Hello, hello! 👋🏻👋🏻
Welcome back to another edition of Tidbits covering all the recent things worth talking about in business, media, and technology.
China Policy Direction and Impact on Capital Markets
In recent months, Chinese domestic policy actions have accelerated and seem to embed a sense of urgency.
While the Chinese government and regulators have taken actions in the past (e.g. anti-corruption in 2014-2015, equity market actions in 2015-2016, P2P lending in 2018, gaming regulation in 2018, education in 2019, real estate fine-tuning throughout), the regulators never seemed to be trying to do more than 1 or 2 things at the same time.
This time it feels different. Ant’s cancelled IPO in late 2020 initially seemed to be just a Jack Ma or Ant / Alibaba issue…but quickly morphed into a broader anti-monopoly drive and crackdown on private lenders. Didi’s post-IPO crisis also seemed to initially just be a Didi “arrogance” issue…but this has also quickly morphed into a broader data / national security drive. And just yesterday, the Chinese regulator has confirmed their desire to nearly effectively ban after school tutoring…mostly seemingly in response to try to solve a demographics / low birth rate issue (since high cost of child-rearing is an often cited cause for not having children and education costs is a big contributor).
These actions are coming together in a very short period of time, and each time catalyzing significant destruction of investor capital.
Capital Flywheels is not a policy analyst and have no views on whether these actions are appropriate for Chinese society or not (as a framework, Capital Flywheels generally believes in the rationality of people and that people generally try to do what makes the most sense; Seemingly irrational actions, I assume, are likely the result of only having irrational choices to choose from…).
Capital Flywheels is merely a simple business and investment analyst. And from a business and investment perspective, the Chinese environment has certainly become materially more challenging to navigate. In the past, these risks existed, but Chinese companies (especially tech) were truly exceptional and had the ability to grow faster than many developed market alternatives. But Chinese tech is maturing and now regulatory risk is front-and-center. Many investors are likely asking why the risk / reward makes sense anymore.
These questions are not new and many investors have been asking these questions for years, but it is becoming increasingly important to consider because of how large China’s place in the capital markets has become. China is now the world’s 2nd largest capital market. The regulatory actions in the last 6 months have already wiped out >$2 trillion of investor capital. Further actions will likely have ripple effects around the world not unlike how US policy and Fed actions often ripple around the world. After all, the whole world’s capital markets basically exists as one giant bathtub of liquidity. Creating a wave in one end is very likely to create waves all over.
Everyone in the world is forced to be a Fed watcher because it matters. Maybe everyone now needs to be a China CAC and SAMR watcher as well.
#1 U.S., U.K., Allies Tie Chinese Government to Microsoft Hack
The U.S., U.K. and their allies formally attributed the Microsoft Exchange hack to actors affiliated with the Chinese government and accused Beijing’s leadership of a broad array of “malicious cyber activities,” escalating last week’s tensions between the White House and China.
The group of nations said Monday that the Chinese government has been the mastermind behind a series of malicious ransomware, data theft and cyber-espionage attacks against public and private entities, including the sprawling Microsoft Exchange hack earlier this year.
The group of nations attributing the attack to China includes Australia, Canada, New Zealand, Japan and NATO, marking the first condemnation by the North American-European alliance on China’s cyber activities, according to a senior Biden administration official.
“In some cases, we are aware that PRC government-affiliated cyber operators have conducted ransomware operations against private companies that have included ransom demands of millions of dollars,” the White House said in a fact sheet.Source: Bloomberg
Things aren’t going to go back to how things were before, are they?
In many ways, Biden has been more bold than Trump when it comes to China. And Biden is doing it with more force and credibility than Trump.
There are a lot of interesting implications to this – From China’s perspective, the US’ displeasure seems hypocritical because the US remains (very likely) the biggest hacking nation in the world with the greatest hacking capability. Even the US’ own intelligence agencies have admitted before that if foreign nations understood the extent of US intelligence operations, it would be problematic.
But drawing such comparisons could box China in because ransomware is an entirely different beast (I should also caveat that the usage of ransomware and its attribution to China is coming from the US, a non-neutral party to the current situation, so interpret it however you want). Ransomware can barely be considered an intelligence operation. Ransomware is highly disruptive and more akin to direct force, and in recent months have led to disabling of key infrastructure around the world including pipelines, hospitals, utilities, etc. Maybe this is a case of a “dog talking to a cat” and neither side understands each other, but it is likely a mistake for China (or any country) to try to conflate intelligence operations with ransomware operations. There is a coalition building against ransomware, and this could become a bigger problem for China (and Russia, North Korea, and Iran) if western nations feel like they are pushed against a wall with no ability to manage crippling ransomware attacks.
The other interesting implication from all this is how NATO is being roped into an issue concerning China very far away from where NATO operates (Europe). So the funny thing about the internet not having digital borders is that every national suddenly becomes neighbors with each other. NATO is physically situated very far away from China, but when it comes to cyberspace, NATO is, can, and will be involved anywhere, including China. Because borders no longer exist in the digital realm. Most nations still think about warfare physically / geographically. More advanced nations have started to think about cyber-warfare offensively without the constraints of physical borders. But sooner or later, the world will likely start to see new geographically-agnostic defensive alliances built in cyberspace that will likely ignore the constraints of physical borders. The removal of physical location as a constraint also means that digital alliances can become much wider / more encompassing than alliances of the past. NATO only involves a handful of countries. But a “digital NATO” could well one day encompass most of the world.
Over the last three years in private discussions with friends, I have raised the concern that a new Iron Curtain is rising. It is not physical. But it is digital. And it is intellectual.
🤑 Economics + Markets
#2 China Bans For-Profit School Tutoring in Sweeping Overhaul
China unveiled a sweeping overhaul of its $100 billion education tech sector, banning companies that teach the school curriculum from making profits, raising capital or going public.
Beijing on Saturday published a plethora of regulations that together threaten to up-end the sector and jeopardize billions of dollars in foreign investment. Companies that teach school subjects can no longer accept overseas investment, which could include capital from the offshore registered entities of Chinese firms, according to a notice released by the State Council. Those now in violation of that rule must take steps to rectify the situation, the country’s most powerful administrative authority said, without elaborating.
