’t as good as American drones,” Paszak says. “But 15 drones instead of one, and without any fuss about human rights? This is a good offer.”

Source: Bloomberg

Similar to how important physical access is to enforcing laws, the leverage in war is often also dependent on doing physical harm to people.

What does war mean when wars are fought purely with machines like drones that don’t have any people involved? Does this make war more violent because drones will need to target civilian theaters in order to make it hurt? Or will drone / machine warfare simply evolve to become like nuclear weapons where two nations that possess it will never have a point in fighting / using it? Is this simply a type of weapon that make the most sense against nations that do not have it?

#3 Russia votes to force U.S. tech giants to open local offices

Major tech companies like Apple must open offices in Russia by January 2022, lawmakers in the country have decided, in what could be a move to crack down on dissent and banned commentary online.

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It is asserted by the bill’s authors that there is a need to create a local branch, otherwise foreign websites will be outside of Russia’s jurisdiction.

Source: AppleInsider

Russia seems to recognize there is no leverage unless you have physical access to people. But even then, not like the CEOs of foreign tech companies will be living in Russia. How much leverage can Russia truly have even if foreign tech firms are required to have a physical presence in Russia?

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🤑 Economics

#4 Emerging markets are right to worry about capital flows

Bruised by past experience, the Fed has tried to assuage concerns about a surprise policy reversal. Chair Jay Powell has been at pains to emphasise that he will be patient and will not unwind the Fed’s balance sheet without seeing “substantial further progress” in the recovery. Several Fed officials have echoed those reassurances, saying that the Fed would not react hastily to a transient spike in inflation.

Even so, emerging markets are right to be apprehensive about possible market tantrums at home. After all, with extraordinarily loose money supply and low returns in the rich world, emerging markets inevitably become a destination of choice for investors looking for high yields. And when the cycle turns, capital flows revert abruptly, leaving emerging country asset and currency markets in turmoil.

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Consider the RBI’s policy dilemma during the current crisis. Despite the pandemic and associated lockdowns, India’s stock market is booming, fuelled by the extraordinary amount of liquidity that the RBI has injected into the system as part of its crisis management. As a consequence, foreign capital is gushing in.

The RBI has been in the market almost continuously, buying dollars to prevent an unwarranted appreciation of the rupee. But buying dollars results in extra rupee liquidity which could go beyond the central bank’s comfort level. The RBI could of course mop up the extra liquidity by selling bonds. But such a move would cause interest rates to spike, resulting in the economy being swamped with “carry trade” dollars looking to make money on the yield differentials.

The RBI faces a dilemma. Intervene in the foreign exchange market but leave the resultant liquidity unsterilised (by not selling bonds) and more foreign capital would come in, attracted by the returns in the stock market. Intervene but sterilise the flows and more capital would still come in, attracted by the potential yield differentials. In either case, the economy has to pay the price of adjustment when the easy money reverses tack.

This shows that foreign exchange reserves are at best a defensive weapon for managing the volatility arising from capital flow reversals. They do not help to prevent the build-up of pressure in the first place. 

Source: FT

About a year ago, I started wondering whether emerging markets would be a trap. A lot of investors are rightfully concerned about the low yields (and high valuations) of developed markets, but there are real reasons why the higher yields (and lower valuations) of emerging markets are that way.

Despite higher yields and lower valuations, emerging markets have not beat developed markets for over two decades…

And the starting point looks worst than ever: COVID-19 will take far longer to bring under control in the emerging markets, the scars will be deep, and the fiscal and monetary situations will be worst than ever. I think slowly this reality and narrative will take hold in the coming years.

#5 Bitcoin Beach: What Happened When an El Salvador Surf Town Went Full Crypto

Now come the tears. Mallers, his voice cracking, explains that that’s why he moved to a little town in El Salvador for three months, to help these people while also launching his company there. “I talked to the kids,” he says, flashing photos of himself with young Salvadorans on the oversize screen. “I told them, ‘Man, we got this. Bitcoin’s here. We got this.’ ”

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The best place to see where El Salvador is going with all this is El Zonte, a surfing village on the country’s Pacific coast. In 2019, a small team of Salvadoran volunteers and an American expat started to transform the local economy to run on Bitcoin. Workers now receive their salaries and pay bills in Bitcoin, tourists can buy pupusas with a special Bitcoin payment app, and community projects are financed with Bitcoin donations. According to Jorge Valenzuela, an upbeat 32-year-old surfing aficionado who leads the volunteers, “it has changed my town.”

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The town’s embrace of Bitcoin is apparent just by looking at the app. Peterson slides his finger across his iPhone, the screen blooming with red dots, each one representing one of the roughly four dozen businesses that accept Bitcoin as payment. The dots look like a rash spreading from Peterson’s headquarters across town and up and down the coast. He says that 18 months after the project launched, roughly 90% of El Zonte’s households are interacting with the currency regularly. “It’s crazy how fast Bitcoin has caught on,” he says. Businesses are using it on their own to pay bills and accept payments. Residents use transfers to the Strike app, the ATM, and peer-to-peer transactions to move money back and forth between Bitcoin and cash. There’s also a local woman who has turned into a market maker. She buys Bitcoin from town residents when they need cash and then deals it to eager investors, many of whom come from San Salvador, where the digital currency has been next to impossible to purchase.

