Tidbits #83 – Inflation, Apple WWDC, and Sentient Google AI?

Hello, hello! 👋🏻👋🏻

Welcome back to another edition of Tidbits covering all the recent things worth talking about in business, media, and technology.

🤑 Economics + Markets

#1 US Inflation Quickens to 40-Year High, Pressuring Fed and Biden

US inflation accelerated to a fresh 40-year high in May, a sign that price pressures are becoming entrenched in the economy. That will likely push the Federal Reserve to extend an aggressive series of interest-rate hikes and adds to political problems for the White House and Democrats.
The consumer price index increased 8.6% from a year earlier in a broad-based advance, Labor Department data showed Friday. The widely followed inflation gauge rose 1% from a month earlier, topping all estimates. Shelter, food and gas were the largest contributors.
Source: Yahoo / Bloomberg

May inflation data came out a few days ago and surprised to the upside. There is no respite from inflation despite recent rate increases. While there are some improvements in some categories, inflation in other categories have deteriorated including services, food, and energy.

Some of these will likely continue to rise near-term since war disruptions and supply chain impacts don’t happen immediately. The global supply chain doesn’t work like the Internet. Moving things around takes weeks and months (May is ~2 months following the onset of Ukraine war at end of February and ~1 month following the deepest parts of Shanghai lockdown). The impacts from war and China lockdowns are likely only just beginning to flow through. And on the gas price front, while supply was negatively impacted earlier in the year, gasoline consumption normally rises in spring and into summer. Supply corrected earlier in the year, but we haven’t seen what prices will do when demand reaches seasonal peak in the summer. This means we should brace for continued inflationary pressures in the near-term. The improvements in previously challenging categories is simply not correcting fast enough to offset the rising pressures elsewhere.

Nonetheless, there’s reason to be somewhat optimistic beyond that. Demand and inflation is correcting in some categories, and lead indicators in areas like freight / logistics are showing some signs of improvements. The question is whether those improvements show up soon enough before the Fed feels obligated to simply crush the economy to tame inflation.

👻 Cryptocurrencies + NFTs

#2 Citadel Securities Is Building a Crypto Trading Marketplace With Virtu Financial: Sources

U.S. electronic trading giant Citadel Securities is building a “cryptocurrency trading ecosystem” with the help of high-frequency trading and market-making firm Virtu Financial, as well as venture capital firms Sequoia Capital and Paradigm, according to a source familiar with the plans. Citadel Securities is the sister company to hedge fund giant Citadel.
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The current crypto market structure is deficient and inhibits wider adoption from a lot of investors, which is what Citadel Securities’ trading consortium is addressing, the source said. “It’s more of a crypto trading ecosystem or marketplace than an exchange. It’s going to take on the exchanges by building a better mousetrap.”
Source: Coindesk

The financial swamp is reclaiming its ground.

#3 Mastercard Brings Its Payments Network To Web3 And NFTs

We believe the process of buying an NFT needs to be easier and safer.
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We’re working…to allow people to use their Mastercard cards for NFTs purchases, whether that’s on one of these companies’ marketplaces or using their crypto services. With 2.9 billion Mastercard cards worldwide, this change could have a big impact on the NFT ecosystem.
Buy the NFTs you want on the marketplace of your choice. No need to buy crypto first.
Source: Mastercard

The financial swamp is reclaiming its ground.

This is actually an incredible coup. NFTs were probably the most culturally mainstream part of crypto. And now, it could potentially be disconnected from crypto payments entirely (with crypto relegated to just the backend database).

#4 Gaming DAO Merit Circle and YGG Caught in DAO Governance Strife

Two prominent names in the play-to-earn scholarship space are at odds after members of the Merit Circle DAO (decentralized autonomous organization) put forward a proposal to refund an investment by Yield Guild Games because of what they deem as an insufficient amount of value added by YGG.
Yield Guild Games and Merit Circle offer play-to-earn gamers so-called scholarships. Gamers, often in developing countries, can borrow the non-fungible token (NFT) that acts as an entrance fee for the game. In exchange, the player has to send back a cut of the in-game earnings.
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All of this highlights a key challenge in the viability of DAOs: As leaderless organizations governed by their members, they are vulnerable to the political whims of stakeholders, who may think they have more control over the DAO than the incorporated, real-world arm of the DAO.
Source: Coindesk

In a normal company, if you don’t like an executive or someone on your Board, you can remove them through some effort. But you can’t “cancel” their ownership in the company and “refund” them. But in crypto you can.