In addition, listed firms will no longer be allowed to raise capital via stock markets to invest in businesses that teach classroom subjects. Outright acquisitions are forbidden. And all vacation and weekend tutoring related to the school syllabus is now off-limits.
The out-of-school education industry has been “severely hijacked by capital,” according to a separate article posted on the site of the Ministry of Education. “That broke the nature of education as welfare.”
Among other things, they also ban the teaching of foreign curriculums, tighten scrutiny over the import of textbooks and forbid the hiring of foreign teachers outside of China — a curb that could have severe consequences for startups like VIPKid that specialize in overseas tutors. The government also ordered local authorities to tighten approvals for companies providing training on extra-curriculum subjects.Source: Bloomberg
I’m still not sure I believe this solves the fundamental issues they are trying to resolve. Chinese people prioritize education. Part of this is cultural, and part of it is economical / rational. The cultural aspects of education is unlikely to change regardless of what the law says parents can or can’t do. And education is a high priority because China is a large country with lots of people competing for few high-end jobs. And high-end jobs is necessary to fund the ever growing list of desires that come to all people naturally (like having nice house, being able to afford rising consumption habits, supporting family, etc). The desire for education is unlikely to change.
From what the media has disclosed, part of the issue is really the cost of child-rearing. The government may not actually be focused on education but views it as a tool for reducing the cost of child-rearing. The real problem may be China’s dramatically falling birth rate. But, I also question whether this resolves the issue. The biggest cost for families is not education, it’s real estate.
Either way, a $100 billion sector is likely now completely wiped out. The Paper Portfolio turned very cautious on China at the beginning of this year and sold out of all Chinese stocks. However, I unfortunately added TAL back as part of the July update after the stock fell >60% since the sale a few months ago. Seems very likely to have been the wrong call at this point with the stock likely worth approximately $0.
#3 China rushes to set up bailout funds for indebted state-run firms
Local governments in China are racing to launch rescue funds worth billions of dollars to bail out state-owned groups after a flurry of high-profile bond defaults that shook international investors.
Public records showed that six Chinese provinces have committed at least Rmb110bn ($17bn) to the funds since the end of last year, as a cash crunch among indebted state-owned enterprises hit local economies.
The wave of defaults included companies such as Yongcheng Coal and Electricity Holding Group, which threw the local economy of central province of Henan into crisis when it missed an Rmb1bn debt payment last year and stopped paying some of its 180,000 workers.
“The government doesn’t have a long-term plan to turn bad SOEs into good ones,” said an adviser to Hebei’s State-owned Assets Supervision and Administration Commission, the SOE regulator. “Its priority is just to get through the short-run liquidity crisis.”
State banks, the biggest suppliers of credit, are also cautious.
“Bailout funds are too small to meet the funding demand from a great many cash-strapped SOEs,” said a risk management official at one of the country’s top lenders. “We need to prioritise performance instead of local interests.”Source: FT
What’s interesting about the actions that the Chinese regulators are taking on education (which might impact science and math output in the future) and technology is that these sectors have been generally highly productive, especially compared to struggling state sector and old economy businesses. There’s a lot of capital tied up in low-returning businesses that are likely facing existential risks, especially in commodity sectors like coal / energy.
#4 Evergrande Contagion Risk Rises as Stock, Bonds Sink to New Lows
Fresh signs of a cash crunch at China Evergrande Group sent shares and bonds of the world’s most indebted developer to new lows on Tuesday, stoking fears of broader market contagion.
The property giant’s stock tumbled to the lowest level since April 2017, extending its two-day loss to 25%. Several of Evergrande’s local and offshore bonds sank to records, with its dollar note due 2025 falling to as low as 54 cents. Bonds of other junk-rated Chinese borrowers declined, while a gauge of developer shares dropped to a nearly three-year low. The nation’s bank stocks also slumped.
Long-simmering doubts about Evergrande’s financial health intensified this week after the developer had a $20 million bank deposit frozen by a local court and was hit with a sales ban by a city government alleging it failed to set aside enough funds in escrow accounts. The city later removed the ban, providing some relief for Evergrande’s stock, but investors remain worried the company isn’t selling properties and other assets fast enough to repay its $301 billion mountain of liabilities.
Late Monday, news emerged that the Chinese city of Shaoyang had halted sales at two of Evergrande’s residential projects. Shaoyang’s government said it took the action after Evergrande didn’t deposit enough pre-sale funds into escrow accounts and intentionally evaded supervision, according to a statement posted on the local housing department’s website.Source: Bloomberg
Evergrande is the largest property developer in China. It’s likely too big to fail. Its balance sheet is >$300 billion. And its total financial footprint including off-balance sheet obligations is somewhere around $800 billion (almost $1 trillion!). This is a very large problem that requires high finesse. I hope the regulators understand that this is too big to fail.
This is before mentioning the importance of real estate to the Chinese economy. An Evergrande collapse could easily wipe off 1-2% of GDP growth alone (real estate is ~10% of GDP and including adjacent services / sectors, real estate is between 20-30% of GDP).
#5 China to Back Shanghai’s Trial of Free Use of Yuan
China’s central bank will support Shanghai to take the lead in testing the free use of the yuan, explore unrestricted inflows and outflows of capital for cross-border trade and investment, and unlimited currency exchange in the city’s new free trade zone, an official said Tuesday.
China issued guidelines last week for development of Shanghai’s Pudong New Area into a test zone for socialist modernization. Pudong is to advance opening-up in the financial sector, including exploring the implementation of capital account convertibility, innovating internationally oriented yuan-denominated financial products, expanding the scope of foreign yuan financial products for domestic investment, promoting the cross-border flow of funds and exploring a foreign exchange futures trading pilot program.
Currently, the yuan is convertible for trade purposes under the current account, which records the value of exports and imports and international transfers of capital, but it is not freely convertible under the capital account, which records the net flow of investment transactions into an economy.Source: Caixin
This could be big! If this happened a decade ago, this would have been world-changing. But the world has changed quite a bit in the last 4 years. China is a bigger economy and on track to becoming the biggest economy within the next 10 years. There are still many investors that would like to have free-access to RMB and the Chinese capital market, but I think that desire has probably softened a little bit. Most businesses that want to invest in China are mostly looking to grow domestic China consumption business. Any cashflows generated were likely to be reinvested indefinitely in China anyway. Being able to take the money out would have been nice but not key for those investments. Being able to take money out is more important for a purely financial investor, but I think China is declining on the totem pole in terms of where people are looking for investments.