For some in El Zonte, the benefits of Bitcoin have been incremental at best. Many business owners say it makes up just a small fraction of sales. Although some 85% of families have access to smartphones, many still live in cramped houses with dirt floors and tin roofs. But for others, it’s clearly been life-altering. A construction crew chief pays his dozen or so employees in Bitcoin. He was sick of losing them for a half-day every month so they could travel to the nearest bank, an hourlong bus ride away, on payday. Adrian Torres, 62, one of the crew, tells me he fixed his teeth with the money he saved in Bitcoin, and now he’s saving up to buy a cow.

Source: Bloomberg

Fascinating look into an experiment in crypto living / society. Some things get better, but many things remain the same. People that have no money, still…have no money.

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🎭 Society

#6 South Korea Crosses a Population Rubicon in Warning to the World

They’re called the Sampo Generation: South Koreans in their 20s and 30s who’ve given up (po) three (sam) of life’s conventional rites of passage—dating, marrying, and having children. They’ve made these choices because of economic constraints and in the process have worsened Korea’s demographic imbalances. Last year, when the country registered more deaths than births for the first time in recent history, then-Vice Finance Minister Kim Yong-beom pronounced the milestone a “death cross.”

I Live Alone is one of Korea’s most popular reality‑TV shows. It follows the single lives of movie actors and K-pop singers engaging in mundane activities such as feeding their pets or eating ramen noodles in the middle of the night—all alone. People living alone already make up almost 40% of the population. Honbap (a solo meal) has worked its way into everyday language; there’s even a lunchbox brand called Honbap Day.

The typical age of a new mother in South Korea is 32, according to the National Statistical Office. The number of births per woman sank to a record low of 0.84 last year, the lowest rate in the world; in Seoul the rate is 0.64. The United Nations estimates that by 2050, Korea’s share of elderly people will become the largest of any country.

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In Kim’s case, she’s chosen to not have children since getting married in 2016. She says the rising costs of owning a home and raising a family make it difficult to consider having kids. “It’s impossible for a couple not to both be working,” she says. “It’s like the whole Korean society is pressuring young people not to have kids.”

Source: Bloomberg

I think this stuff is fascinating and very, very close to the top of the list of issues that are important to consider with respect to long-term investment or decision-making of any kind.

South Korea appears to be going through what Japan has been going through. When it was just Japan, it was possible to write it off as an edge case. But increasingly, many, many countries around the world are falling into the same trap. Japan, South Korea, and many parts of Europe.

This is a very tough trap to get out of because everything we know about economics (and there isn’t that much…since a lot of economics doesn’t seem to work to begin with) is predicated on growth. There are almost no economic theories that help policymakers understand what to do when economies are in structural decline. What do you do when labor is in decline? Labor declines also naturally lead to deflation in prices and credit contractions, which further amplifies the impact of labor pressures. And capital can not easily step up to the plate because capital tends to be non-linear. In periods of growth, capital is easy to deploy and create. In periods of contractions, capital is very hard to deploy and create.

Also, the situation above sounds very much like what is going on in China right now. China is on the cusp of a population contraction. And China has its own version of Sampo called “lying flat”, where young people are rebelling against the pressures of society by doing the very minimal to survive and nothing more including a wholesale rejection of marriage, children, and careerism.

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💬 Media

#7 Ride on Yoshi. Race in a Mario Kart. Try to Forget the Pandemic.

A theme park, Super Nintendo World, opened at Universal Studios Japan in Osaka, ending months of delays and testing the proposition that people will want to gather in large numbers while the coronavirus is circulating to race in a Mario Kart or punch question mark blocks.

Source: NYT

Okay turning to more optimistic subjects now…it’s interesting to compare and contrast the infinite optimism of our digital worlds against the, often, dark realities of the physical world we live in. Anyway.

This came out a few months ago, but I didn’t get around to highlighting it until now. From a business perspective, Nintendo continues its slow transformation into Disney. A merger between Disney and Nintendo has been on my bingo card since 2014, but it increasingly looks unlikely.

But also, doesn’t it feel like the digital world is increasingly infiltrating and transforming our world from a cultural perspective rather than the other way around? Culture is increasingly made online. Identities are increasingly explored and forged online. And offline is increasingly just one arena for expressing identities. The monopoly that the physical world had in shaping our identities increasingly no longer exists.

#8 Stranger Things’ Starcourt Mall comes to Roblox

Starcourt Mall, the central location from season three of Stranger Things, is now a playable location in Roblox, the company announced today. The level includes four mini-games based around the Netflix show, as well as quests that reward players with Stranger Things-themed cosmetic items like a Scoops Ahoy costume, Dustin’s Hat, or Eleven’s Headgear. The experience is available in Roblox now.