In a normal company, your shares entitle you to some votes. If you don’t win, you don’t win. You still have your shares. In crypto, if you don’t win, you might not have any “shares” after the winners decide what they want to do with you.

🔋 Energy

#5 China Aims For Space-Based Solar Power Test In LEO In 2028, GEO In 2030

China is planning solar power generation and transmission tests at different orbital altitudes over the next decade as part of a phased development of a space-based solar power station.
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The satellite will be capable of generating 10 kilowatts and carry a solar cell array, microwave transmitting antenna, a low power laser transmission payload, a transmitting array and test power transmission across distances of 400 kilometers from orbit.
Source: Space News

One of the reasons why carbon energy works is because it is not just a source of energy but also a store of energy. The challenge with moving off carbon energy is that you need to find new sources of energy and new ways of storing it. The world’s current drive to electrify is mostly focused around shifting the storage of energy from lumps of coal and barrels of oil to Lithium batteries, while still using the coal or oil or natural gas as the source of energy in electric power plant generation. This is of course silly. The problem we have is the carbon source, yet remarkably little headway has been made in resolving that. In fact, electrification so far has made our global energy supply chains even more complicated. We still need to be dependent on complex carbon / oil supply chains because it is still our energy source, but now we also have to deal with another very complex metals supply chain for the storage problem.

Wind and solar are often bandied about as the “preferred” non-carbon energy sources. But the challenge is that not all countries have the right conditions for wind and solar. Not all countries are windy, and not all countries have high sun exposure. For example, for countries near the poles, there are at least a few months out of the year where people experience 16+ hours of darkness.

Anyway, it’s interesting that China is now pioneering a way that could bring solar power to any country. If you fly a satellite system into space above the earth, you can have a lot more sunlight! Seasons are a function of the earth’s tilt. In space, you don’t have seasons. In space, the sun is always there.

💬 Media + Games

#6 Express yourself through TikTok Avatars

Today, to empower continued creative expression, we’re introducing TikTok Avatars – yet another way for people to showcase their individuality on TikTok.
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We’re excited to see how people use Avatars to express their creativity and continue exploring ways to bring Avatars into more TikTok experiences, building spaces across TikTok for self-expression and expanding on the ways people connect and create across our global community.
Source: TikTok

Not surprising, but this is an interesting evolution to pay attention to. TikTok historically is very, very good at frictionless consumption. It’s an app that doesn’t even require you to set up a profile (or login credentials) before using. The user is almost entirely invisible (unless you want to broadcast).

However, TikTok Avatars could potentially change the fundamental relationship that users have with the platform. It would definitely make the average user potentially more visible and reachable on the platform. This could be the first step towards more of a social network rather than just social media / broadcast channel. It’s potentially moving much closer to the Snap and Instagram way of doing things.

#7 Meta Will Stream Its Roblox Competitor Crayta Over The Cloud

Meta is taking another substantial leap toward its vision for the metaverse with a lesser-known social platform it acquired last year. Starting Wednesday, the company will stream Crayta, a game-making platform where players can design their own virtual worlds, for free on Facebook Gaming, making the title available to anyone regardless of the hardware they’re using.
rayta falls somewhere between Roblox and Fortnite, with a more mature art style reminiscent of Epic’s battle royale but with the game-making tools and creativity focus of the former.
Source: Protocol

Seems interesting, but will it get traction? Or will they need to pull back a few months from now like how they are now pulling back on AR / VR hardware.