#6 Bill Would Strip Social Media of Protections for Health Misinformation
Sen. Amy Klobuchar (D., Minn.) introduced a bill Thursday that would strip online platforms such as Facebook Inc. and Twitter Inc. of their liability protections if their technologies spread misinformation related to public-health emergencies, such as the Covid-19 pandemic.
The bill, which Ms. Klobuchar previously telegraphed was in the works, would create an exception to the law known as Section 230, which shields internet platforms from lawsuits for content generated by their users and other third parties.Source: WSJ
How the internet works is probably going to change in the coming years. This seems sensible, though, by creating a carve-out for a very specific area (science and health) that shouldn’t be that controversial at all.
#7 Meet China’s new gaming underclass
A 23-year-old Shanghai native nicknamed Sake has been playing competitive games since a young age. During her senior year in college, Sake learned that she could make extra cash from her hobby by serving as a virtual companion (陪玩, pronounced peiwan) for online gamers. Her customers were mostly men willing to pay for a partner to play with them, help improve their skills or sometimes just chat with them during downtime.
Sake usually waited for gamers to find her on Bixin, China’s leading online marketplace for gamers. Proactive peiwan can find clients by grabbing orders that are already priced. Other times, companions enter an order distribution hall (派单厅) where they line up in front of a customer and a host to show off their voices. Because audio chat is a major component of gaming, a gamer will often pick the companion who he thinks sounds the best.
In the game companion world, women like Sake refer to their male clients as “boss” (老板). And the “boss,” often men, call the women “missie” (小姐姐), an affectionate moniker for attractive young women in China.
“It’s a little sexist,” Sake said. The gamers “are not here to level up; what they want is entertainment.” For that, they usually hire a male trainer.
“Only men are considered serious, skilled gamers,” Mengyang Zhao, a Ph.D. candidate at the University of Pennsylvania who studies China’s video game service industry, told Protocol. “However skilled a female gamer is, people generally don’t take her seriously, so women tend to hit a low wage ceiling.”
State media has praised platforms like Bixin for helping revitalize China’s post-COVID economy by offering freelance gigs.
But game companions exist in a corner of the digital gig economy that’s given far less public attention than delivery workers, car-hailing drivers and livestream hosts. It’s a job virtually unique to China, according to Zhao, the Penn researcher, who said she has interviewed more than 60 Chinese peiwan over the past two years. In 2021, the game companions for hire on marketplaces like Bixin were overwhelmingly female and were generally looked down upon by professional esports players and game developers. Most of them live in China’s economic backwaters: rust belts, far-flung regions and small towns. They tend to not have college degrees, which leaves them fewer employment options. And on apps like Bixin, they are constantly objectified, harassed and exploited.Source: Protocol
This was a really eye-opening article.
I’m generally a techno-optimist. And Silicon Valley has many techno-optimists. But my flavor of techno-optimism isn’t “I don’t have to pay attention to the problems of tech because tech will somehow magically solve it in the future”. Problems can only be solved if people focus on it. It requires us, including the optimists, to focus on it.
And this article raises a lot of interesting questions about how digital worlds could become problematic. This seems mostly confined to China at the moment, but these problems are possible anywhere:
1/ Digital worlds can make us more connected because it allows us to interact with anyone, but it can also be a very lonely and isolating experience. The right way to solve that loneliness likely isn’t to create a market for gamer buddies…it’s to figure out how to connect gamers to likeminded people and create more ways to socialize and share interests in a safe space.
2/ Money doesn’t change people, it makes people more of who they are. The internet and digital worlds are probably the same way. It doesn’t change people, but it does remove more of the offline consequences that may have prevented people from being exactly who they are, including sexist tendencies. These are things that need to be managed and solved.
3/ Gig work is becoming more and more diverse. Regulations need to be flexible enough to keep pace because gig work will evolve faster than regulations can follow.
💬 Media + Games
#8 Billionaire Who Missed Out on TikTok Is Trying to Beat It
In 2017, Su Hua, the founder of a Chinese startup called Kuaishou Technology, was on the verge of closing the biggest deal of his career — the acquisition of a fledgling video service that would become TikTok. But arch-rival ByteDance Ltd. swooped in with a better offer, and Su missed out on what has become a global sensation.
Now, the 38-year-old entrepreneur is getting some payback. In February, Kuaishou went public in Hong Kong, raising more than $5 billion on the strength of its booming video and commerce operations. ByteDance, meanwhile, tangled with the U.S. government and then got ensnarled in China’s tech crackdown, likely delaying its own initial public offering.
Su isn’t wasting a moment. Flush with cash from the IPO, Kuaishou is cranking up spending to close the gap with ByteDance, more than four times its size. Kuaishou plans to expand in countries like Brazil and Indonesia, rather than TikTok’s stronghold in the U.S. The company intends to double its global squad to 2,000 by year’s end to accelerate the roll-out of its international products.
About half of its 150 million monthly overseas users now hail from Latin America, one of TikTok’s key markets. Earlier this year, Su’s company struck a deal to sponsor the 2021 Copa América tournament, a big draw in the region. It also pledged to spend $10 million to incentivize sports content creators over the next year.Source: Bloomberg
While Kuaishou often plays second fiddle to Bytedance in China (and abroad), it’s created a fairly impressive ecosystem in its own right.
This profile of the founder along with a discussion of Kuaishou’s global ambition is worth reading.
#9 ByteDance’s gaming chief sets out global ambition to rival Nintendo and Blizzard after US$4 billion Moonton deal
ByteDance’s gaming chief, Yan Shou, said that the Beijing-based tech giant needs to focus on becoming a global gaming company to rival international gaming powerhouses such as Nintendo and Activision Blizzard, according to an internal speech, a copy of which was obtained by the South China Morning Post.
Yan said that now is the time for “a new generation of global gaming companies” coming out of China, and that ByteDance can become a giant in gaming which can remain popular for decades.Source: SCMP
That’s an ambitious goal.