“Stranger Things is one of Netflix’s most iconic shows, and now it has a persistent space in the Roblox Metaverse where fans can experience and interact with the franchise in exciting new ways,” said vice president of brand partnerships at Roblox, Christina Wootton. “Roblox is the new social hangout, much like the local mall back in the 80s where teens came together. The virtual Starcourt Mall is a similar setting reimagined within Roblox that opens up unique possibilities to engage and grow the show’s global audience.”

Playable mini-games include “Hawkins Lab Escape” which Roblox describes as a game of “multiplayer cat-and-mouse.” There’s also a turn-based dice game, a slingshot shooting gallery, and a delivery game where you have to race to deliver Scoops Ahoy ice cream. But Roblox is styling the overarching virtual location as an “experience” rather than a “game.” It’s a distinction that’s become important in light of the Epic vs Apple trial, which focused on the often blurry lines between the two categories, and hence the App Store rules they have to follow.

Source: The Verge

The expansion of the metaverse continues.

#9 TikTok Owner ByteDance Finds Game Success Through Influencers

In April, ByteDance launched a new mobile game in China based on One Piece—a popular Japanese cartoon about pirates. To promote the app, ByteDance paid an army of top influencers on its Douyin video app, the Chinese version of TikTok, which has 600 million daily active users. One of those influencers, Shao Yuxuan—an internet celebrity whose Douyin account, Crazy Sisters, has about 40 million followers—posted short videos in which she dressed up as One Piece’s main protagonist, Monkey D. Luffy, in a red shirt and blue shorts.

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The episode also showed how ByteDance could use the vast audiences for its video apps to expand in new categories like games. The company is likely to rely on the same promotional game plan in countries outside China by using the growing reach of TikTok. While the closely held ByteDance—the world’s most highly valued venture-backed startup—doesn’t disclose TikTok’s current user numbers, a lawsuit in the U.S. last year revealed that the app had 689 million monthly active users worldwide as of July 2020.

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ByteDance sought out about 200 top Douyin influencers to post One Piece–themed short videos as well as live broadcasts of themselves playing the game. Hujiao Wangguan, one of China’s most popular videogame influencers with more than 10 million followers on Douyin, livestreamed a session. During the first month after the launch, 45,000 Douyin users livestreamed the game, and the hashtag for “One Piece livestreaming” generated more than 60 million views.

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By demonstrating Douyin’s ability to promote ByteDance’s own games, the company is hoping to attract more game makers to its video platforms. Earlier this year Douyin launched the Game Publisher Program, which uses the app’s data to match game makers with the right kinds of Douyin influencers, who can promote the games to the most suitable audiences. This program could eventually help ByteDance generate revenue even if it isn’t publishing the games itself, allowing it to take a cut of what other game companies pay influencers.

Source: The Information

The last edition of Tidbits highlighted how Bytedance is starting to get some traction in games. This article goes into a lot deeper detail in how Bytedance is evolving its marketing / go-to-market strategies by leveraging its own strengths.

Tencent is the leader in China not least because of its significantly advantaged go-to-market channels on WeChat.

But Bytedance also has a very well trafficked app these days. And Bytedance has the advantage of very compelling streaming and short video influencers that can help market games.

#10 Tinder to Launch New Interactive Messaging Feature “Hot Takes”

To usher in the beginning of people’s renewed dating lives, Tinder is launching three new features on Tuesday designed to make the app more “multimedia and experiential,” Tinder’s chief executive, Jim Lanzone, told The Hollywood Reporter.

“Everybody coming out of COVID kind of wound up in the same place,” Lanzone, the former CEO of CBS Interactive who joined Tinder last August, said. “They don’t want to just get straight to the matching and connecting part. They want to have more ways to figure out first who the right person is.”

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With Hot Takes, which launches on Tuesday, users will get to have a conversation with other potential matches — before they officially match with one another. If they choose to play the game, users will select from a set of responses to opinion-inducing prompts, such as, “If you do this, you can’t be trusted…” or “The worst thing you can text someone is…” Users will then be paired with another person online and can start a low-stakes conversation based on their responses to the same prompt. The only catch? They’ve got 30 seconds to chat and decide whether they want to officially match and keep the conversation going or let the timer run out on a flop.

Hot Takes will be housed on a new Explore section that gives users the chance to connect with a more curated selection of potential matches. Want to find other activists who share the same values? Love roller skating and want to match with someone who can join you at the rink? The Explore feature will help facilitate connections that go beyond just photos.

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But that isn’t to say the visual aspect of Tinder will be fading away, either. As the final feature unveiled on Tuesday, Tinder is taking a cue from the massive rise in short-form video by allowing users to upload 15-second videos to their profiles. The short videos will appear alongside the photos that typically show up on a user’s Tinder profile, but they’re meant to provide an eye-catching way to introduce users to one another and appeal to Gen Z users, who make up half of Tinder’s userbase.

Source: Hollywood Reporter

Another reminder that Tinder is a game. And that’s a good thing! I’m all in favor of using game-like mechanics to encourage people to choose partners based on personality and soft qualities rather than purely looks.

#11 Netflix: Sexy Beasts

I don’t have anything important to say about this. I just really wanted to include this. Whoever came up with this idea deserves an award for creativity.