Funny how Yan Shou didn’t include Tencent on the list even though Tencent is by far the largest game company in the world now (and is very likely the target Bytedance is aiming for).
#10 TikTok Launches New ‘Spark’ Ads Which Enabled Brands to Tap into Trending Organic Content
TikTok has launched a new ad option which essentially enables brands to sponsor already trending organic content that aligns with their offerings, in order to get an association boost without having to create anything themselves, or even commission a creator to do so.
Through TikTok’s new ‘Spark‘ ad option, brands can identify existing organic videos that might fit their campaign – like, say, if a beauty influencer has showcased your product in his or her organic clips.
Through Spark, brands can boost both their own organic posts and/or relevant content posted by creators, converting them into In-Feed Ads or TopView ads. And given that this is essentially boosting already strong performing content, it could be a great way to maximize brand reach and resonance, which could come in particularly handy for marketers that are less familiar with the platform and may not have the budget or skills for original material.Source: Social Media Today
So instead of making an ad that may or may not work, TikTok is giving advertisers the ability to look at what already works and just put a logo / sponsorship on it. It’s actually…kind of brilliant?
#11 YouTube Shorts Launches First Official TikTok-Like ‘Dance Challenge’ In Collaboration With BTS
YouTube is following in the footsteps of TikTok by initiating an exclusive dance challenge with one of the biggest K-pop acts on earth.
Today, YouTube and boy-band BTS have unveiled the Permission to Dance Challenge, which will be held exclusively on YouTube’s TikTok copycat, Shorts. The challenge serves to fete the fact that Shorts expanded globally last week to 100 additional countries.
The challenge will run from July 23 to 14, and asks participants from across the globe to create 15-second Shorts within the YouTube app replicating BTS’ dance moves from “Permission to Dance” — including the international sign gestures that the group brandishes for ‘peace’, ‘dance’, and ‘joy’ (see below). Applicants should hashtag their submissions #PermissionToDance and #Shorts.Source: Tubefilter
Youtube is coming from behind in short video. I’m still not quite convinced that a platform built for horizontal video works all that well for short video, which has standardized to vertical videos given its mobile-first orientation.
BUT, BTS will very likely attract a very, very large audience to at least give it a try.
#12 Youtube Acquires Indian Social Startup Simsim
The Gurgaon-headquartered startup helps small businesses in India transition to e-commerce by using the power of video and creators. The startup’s eponymous app acts as a platform to connect local businesses, influencers and customers.
The thesis, according to Rohan Malhotra of Good Capital, an early backer of Simsim, is: “micro-influencers are more effective at building a targeted audience (growth), creating entertaining experiences (retention), building trust (higher value) and personalising messaging (conversion). Consumer social platforms (Facebook, YouTube, Instagram, etc.) cannot meaningfully monetise via advertising-financed models in India; this unlocks the opportunity for more deeply integrated transactional platforms. New internet users in India need an interactive seller-led experience to replicate the offline e-commerce experience this market is used to.”
“We started Simsim with the mission of helping users across India shop online with ease, enabled through small sellers and brands showcasing and selling their products using the power of content by trusted influencers. Being a part of the YouTube and Google ecosystem furthers simsim in its mission,” Simsim co-founders Amit Bagaria, Kunal Suri and Saurabh Vashishtha said in a joint statement. Bagaria and Vashishtha previously worked together at Paytm.Source: TechCrunch
More evidence that Youtube is paying attention to (social) commerce. Will be interesting to see if some of the learnings here will be expanded globally. Google (and Facebook and Amazon) have used India as a testing ground for new innovations for a few years already.
Maybe I am reading a bit too much into the structure of the company, but I find it interesting that Youtube is engaging in much more of the interesting new paradigms across media and commerce. And that these things are happening at the Youtube level and not at the Google level. I wonder how much of Youtube’s learnings and efforts will percolate through the rest of Google. For example, will Google Shopping benefit from this acquisition?
#13 Epic Games acquires Sketchfab, a 3D-model sharing platform
New York-based startup Sketchfab has been acquired by Epic Games, the company behind Fortnite and Unreal Engine. Sketchfab has been building a platform to upload, download, view, share, sell and buy 3D assets. Essentially, it is the leading repository for 3D files on the web.
More recently, Unreal Engine has been used for different use cases beyond video games, such as special effects, 3D explorations of virtual worlds, mixed reality projects and more.
But an engine without assets is pretty useless. That’s why creators either design their own 2D and 3D assets, outsource this process or buy assets directly. It led to the creation of an entire ecosystem of assets and creators.
Epic Games has its own Unreal Engine marketplace, but Sketchfab has been working on building the definitive 3D marketplace for many years with three important pillars — technology, reach and collaboration.Source: TechCrunch
Epic (and Unity and Facebook) are acquiring a lot of the digital assets and infrastructure that is needed for creating digital worlds. These digital assets are like “oil” for digital worlds.
See also Unity’s acquisition of SpeedTree.
#14 Netflix confirms gaming efforts will focus on mobile
The video service officially confirmed plans to get into the video game space in its letter to investors Tuesday. “We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV,” the letter reads.
Netflix’s gaming efforts will initially be focused on mobile, and the company has no plans to charge members additional fees for access to games. “But since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games,” the company said.Source: Protocol
Watch out Fortnite. Netflix has said quite a few times that their biggest competitor for user time is Fortnite.
Though the Netflix interface itself is probably more suited for a Roblox-type experience.
#15 MARK IN THE METAVERSE
I think a lot of people, when they think about the metaverse, they think about just virtual reality — which I think is going to be an important part of that. And that’s clearly a part that we’re very invested in, because it’s the technology that delivers the clearest form of presence. But the metaverse isn’t just virtual reality. It’s going to be accessible across all of our different computing platforms; VR and AR, but also PC, and also mobile devices and game consoles. Speaking of which, a lot of people also think about the metaverse as primarily something that’s about gaming. And I think entertainment is clearly going to be a big part of it, but I don’t think that this is just gaming. I think that this is a persistent, synchronous environment where we can be together, which I think is probably going to resemble some kind of a hybrid between the social platforms that we see today, but an environment where you’re embodied in it.
It just touches a lot of the biggest themes that we’re working on. Think about things like community and creators as one, or digital commerce as a second, or building out the next set of computing platforms, like virtual and augmented reality, to give people that sense of presence. I think all of these different initiatives that we have at Facebook today will basically ladder up together to contribute to helping to build this metaverse vision.
And my hope, if we do this well, I think over the next five years or so, in this next chapter of our company, I think we will effectively transition from people seeing us as primarily being a social media company to being a metaverse company. And obviously, all of the work that we’re doing across the apps that people use today contribute directly to this vision in terms of building community and creators.
I think one of the things that is most magical about the present, and that I think is going to get even more so, is that flattening out distance creates a lot more opportunities for people. Not just in the sense that a version of me growing up today wouldn’t be stuck playing Little League, that I’d get to find people who are interested in the same things, so I could explore coding and have a much more vibrant community around that, or surfing, or whatever the thing is that you’re interested in. I think that that’s probably quite compelling and positive. I also think it is really important for economic opportunity. One of the big issues today in society is inequality. And one of the people I think has done the most interesting research on this is this guy, Raj Chetty, I think he’s at Harvard now. And basically some of the research that he’s done shows that the zip code in which you were born and raised is highly correlated with your future mobility and what your income is going to be. And I think that that just goes against the sense that we have in this country that people should have equal opportunity.Source: The Verge
Fascinating interview with Zuckerberg. I generally don’t think Zuckerberg gets culture, and he probably doesn’t get the cultural aspects of the Metaverse. But he does get strategy. And he’s probably one of the best CEO strategists alive today.
#16 THE GAME MAKERS AND ARTISTS PUSHING ROBLOX TO ITS LIMITS
Last year, when the pandemic made in-person gatherings impossible, Pipkin downloaded Roblox Studio, the platform’s game creation software, to construct a digital space to host their own party. It’s still publicly accessible, a giant mountainous landscape packed full of hang-out spots and, befitting the celebratory occasion, a balloon dispenser. Friends rolled through virtually over the course of six hours, an event Pipkin describes as “goofy,” “strange,” and, above all, “lovely.” In fact, Pipkin was so taken with the platform that they decided to use it to build a new project entirely within it. The so-called Dream Diary is a little different from the birthday zone; it allows players to peek into the most intimate recesses of its creator’s nocturnal mind.
Having been updated incrementally over the years, Roblox Studio has become a robust piece of software in its own right, stacked with enough features for Pipkin to render these whimsical nighttime visions. They’re explicitly poetic, a tonal far cry from Cavanagh’s Climb the Giant Man Obby, which leans into the silliness found on much of the platform. Pipkin’s “It’s Time” is about conversing with a hand-drawn mythological creature in a garden overgrown with pink cherry blossoms. It turns out that you and this creature are in a relationship and that your partner doesn’t have much longer to live; the game involves spending a final few minutes together.
While outsider game makers migrating to the platform won’t likely impact the fortunes of the company in the long run (unless, say, Hideo Kojima joins the party), such curiosity could yet spark interesting results that reverberate beyond it. One only need listen to Ricky Haggett, whose credits include cult video game hits Wilmot’s Warehouse andHohokum in addition to I Am Dead, for one possible peek at the ways Roblox’s seamless multiplayer components might impact video games more broadly. “Our new game has definitely been influenced by playing a lot of Roblox,” he says. “It’s been such a good expression of faff-free hanging out with friends in a pandemic. There’s almost no barriers to entry — Roblox feels frictionless.”Source: The Verge
I loved this article. Most people focus on Roblox from the user / gamer perspective. But this article goes into how Roblox Studio (the editor that allows people to create experiences) is attracting artists and game makers. Roblox is not a platform that lends itself easily for generating income (since Roblox takes ~70% cut…makes Apple’s 30% cut seem like child’s play), but it’s so compelling for some artists and game makers that they use it anyway.
#17 Meet Visa: Reintroducing the Iconic Visa Brand to Everyone, Everywhere
Inviting the world to ‘Meet Visa,‘ the global payments technology company today unveiled the initial phase of its brand evolution spotlighting the diverse capabilities of its network and commitment to enabling global economic inclusion. Aligned closely with the company’s business strategy, this phase includes the debut of a dynamic global marketing campaign and a preview of a modernized look for Visa’s iconic brand.
More than 60 years ago, when Visa was founded, few could imagine a world beyond cash and checks. Visa’s founding vision to introduce a more secure, reliable and convenient currency in digital form began with a simple question: what if money became fully electronic? Today, Visa continues to anticipate the future of digital commerce, providing access through its secure global network working for everyone, everywhere.
While Visa continues to shape the physical and digital credit or debit card transaction, it also increasingly sits at the center of enabling money movement. A company built on access to economic inclusion, the Visa network connects 3.6 billion credentials, over 70 million merchant locations, tens of thousands of partners and powers more than $11 trillion in total volume annually. Over the last five years alone, Visa has invested $9 billion in technology to shape the future of commerce, delivering a differentiated set of products, services and benefits.1 Visa’s network helps enable a gig-worker with the flexibility to get paid in real time, facilitates person to person payments that can send and receive money between billions of cards and accounts worldwide, and large corporate payments to be made more effortlessly across borders, as just a few examples.Source: Visa
The rebranding highlights what should have been apparent for at least a couple of years. Visa is a generalized network. It was previously used to run cards on top of, but it can be a network for anything. It is a network that connects the financial system with users and merchants. What can people do with a 3-sided network that connects these parties?
#18 Visa to Acquire Currencycloud
Visa (NYSE: V) today announced it has signed a definitive agreement to acquire Currencycloud, a global platform that enables banks and fintechs to provide innovative foreign exchange solutions for cross-border payments. The acquisition builds on an existing strategic partnership between the two companies and values Currencycloud at £700 million, inclusive of cash and retention incentives. The financial consideration will be reduced by the outstanding equity of Currencycloud that Visa already owns.
Currencycloud’s cloud-based platform offers a broad set of APIs enabling banks and financial services providers to offer currency exchange services, including real-time notifications on foreign exchange transactions, multi-currency wallets, and virtual account management. The Currencycloud platform supports nearly 500 banking and technology clients with reach in over 180 countries.