#12 Instagram Tests ‘Fan Club’ Stories, NFT-Style ‘Collectibles’ In-App

First off, Instagram is experimenting with a new Stories option called ‘fan club’ stories, which would enable users to post exclusive Stories content that can only be viewed by members of a fan club or approved group.

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In addition to this, Paluzzi has also discovered a new ‘Collectibles‘ options in testing.

Source: Social Media Today

Cannot wait to turn all my grams into NFTs.

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💰 Fintech

#13 Tink is joining Visa

We are thrilled to announce Visa is acquiring Tink. This is the beginning of a new chapter in open banking, and we couldn’t be more excited about what this means for our employees, our customers and the future of financial services.

The future of open banking has never looked brighter.

Almost ten years ago we founded Tink on the idea that access to financial infrastructure should be for everyone. Since that day, each and every one of our colleagues has worked relentlessly to build technology that makes it easy for people to connect their bank accounts to a new generation of financial services. Services that are intuitive, effortless and enjoyable. Services that remove barriers that have stood in the way of innovation for years.

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As we got to know Visa, it became clear that we share a common mission – to connect the financial world and accelerate the growth and adoption of digital financial services. Teaming up with Visa means we’ll now be able to move faster and reach further than ever before, and we know that Visa is the perfect partner for the next stage of our journey.

Source: Tink / Visa

Tink seems like the European version of Plaid.

#14 Afterpay Expands Service to Largest Online Brands

Afterpay (ASX:APT), the leader in “Buy Now, Pay Later” payments, today announced that it’s making its service available to select app customers at the most popular and largest merchants in the United States, including Amazon, CVS, Dell, Kroger, Macy’s, Nike, Nordstrom, Nordstrom Rack, Sephora, Target, Victoria’s Secret, Walgreens and Yeti. These merchants represent almost half of all U.S. ecommerce volume.

Available only through the Afterpay app, select customers can shop at merchants by simply choosing their favorite brand in the Afterpay Shop Directory and paying with Afterpay. Customers enjoy all the same benefits of using Afterpay, including the ability to pay over time without having to pay interest or finance charges.

Source: PR Newswire

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🛍 Commerce

#15 How Singapore’s Sea Used Facebook to Become an E-Commerce Giant

Five years ago, Facebook was a catalyst for e-commerce across Southeast Asia, where cheap smartphones were changing consumer behavior in a region with twice the population of the U.S. On the Facebook and Instagram apps, local merchants and shoppers were able to find each other and arrange sales, sorting out payment and delivery elsewhere. It looked like an opportunity for the U.S. tech giant in a fast-growing part of the world.

But it was a little-known local online videogame startup that stepped in to meet that demand. Singapore-based Sea Ltd. launched a mobile-shopping app called Shopee in 2015 and used Facebook in the ultimate growth hack: Sea aggressively poached merchants from Facebook, luring them to its own app by offering free shipping and other perks. And having observed how consumers used Facebook, Sea incorporated chat and other social features to get people hooked on Shopee. Last year the pandemic turbocharged Shopee’s growth: As traditional retailers shut their doors, many local merchants and brands flocked to the app to sell their products, while homebound consumers also began spending more time on it.

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Shopee is more like Alibaba than it is like Amazon. It offers independent merchants—including many tiny local businesses—an online platform for their operations rather than selling goods itself. In order to grow, Shopee needed to build its base of merchants—and one of the best places to look for them was Facebook. Shopee initially took inspiration from what was already happening on the ground in Thailand and Malaysia, where smaller boutique owners were using Facebook, Instagram and messaging apps to sell their goods to a growing consumer class in the region’s emerging economies.

But completing a transaction was a multistep process that required arranging payment and shipping separately. Shopee’s model incorporated the social aspects of what was already happening on Facebook and married them to a payment and logistics network, creating a one-stop shop to fulfill orders. Shopee focused on small and medium enterprises, a strategy similar to that of Alibaba’s Taobao marketplace, as those businesses were a growing part of local economies.

Sea employees called merchants and told them using Shopee would be far more convenient than trying to sell stuff through Facebook and Instagram, whose interfaces weren’t designed for buyers and sellers. Shopee employees also showed up at Facebook merchants’ regular gatherings in order to recruit them.

“Shopee told the merchants, ‘We will cover your shipping fees and subsidize your discounts.’ It was impossible for them to say no,” said Lusarun Silpsrikul, CEO of Bangkok-based Softbaked, which provides brands and merchants on Facebook and Instagram with payment, logistics and other services.

To make the switch easier, Sea even built software that could import product listings from Facebook and Instagram directly into Shopee, according to former Sea employees. At the same time, Shopee, which came with a chat function, provided consumers with experiences that in some ways resembled social apps.

Source: The Information

This article also came out a few months ago, but I didn’t get around to reading it until now.

Very interesting look into Shopee’s creative strategies for growth. Many people have heard of how Pinduoduo became China’s largest e-commerce platform by leverage traffic from partner WeChat, but Shopee’s masterful leveraging of Facebook is pretty impressive in its own right because Facebook and Shopee are hardly partners.

#16 Instagram and Shopify are poised to join the new affiliate link wars

Instagram and Shopify appear to be entering the affiliate commissions race. It’s a sign that the two companies are trying to disrupt Amazon’s dominance over product affiliate links.

Earlier in June, Instagram rolled out more details of its planned affiliate system, whereby influencers promote — and earn commissions on — products already embedded in Instagram Checkout, the company’s in-app payment system where users make purchases directly on Instagram. At the same time, The Information reported this week that Shopify has also begun to pitch an affiliate-link system of its own to several major publishers, including Buzzfeed and Vox Media, which would allow them to earn money by including buy links to products on Shopify stores instead of to products on Amazon.

Together, these forays represent potential challenges to Amazon’s dominance among affiliate linkers. Although retailers like Target and Walmart have their own affiliate programs, Amazon’s is the most well-known and boasts over 900,000influencers. These moves may also broaden the reach of affiliate linking in general — turning potentially anyone into a product affiliate influencer.

…

The way the Instagram affiliates system works is that influencers can select products that have been uploaded into the Instagram Checkout ecosystem (though Instagram is only testing it within a small group of creators and companies right now) and they can earn commissions in exchange for referring direct sales on Instagram. TikTok has also been testing an internal affiliate commissions system, which, from the early info that the company has released, seems to function along similar lines to Instagram’s.

The advantage of these is that they function natively within each social app. Whereas Amazon’s program relies on external links — in order to earn a commission, influencers post links to Amazon products they recommend in the descriptions of a YouTube video, a blog post or in a link-in-bio page on Instagram or TikTok — Instagram and TikTok would let people purchase directly from affiliates. That could potentially lead to higher conversion rates, and give influencers credit for a larger proportion of the sales they refer.

Source: Modern Retail

I’ve often harped on how Amazon offers a poor shopping / discovery experience. Where Amazon does excel at is post-purchase experience (e.g. delivery). But despite Amazon’s poor shopping / discovery experience, it does have a significant advantage in affiliate marketing. This means, external blogs / 3rd parties currently vastly prefer to link to Amazon. In a way, this helps close some of the discovery experience gap on Amazon and amplifies the influencers / people funneling sales into Amazon’s ecosystem.

Shopify and Instagram are starting to pay more attention to this battleground.

#17 Facebook Adds Shops to WhatsApp

Facebook is making it even easier to buy stuff while you scroll past photos of your high school lab partner’s dog. Yes, Instagram Shops and Facebook Marketplace are already displayed prominently on the apps’ bottom navigation tabs. But now, you can shop on WhatsApp too, along with other updates.

Today on a Live Audio Room, CEO Mark Zuckerberg announced three e-commerce updates that are coming to Facebook products: Shops on WhatsApp and Marketplace, Shops Ads and Instagram Visual Search.

Source: TechCrunch

#18 MercadoLibre Is Changing the Way Latin Americans Shop—and Pay

When Latin American cities began locking down in March 2020, it seemed like an existential crisis for MercadoLibre Inc., the region’s dominant e-commerce platform. Sales slowed to a trickle—for about a week. Then they bounced back, and soon they were above where they’d been a year earlier.

MercadoLibre’s e-commerce revenue grew 90% in 2020 as Covid accelerated the shift toward online shopping, according to Bloomberg Intelligence. The number of buyers on its marketplace grew 40%, to 65 million, in the 12 months ended on March 31. “We moved forward three to five years, depending on the country,” says Marcos Galperin, the company’s co-founder and chief executive officer. “There’s no going back.”

If MercadoLibre is changing the way Latin Americans shop, investors seem even more excited about how it’s changing the way they pay. Payment volume at MercadoPago, the company’s financial tech arm, increased 75% last year, to $50 billion, as merchants incorporated the ability to pay through smartphone apps or QR codes. The company also more than doubled the portfolio of its lending business. In 2018, Goldman Sachs Group Inc. estimated that 40% of MercadoLibre’s value came from its financial-services arm; today it’s 60%.

Source: Bloomberg

Good read on where / how Mercadolibre started and where it’s going.

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👨‍💻 Technology

#19 Unicorn Market Cap, June 2021

Source: CB Insights via Elad Blog

Not clear how clean the data is, but there’s a couple of very striking data points.

1/ COVID has caused an explosion of unicorns in a lot more places around the world beyond the “obvious” places including India, France, Israel, Canada, and Germany.

2/ New unicorns coming out of China has declined significantly over the last couple of years. The most valuable unicorns (Bytedance and Alipay) are still Chinese, but new unicorn formation has slowed significantly since 2018. I’ve heard many Chinese start-ups are reluctant to publicize their funding rounds in order to avoid competition / torrents of capital and funding, but the decline is still quite stark even if we account for this factor.

#20 Google Executives See Cracks in Their Company’s Success

It is hard to argue that things aren’t going great for Google. Revenue and profits are charting new highs every three months. Google’s parent company, Alphabet, is worth $1.6 trillion. Google has rooted itself deeper and deeper into the lives of everyday Americans.

But a restive class of Google executives worry that the company is showing cracks. They say Google’s work force is increasingly outspoken. Personnel problems are spilling into the public. Decisive leadership and big ideas have given way to risk aversion and incrementalism. And some of those executives are leaving and letting everyone know exactly why.