“The acquisition of Currencycloud is another example of Visa executing on our network of networks strategy to facilitate global money movement,” said Colleen Ostrowski, Visa’s Global Treasurer. “Consumers and businesses increasingly expect transparency, speed and simplicity when making or receiving international payments. With our acquisition of Currencycloud, we can support our clients and partners to further reduce the pain points of cross-border payments and develop great user experiences for their customers.”Source: Visa
Here’s an example – Visa is turning itself into a cross-border FX network. And Currencycloud even offers fintech-y things like APIs for wallets and virtual account management.
A network is a network is a network.
#19 Introducing Square Banking, a Suite of Powerful Financial Tools for Small Businesses
Today, Square launches Square Banking, a suite of financial products purpose-built to help small business owners easily manage their cash flow and get more out of their hard-earned money. Coming on the heels of Square’s industrial bank, Square Financial Services, beginning operations in March, Square Banking represents a major milestone in Square’s continued efforts to expand access to financial tools for underbanked populations and marks the beginnings of the company’s journey to provide more banking solutions to small businesses.
Square Banking consists of three core products designed to help small business owners confidently manage cash flow stress: two new deposit accounts, Square Savings and Square Checking, join Square’s existing lending capability, now called Square Loans. By offering essential banking tools that work seamlessly with Square’s ecosystem of solutions like payments and Square Payroll, sellers now have a single home for their entire business, gaining a unified view of their payments, account balances, expenditures, and financing options.
With automated savings, Square Savings removes the friction from setting aside funds, enabling sellers to effortlessly save a percentage of every Square sale they make. To better help businesses organize their savings, Square Savings also offers customizable folders that sellers can use to save for specific goals and priorities, like purchasing new equipment or paying quarterly tax obligations. These FDIC-insured accounts offer a 0.5% annual percentage yield1, and have no minimum deposits, balance requirements, or account fees.Source: Square
From the user’s perspective, not much has really changed. You were able to store money on Square before. Now you can still do that. You get a little bit of extra interest now, but it’s not a big change.
The biggest change will be for Square.
The difference between a digital wallet and a bank account is that a bank account is a very specific legal / regulatory term (many fintechs have gotten into hot water for calling themselves “better bank accounts”). A bank account is FDIC-insured and allows the bank to lend your money out. Square couldn’t just take wallet balances and lend it out before. But now they can take the balances in the bank account and lend it out (this is why bank accounts are insured to reduce credit risk to depositors). I anticipate Square lending to expand meaningfully in the coming years.
#20 How brands develop DTC e-commerce on WeChat in China?
Given the penetration of WeChat among Chinese consumers, leveraging WeChat Mini Program Stores has become a pivotal approach for luxury brands to develop a direct-to-consumer e-commerce business in China.
While e-commerce marketplaces like Tmall drive massive amounts of consumer traffic and continue to form a significant portion of a brand’s e-commerce revenues, brands should also not overlook the development of brand-owned direct-to-consumer e commerce in China. But how can they go about this? In the West, a DTC e-commerce channel is typically established on the brand’s .com website. However, shopping on websites does not come naturally to Chinese consumers.
This is where WeChat, the country’s most ubiquitous social platform, comes into the picture. The platform has been building up its e-commerce legitimacy since the introduction of its Mini Programs in 2017 – mini applets within the platform that can be developed and run independently by brands – and now presents a very interesting opportunity for brands to develop an alternative DTC e-commerce channel in China apart from its official website.Source: Retail in Asia
Good overview of how direct-to-consumer in China is heavily dependent on WeChat.
#21 Snap buys another company to make AR shopping a reality
The parent company of Snapchat has bought Vertebrae, a company that lets brands create and manage 3D versions of their goods. Vertebrae’s 50-person team will keep developing the platform for existing and new clients, according to a Snap spokesperson. The idea is that a company can easily upload visuals and other information about an item into Vertebrae and have a 3D version made for shoppers to access, and potentially buy directly, within Snapchat.
“We’re thrilled to join Snap, where we will strengthen and scale our world class 3D asset platform for retailers and brands,” Vertebrae CEO Vince Cacace said in an exclusive statement to The Verge. “The future of AR commerce is bright, and we’ll continue to make it easy for our partners to create, manage, and deploy AR experiences across all customer touch points.”
When you piece together Vertebrae with Snap’s other shopping-related acquisitions and features, including Fit Analytics and Screenshop, it’s easier to get a sense of its ambitions to be a shopping destination. For brands, the company is setting up a self-service system to easily upload and manage AR versions of their goods that people can discover in Snapchat. For Snapchat users, imagine being able to scan just about anything in the real world and turn it into a virtual object that you can manipulate, resize, and then buy without leaving the app.Source: The Verge
#22 Snap Inc. and Verishop Launch Social-Shopping, E-Commerce Partnership
Today, Verishop and Snap Inc. announced the launch of Verishop Mini: a curated shopping experience that lives exclusively within Snapchat, allowing users to discover and shop the latest in fashion and beauty products all without leaving the app. Verishop Mini, which debuts today, seamlessly delivers Verishop’s best-in-class e-commerce experience to the 280M daily Snapchatters.
The curated store, accessible through Snap’s rocket icon within Chat and search, will feature a rotating selection of cult-favorite fashion labels including Ganni, Faithfull the Brand, Labucq, The Line by K, Dannijo, Frankie’s Bikinis, Bebe, Richer Poorer, and Fifth & Ninth; and beauty brands including Kosas, R+Co, Blume, EXA, and Saie. Snapchatters can shop their “mood” via ten themed categories, created exclusively for Verishop Mini, that run the gamut from Free Spirited, to Mid-Century Modern, and High Glam. Minis integrate directly with Chat, making it easy to share favorites in real time with friends.
“Our Minis platform offers an exciting new way for Verishop to create a socially-driven e-commerce experience inside of Snapchat,” said Alston Cheek, Director of Platform Partnerships at Snap Inc. “The Verishop Mini makes it easy and fun for our community to shop fashion and beauty favorites expertly curated just for them, right alongside their friends on Snapchat.”Source: Businesswire
#23 Chip design giant Cadence launches AI platform to speed processor development
Cadence Design Systems Inc. today launched a new artificial intelligence platform, Cerebrus Intelligent Chip Explorer, that it says can improve the productivity of semiconductor engineers and help them develop faster chips.