“I keep getting asked why did I leave now? I think the better question is why did I stay for so long?” Noam Bardin, who joined Google in 2013 when the company acquired mapping service Waze, wrote in a blog post two weeks after leaving the company in February.

…

Fifteen current and former Google executives, speaking on the condition of anonymity for fear of angering Google and Mr. Pichai, told The New York Times that Google was suffering from many of the pitfalls of a large, maturing company — a paralyzing bureaucracy, a bias toward inaction and a fixation on public perception.

The executives, some of whom regularly interacted with Mr. Pichai, said Google did not move quickly on key business and personnel moves because he chewed over decisions and delayed action. They said that Google continued to be rocked by workplace culture fights, and that Mr. Pichai’s attempts to lower the temperature had the opposite effect — allowing problems to fester while avoiding tough and sometimes unpopular positions.

Google in a way sounds like the US. It’s so wonderfully positioned that it can somehow tolerate a lot of internal dysfunction.

A common critique among current and former executives is that Mr. Pichai’s slow deliberations often feel like a way to play it safe and arrive at a “no.”

Google executives proposed the idea of acquiring Shopify as a way to challenge Amazon in online commerce a few years ago. Mr. Pichai rejected the idea because he thought Shopify was too expensive, two people familiar with the discussions said.

Source: NYT

That would have been an excellent choice for an acquisition! I’m not sure Shopify would be as relevant or successful, though. And I’m sure many other companies made the same mistake passing on Shopify so I wouldn’t ding Pichai that much.

#21 TikTok will let creators add mini apps to videos

TikTok is announcing a new feature that will let users embed mini apps, called Jumps, into their videos. For example, if someone is making a cooking video, they could embed a link to the recipe app Whisk, which would allow viewers to pull up a recipe sheet inside of TikTok with the tap of a button. The feature is currently being tested, with only a select group of creators having the ability to embed a Jump into their videos, but TikTok says it will be rolling out the feature after more testing.

When watching a video with a Jump, viewers will see a button near the bottom of the screen, which will then open the content on a new screen within TikTok. Creators making a video will be able to choose a Jump to add and will then be able to customize the content that viewers see after tapping on the Jump.

Source: The Verge

In a way, this is similar to Snap Minis. Both TikTok Jumps and Snap Minis transform the respective apps from purely media channels into broader app ecosystems.

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🚘 Mobility

#22 Tesla unveils its new supercomputer (5th most powerful in the world) to train self-driving AI

Tesla has unveiled its new supercomputer, which is already the fifth most powerful in the world, and it’s going to be the predecessor of Tesla’s upcoming new Dojo supercomputer.

It is being used to train the neural nets powering Tesla’s Autopilot and upcoming self-driving AI.

Source: Electrek

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🚀 Software

#23 Adobe launches Substance 3D tools for immersive creativity

Adobe has launched Substance 3D tools that take advantage of AI technology for immersive creation.

The tools are aimed at making more realistic special effects, gaming, and entertainment imagery. They are also targeted at wider industries that similarly require a precision realism in design, said Sebastien Deguy (the vice president of 3D and immersive at Adobe) in an interview with GamesBeat.

…

“Creators and designers in other industries beyond the game industry are adopting these game technologies,” Deguy said. “There is a lot of room to grow. Most of the actual 3D tools are really complex and complicated to learn. Our tools are really well defined and easy to get into. We’re trying to make it more accessible.”

But Adobe isn’t making toys, either. It is targeting a new generation of designers who are just starting to use 3D in their processes. Substance 3D uses artificial intelligence to eliminate much of the technical complexity of 3D design and features the “what you see is what you get” interface artists know from Photoshop or Illustrator. And the collection isn’t just about tools — it also includes thousands of models, textures, lighting systems, and other assets designers can use to jump-start projects.

One of the main concerns of 3D artists and designers today — whether in game development, VFX, or product design — is that the design process is really fragmented. They need to jump between various tools as part of their workflows. The Adobe Substance 3D Collection was designed to connect seamlessly with Adobe Creative Cloud in order to drastically help streamline this process, allowing 3D artists to switch between Substance, Photoshop, InDesign, and more. Also, Adobe says this will help creatives curious about 3D quickly adopt and learn the tools because they are accustomed to the interface and the Creative Cloud, Deguy said.

Source: VentureBeat

Is that incredible or what?

#24 As Fast as One Can Gogh: Turn Sketches Into Stunning Landscapes with NVIDIA Canvas

Turning doodles into stunning landscapes — there’s an app for that.

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Building on this work, NVIDIA Canvas lets creators paint by material rather than color, using AI to turn brushstrokes into lifelike images. The app displays the photographic result as people paint, so they don’t need to wait to see the form of their vision — they see it right away.

…

Users start by sketching simple shapes and lines with a palette of real-world materials, like grass or clouds. The AI model then immediately fills the screen with show-stopping results. Four quick shapes and a stunning mountain range appears. A few more lines produce a beautiful field.

Draw in a pond and nearby elements like trees and rocks appear as reflections in the water. Swap a material, changing snow to grass, and the entire image changes from a winter wonderland to a tropical paradise.

Source: Nvidia

Is that incredible or what??

Also, this is no-code. Exactly what the world needs more of.

#25 ZoomInfo Releases ‘ZoomInfo Recruiter’ to Identify and Reach Top Talent Faster

ZoomInfo (NASDAQ: ZI), a global leader in go-to-market intelligence solutions, today announced the general availability of the ZoomInfo Recruiter platform.

ZoomInfo Recruiter is built specifically for recruiting teams to identify, target, and connect with top talent so they can fill open requisitions with the right individuals quickly and efficiently. Through the platform, staffing agencies, executive recruiters, corporate recruiters, and sourcers can uncover data such as work history, educational background, and department organizational charts to better understand candidates’ managerial, functional, and technical experience. Recruiters can apply preset filters in order to focus on specific initiatives, including diversity, equity, and inclusion.

“ZoomInfo Recruiter gives recruiters an edge in identifying hard-to-find candidates,” said Henry Schuck, ZoomInfo Founder and CEO. “Recruiters can easily automate their identification of and outreach to candidates. In an increasingly competitive hiring environment, ZoomInfo Recruiter provides talent acquisition and recruiting teams with the data, insights, and technology they need to source, engage with, and hire ideal talent faster.”

Source: ZoomInfo

Although ZoomInfo has been in the Paper Portfolio for over a year, I haven’t written much about it. It’s not exactly CRM, but it’s the leading network for helping sales people find the relevant buyers within a target organization. The value comes primarily from its database / network of contacts. Finding the right contacts helps sales people save a lot of time and avoid a lot of dead ends.

Turns out, you can leverage that database / network to create a recruiting product as well. Whereas LinkedIn requires you (the user) to manually provide info about your work experience, ZoomInfo’s network is almost self-propagating, which allows recruiters to target a broader and deeper audience than what might be available on LinkedIn.

ZoomInfo remains one of the more interesting assets out there that seems to fly under the radar.

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💉 Health

#26 Unlocking the Covid Code

Edward Holmes was in Australia on a Saturday morning in early January 2020, talking on the phone with a Chinese scientist named Yong-Zhen Zhang who had just sequenced the genome of a novel pathogen that was infecting people in Wuhan. The two men — old friends — debated the results. “I knew we were looking at a respiratory virus,” recalls Holmes, a virologist and professor at the University of Sydney. He also knew it looked dangerous.

Could he share the genetic code publicly? Holmes asked. Zhang was in China, on an airplane waiting for takeoff. He wanted to think it over for a minute. So Holmes waited. He heard a flight attendant urging Zhang to turn off his phone.

“OK,” Zhang said at last. Almost immediately, Holmes posted the sequence on a website called Virological.org; then he linked to it on Twitter. Holmes knew that researchers around the world would instantly start unwinding the pathogen’s code to try to find ways to defeat it.

From the moment the virus genome was first posted by Holmes, if you looked, you could find a genetic component in almost every aspect of our public-health responses to SARS-CoV-2. It’s typically the case, for instance, that a pharmaceutical company needs samples of a virus to create a vaccine. But once the sequence was in the public realm, Moderna, an obscure biotech company in Cambridge, Mass., immediately began working with the National Institutes of Health on a plan. “They never had the virus on site at all; they really just used the sequence, and they viewed it as a software problem,” Francis deSouza, the chief executive of Illumina, which makes the sequencer that Zhang used, told me with some amazement last summer, six months before the Moderna vaccine received an emergency-use authorization by the Food and Drug Administration.

…

Historians of science sometimes talk about new paradigms, or new modes of thought, that change our collective thinking about what is true or possible. But paradigms often evolve not just when new ideas displace existing ones, but when new tools allow us to do things — or to see things — that would have been impossible to consider earlier. The advent of commercial genome sequencing has recently, and credibly, been compared to the invention of the microscope, a claim that led me to wonder whether this new, still relatively obscure technology, humming away in well-equipped labs around the world, would prove to be the most important innovation of the 21st century. Already, in Church’s estimation, “sequencing is 10 million times cheaper and 100,000 times higher quality than it was just a few years ago.” If a new technological paradigm is arriving, bringing with it a future in which we constantly monitor the genetics of our bodies and everything around us, these sequencers — easy, quick, ubiquitous — are the machines taking us into that realm.

Source: NYT

The 21st Century is the Century of Biology. A lot will change before this century is over.

The power of near-instant sequencing can break the cat-and-mouse games that have defined the world since the creation of the first organisms. The way the world works is that predators consume prey, and through Darwinistic selection, species evolve to either evade (if you’re prey) or become more lethal (if you’re predator) in order to survive. Humans have always played this game with bacteria and viruses. But bacteria and viruses have a significant advantage of being able to replicate (and hence evolve) so much faster than humans can. Bacteria and viruses can replicate and evolve very quickly, but humans effectively only evolve over thousands of years.

But with near-instant sequencing, humans for the first time can develop treatments almost as fast as bacteria or viruses can evolve.

#27 How mRNA Technology Could Change the World

The dream of mRNA persevered in part because its core principle was tantalizingly simple, even beautiful: The world’s most powerful drug factory might be inside all of us.