Publicly traded Cadence is one of the world’s top makers of chip design software. Its software is used by Nvidia Corp., Advanced Micro Devices Inc. and many other major players in the semiconductor market to develop new products. The company posted revenue of $2.68 billion in its 2020 fiscal year.
Chip design teams need software tools such as those sold by Cadence to help them with semiconductor development because modern processors contain as many as billions of transistors. It’s impossible manually to determine the optimal way to build, configure and link together so many transistors. Cadence’s software automates a big portion of the calculations involved in developing a chip so engineers can save time and focus on the most important aspects of a project.
The company’s newly debuted Cerebrus platform uses machine learning to automate even more aspects of engineers’ work.
One phase of chip projects that Cerebrus promises to speed up is what’s known in the semiconductor industry as the register-transfer level development process. Engineers start building a new chip by creating an abstract representation of how data will move through the chip and what computations should be performed on the data by transistors. This abstract representation is referred to as the register-transfer level.
Chip engineers can provide Cerberus with the abstract register-transfer level representation of a chip, then instruct the software to refine the design until a certain combination of chip performance and power efficiency is achieved. Cerberus performs the task using reinforcement learning algorithms.
Among the hardware-level tasks Cerebrus can help partially automate is floorplan creation. That’s the process of figuring out the optimal placement of circuits on a chip. One early user of Cerebrus’ floorplan optimization feature is Renesas Electronics Corp., one of the auto sector’s main semiconductor suppliers, which used the software to improve performance of a recently developed chip by more than 10%.Source: Silicon Angle
A few weeks ago, Tidbits flagged the usage of AI in chip design.
Now it’s actually being implemented in critical software that chip designers use. What kinds of new chips and chip behavior will we get when this becomes more commonplace? What can humans + AI do that humans alone cannot imagine?
#24 Arm researchers have created a flexible 32-bit computer chip made from plastic
Researchers from Arm Holdings Ltd. and PragmatIC Semiconductor Ltd. say they have created the first true computer chip that uses plastic rather than silicon as its base material.
By using plastic, the researchers said, the chip is more flexible and could potentially usher in a new era called the “internet of everything” where microprocessors are used in everyday objects such as clothes and food packaging.
The research, published today in the journal Nature, notes that silicon has been the base element of semiconductors since the earliest days of digital computing. That’s thanks to two fundamental characteristics – silicon is the second-most common element on the planet, meaning it’s both cheap and in plentiful supply, and it can function as both an energy conductor and an energy insulator, depending on how it’s implemented.
But silicon isn’t suitable for every possible computing application. One of its main limitations is that it’s incredibly rigid and brittle, which means, for example, it cannot easily be integrated into biology. And although silicon is cheap enough to use products that are meant to last a while, such as computers and smartphones, they’re not cost-effective enough for dispensable products designed to be used once and then thrown away.
The PlasticARM processor, the researchers explained, is designed to overcome those limitations.
The researchers were quick to point out that PlasticARM is not intended as a replacement for silicon. In terms of performance, power efficiency and density, silicon maintains a big advantage that probably won’t be overcome anytime soon, they said. Rather, they envisage that plastic chips will be an option in cases where more novel form factors are required, and where silicon is not cost-effective.Source: Silicon Angle
#25 Uber’s Freight Unit to Buy Logistics Tech Firm Transplace for $2.25 Billion
Uber Technologies Inc.’s Freight unit is buying technology-focused logistics services provider Transplace in a cash and stock deal worth about $2.25 billion that extends the ride-hailing giant’s reach into the U.S. domestic shipping sector.
The company is seeking to bring greater efficiency through digital bookings to the domestic shipping sector but faces strong competition from traditional middlemen that match freight loads to available trucks and from a lineup of tech-focused startups including Convoy and Transfix Inc.
Uber Freight head Lior Ron said in a statement the combination with Transplace would “bring together complementary best-in-class technology solutions and operational excellence…that will transform shippers’ entire supply chains, delivering operational resilience and reducing costs at a time when it matters most.”Source: WSJ
Uber Freight isn’t something most investors focus on. But freight industry is ripe for disruption and might have better economics than passenger ride hailing. This deal would bring necessary scale to Uber Freight.
#26 Dara Khosrowshahi, Dad of Silicon Valley
Can this rational, charming chief without the edge, ego or cult following of wacky founders succeed in today’s insane economy? Does the incredible shrinking kingdom of Uber still dream big?
“Right now, I dream about pushing a button and getting a piano delivered to your home in an hour and a half,’’ Mr. Khosrowshahi said. “I think that’d be really cool.”
He continued: “We’ll keep working on go-and-get. Anywhere you want to go, anything you want to get, however you want to get it, we’ll be there for you.”
“My goal in life is not to build the most sexy company,” he said. “It is to build the best company.”
Great interview that shows Dara’s personal side and what he’s aiming to achieve at Uber.
In 1979, when Dara was 9, his Muslim family fled Iran to escape the revolution, leaving the fortune they had made from their large pharmaceutical and cosmetics company. They moved to an uncle’s mansion in Irvington, N.Y., for a couple of months before getting a condo in Tarrytown.
Once, his mother, Lili, had shopped in Paris at Dior, Saint Laurent and Celine. Now she had to go to work at the Madison Avenue Celine. Once, she had had a cook, two gardeners, a driver and a babysitter for each child; now the woman who had never set foot in a kitchen became her own cook.Source: NYT
And this background is incredible. I think it explains a lot of Dara’s humility and quiet confidence.
#27 Argo, Ford to launch self-driving vehicles on Lyft’s ride-hailing app
Autonomous vehicle technology startup Argo AI and its backer and customer Ford plan to launch at least1,000 self-driving vehicles on Lyft’s ride-hailing network in a number of cities over the next five years, starting with Miami and Austin.
“It’s the biggest deployment certainly that we’re doing and that I think anyone else is doing,” Kelman said. “One thousand cars across six markets is a big leap forward in terms of scaled commercialization.”
This isn’t just about Argo and Ford jumping on the Lyft network. Lyft will also provide access to driving data from its entire network in exchange for a 2.5% stake in Argo AI, under terms of the agreement announced Wednesday. The partnership has boosted Argo’s valuation to $12.4 billion, sources confirmed to TechCrunch. (The valuation was first noted by Bloomberg).
Lyft already captures driving data, which includes telemetry information such as hard-braking events and even collisions. Argo is most interested in two areas of data: safety information around human drivers on its app and more generally what trip movements look like across a city, Argo CEO Bryan Salesky told TechCrunch.Source: TechCrunch
Two things that stand out:
1/ Driverless cars continue to expand. And this will be in partnership with a ride hailing player, which reduces the risk of the ride hailing players being disintermediated.
2/ Lyft gathers a bunch of data that is useful for driverless car development. I bet Uber gathers the same data. Could be valuable.
🚀 Enterprise Software
#28 Zoom Elevates Platform Experience with Launch of Zoom Apps and Zoom Events
Zoom Video Communications, Inc. (NASDAQ: ZM) today announced the general availability of its latest innovations, Zoom Apps and Zoom Events. Zoom Apps seamlessly embeds third-party apps within the Zoom Meetings and desktop client experience, enhancing collaboration, productivity, and entertainment for today’s hybrid workforce. Zoom Events is an all-in-one platform for creating a wide range of interactive and immersive virtual events to reach and engage audiences.
Zoom Apps expands the offerings of the Zoom App Marketplace, which already hosts over 1,500 third-party integrations. With Zoom Apps, you can boost productivity and stay focused on your workflows by incorporating your favorite apps into your meetings. There are over 50 Zoom Apps available now, ranging from enterprise to consumer use cases—including whiteboarding, project management, note-taking, and video games, with more in development and available soon.Source: Zoom
Zoom went from floor to ceiling in 1 year. Now it’s trying to figure out how to go beyond the ceiling. Can it become a generalized ecosystem focused on video?
#29 Zoom to Acquire Five9
Zoom Video Communications, Inc. (NASDAQ: ZM) today announced it has entered into a definitive agreement to acquire Five9, Inc. (NASDAQ: FIVN), a leading provider of the intelligent cloud contact center, in an all-stock transaction valued at approximately $14.7 billion. Combining Five9’s Contact Center as a Service (“CCaaS”) solution with Zoom’s broad communications platform will transform how businesses connect with their customers, building the customer engagement platform of the future.
The acquisition is expected to help enhance Zoom’s presence with enterprise customers and allow it to accelerate its long-term growth opportunity by adding the $24 billion contact center market. Five9 is a pioneer of cloud-based contact center software. Its highly-scalable and secure cloud contact center delivers a comprehensive suite of easy-to-use applications that allows management and optimization of customer interactions across many different channels.Source: Zoom
But it’s diversifying its bets in case it doesn’t work. It can fall back on just being a cloud call center.
#30 DeepMind creates ‘transformative’ map of human proteins drawn by artificial intelligence
AI research lab DeepMind has created the most comprehensive map of human proteins to date using artificial intelligence. The company, a subsidiary of Google-parent Alphabet, is releasing the data for free, with some scientists comparing the potential impact of the work to that of the Human Genome Project, an international effort to map every human gene.
Proteins are long, complex molecules that perform numerous tasks in the body, from building tissue to fighting disease. Their purpose is dictated by their structure, which folds like origami into complex and irregular shapes. Understanding how a protein folds helps explain its function, which in turn helps scientists with a range of tasks — from pursuing fundamental research on how the body works, to designing new medicines and treatments.
Previously, determining the structure of a protein relied on expensive and time-consuming experiments. But last year DeepMind showed it can produce accurate predictions of a protein’s structure using AI software called AlphaFold. Now, the company is releasing hundreds of thousands of predictions made by the program to the public.
Understanding a protein’s structure is useful for scientists across a range of fields. The information can help design new medicines, synthesize novel enzymes that break down waste materials, and create crops that are resistant to viruses or extreme weather. Already, DeepMind’s protein predictions are being used for medical research, including studying the workings of SARS-CoV-2, the virus that causes COVID-19.Source: The Verge
Could be very important in the coming years.
#31 Zomato shares soar in red-hot start for first Indian unicorn to go public
India’s first billion-dollar tech startup to go public got off to a flying start on Friday.
Shares in Zomato gained as much as 80% on their first day of trading on Mumbai’s stock exchange. The listing comes a little over a week after the food delivery company launched its IPO to raise $1.3 billion. The stock ended the day about 65% above its offer price, giving the company a market value of about $13 billion.
While Indian stock markets have been trading near all-time highs, Zomato’s listing was a big test of investor appetite for loss-making tech startups. Zomato reported revenue of 19.93 billion rupees ($266 million) for the year to March 31, 2021, and a loss of 8.16 billion rupees ($109 million).
The country has a ton of so-called unicorns — tech startups valued at more than $1 billion — but none of them had ever gone public in India or overseas before. Analysts had previously expressed concern that the startups — many of which have raised hundreds of millions of dollars from private investors at extremely high valuations — needed to start showing consistent profits.CNN
India has been an afterthought when it comes to tech compared to China. There are few domestic tech champions. Most of the wealthy Indians speak English and will use American tech services (like Google, Facebook, Netflix, Amazon). Many Indians use American services overall, already (or Chinese tech).
But tech sovereignty desires is creating potential for more domestic champions. And if successful, this could create a lot of tech unicorns in India because of how large the market is (despite having GDP per capita less than 1/4th of China, it is already a top 5 economy in the world given its population size with population on track to exceeding China in the coming decades). Zomato’s capital market success likely opens the door for more Indian tech IPOs soon, and will likely also bring more VC attention to the market. This should help finance many more unicorns in the future.
#32 Just in Time for the Olympics, Starchitects Reimagine Tokyo’s Toilets
Cleanliness and hospitality are so ingrained in Japanese culture that even the bathrooms are works of art. As part of the Tokyo Toilet, 16 artists, designers, and architects were tasked with redesigning 17 public restrooms throughout Tokyo’s chic Shibuya district.Source: Architectural Digest
Even the toilets are nice in Japan. These toilets might be nicer than my house. Meanwhile in San Francisco, people just poop on the streets.