People rely on proteins for just about every bodily function; mRNA—which stands for messenger ribonucleic acid—tells our cells which proteins to make. With human-edited mRNA, we could theoretically commandeer our cellular machinery to make just about any protein under the sun. You could mass-produce molecules that occur naturally in the body to repair organs or improve blood flow. Or you could request our cells to cook up an off-menu protein, which our immune system would learn to identify as an invader and destroy.

Source: The Atlantic

And mRNA technology is one way in which humans can turn near-instant sequencing into something fast, powerful, and transformative.

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🤔 Hmm…

#28 The man whose software ate the world

Andreessen has very interesting takes on everything. Fascinating interview including…

On the desire for progress:

I think you also have to ask the question, okay, what about progress? What about actually getting to the future? For the environment, just the most striking thing that keeps jumping out, which I just still can’t believe it’s not the topic of daily conversation is: ok, if you want to eliminate emissions, we actually have the technology for doing that, it’s nuclear fission power. It’s actually highly safe, certainly compared to the myth and legend and compared to the alternatives. It’s just like a kill shot for carbon emissions. And yet it’s completely ruled out from the environmental movement. It’s representative of the fact that we do have the technological capability to fix a whole bunch of problems that we all agree that we have, and we also lack something in the national spirit or national character right now that really wants to actually fix these things. We want to complain about them; we just don’t want to fix them.

On oral vs textual culture:

One of the most kind of amazing things that I realized, in kind of a shock: turns out Socrates was right. Specifically where he condemns the written word on cultural and social grounds2. As he said, we Greeks—Western civilization at that point—transmit everything that we know and everything that we understand and everything that matters via stories. We tell the stories, and it’s in the process of telling the stories and hearing the stories discussing the stories that information transfer happens and civilization is maintained.

Written language however was two different things. Number one, what changed was the emotional load or the emotional impact of the stories, going from emotion to intellect. It changes the nature of how people learn about the world, and to Socrates’ argument, not for the better.

His other critique was that the written word can’t talk back3. It never changes, no matter how many times you read the same story, it’s always the same. Whereas if you told me the story, then we can actually have a discussion around it.

Source: The Pull Request

#29 The Empire of Son – Hard truths about SoftBank

Every day, from 8am to 10pm, Son Masayoshi sits in his mansion in Tokyo doing what entertains him like nothing else: sizing up technology entrepreneurs and handing out money. Working from home has not slowed down the billionaire boss of SoftBank. At the Japanese group’s earnings call on May 12th Masa, as he is universally known, boasted of backing 60 companies in three months. Between January and March he doled out $210m a week.

In the past four years SoftBank has poured $84bn or so into startups. It was the world’s biggest tech investor even before complementing a $98.6bn vehicle it runs, the Vision Fund, with a sibling that now contains $30bn. The 224 tech firms it has backed range from early-stage startups to established giants like ByteDance, owner of TikTok, a Gen-z time-sink. Names such as Plenty, Better and Forward imply missions to transform industries like food, health and banking. Going by the valuations used by SoftBank and other venture-capital (vc) funds, the backed companies are collectively worth a colossal $1.1trn, according to PitchBook, a data provider.

…

Today SoftBank is best understood as having four main parts. The most valuable by far is the 24.85% stake in Alibaba, worth $144bn. The second part contains its remaining mobile businesses and Arm (with Arm heading for disposal). SoftBank’s two Vision Funds make up the third portion. Finally comes Northstar, an internal hedge fund set up a year ago. At the centre sits Mr Son. “It’s one company, the Masa show, that’s it,” sums up a former executive.

Mr Son has two big ideas for the latest iteration of SoftBank. The first is to combine tech investing with financial engineering. In order to juice up returns, he has taken traditional vc and piled on leverage and complex structures. Second, Mr Son wants to create an over-arching tech “ecosystem” with SoftBank at its heart. Although SoftBank often owns only slivers of companies, he wants them to work together as if part of one group. The model is evocative of, if not identical to, the keiretsu—Japanese conglomerates such as Mitsubishi, with tentacles in finance, carmaking and lots besides, all helping each other.

Source: The Economist

I’d like a job where I can just give away money as fast as I can.

And despite being the butt of jokes, his record remains very good! Yes, WeWork was a disaster (among others). But his successes have more than made up for it by now. And this is before Bytedance goes public!

#30 China plans to send its first crewed mission to Mars in 2033 and build a base there

China plans to send its first crewed mission to Mars in 2033 as it continues to boost its space ambitions in a battle with the U.S.

…

Wang said the first step in China’s plans is to use robots to explore Mars to sample its surface and help select a place to build a base. The next stage would be to send astronauts up to Mars to build a base station there. Then China wants large-scale Earth-to-Mars cargo missions.

China has earmarked 2033, 2035, 2037, 2041 and 2043 for such missions and said it will explore technology to fly astronauts back to Earth.

Source: CNBC

New space race?

BUT, leaving aside politics, what an incredible time to be alive. Mars missions. Mars bases. Interplanetary commerce. We live in the age of science fiction.