💰 Fintech

#8 Apple Enters The BNPL Market As Regulation, Competition Intensify

During its WWDC speech, Apple announced a new service called Apple Pay Later that will allow consumers to make mobile and online purchases sliced into four payments over six weeks at the millions of U.S. retailers that already accept Apple Pay. The offering won’t include fees or other charges, the company said, requiring only a “soft” credit check and review of the user’s transaction history with Apple.
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“We are quickly seeing BNPL providers evolve into more full-featured digital wallets that include ‘pay in one’ in addition to installments, and we have seen traditional digital wallets such as PayPal add the pay-in-installment feature. So it is not surprising that Apple has added this feature,” Dayna Ford, senior director analyst at Gartner, told TechCrunch via email. “BNPL has proven to be popular among consumers and merchants as a way to increase sales. It is likely to help boost Apple Pay usage, and it is a logical extension of their growing financial relationship with Apple users.”
Source: Techcrunch

We’ve talked before about how BNPL will need to evolve. At the end of the day, BNPL is just one way of paying for things. As with all payments, there are adjacent problems that need to be solved including distribution and funding. Afterpay is improving its distribution by combining with Square. Affirm is improving its distribution by striking deals with Shopify and Amazon and Stripe.

Unfortunately, time is running out for standalone BNPL companies. Apple already has significant distribution thanks to 8 years of effort behind Apple Pay. But Apple also has the advantage of the world’s largest corporate balance sheet, which will be used to fund BNPL lending. The primary thing bottlenecking Apple is that a large minority of smartphone users in the US are on Android, and Android makes up a majority of the world’s smartphones.

What makes Apple’s strategy hard to counter is that Apple is building a broader, general purpose wallet that will be hard to match. It’s not just payments, but aims to extend deep into identity as well as shipment tracking.

👨‍💻 Technology

#9 Apple Wants to End Passwords for Everything. Here’s How It Would Work.

When Apple’s latest software updates for iPhones, iPads and Macs arrive this fall, they will include a way for users to log into various online accounts without entering passwords or relying on password managers to save and fill in credentials. The technology generates unique passkeys for each app or browser-based service in the place of characters. Those passkeys, a new type of identity authentication, prompt a scan of your face or fingerprints to log you in.
Passwords have been the longtime standard for securing online accounts, but they pose security risks. Despite expert advice to create complex, unique passwords for every account, people often use the same password, get tricked into signing into fake websites that log their information, or have their account details leaked in data breaches. Password managers beef up security, but if someone gets your master password, they can access all your logins.
Apple’s passkeys—and similar efforts from other technology giants—want to address those problems and replace passwords entirely. They aim to be easier and more secure than passwords of old, Darin Adler, Apple’s vice president of internet technologies, said last week at the company’s Worldwide Developers Conference.
Source: WSJ

We’re in an interesting period where the core technologies underpinning the Internet are being rewritten. Passwords is one of them. Apple is one of the companies I pay a lot of attention to in this area because they hold many of the keys necessary to change how things work.

If this is successful, it would fundamentally change how we interact with digital services. Our personal digital security situation would improve. However, it would likely place more power within the hands of the few companies that can design and push the necessary software and hardware to enable it.

Speaking of changing the way the internet works:

#10 Private Access Tokens: Eliminating Captchas On iPhones And Macs With Open Standards

Today we’re announcing Private Access Tokens, a completely invisible, private way to validate that real users are visiting your site. Visitors using operating systems that support these tokens, including the upcoming versions of macOS or iOS, can now prove they’re human without completing a CAPTCHA or giving up personal data. This will eliminate nearly 100% of CAPTCHAs served to these users.
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Asking for a token, validation, token generation, passing, all takes place behind the scenes by third parties that are invisible to both the user and the website. By working together, Apple and Cloudflare have just made this request more secure, reduced the data passed back and forth, and prevented a user from having to see a CAPTCHA. And we’ve done it by both collecting and exchanging less user data than we would have in the past.
Source: Cloudflare

Cloudflare continues to improve the way the internet works, while making itself more and more indispensable.

🍪 Semiconductors + Chips

#11 Apple Unveils M2, Taking The Breakthrough Performance And Capabilities Of M1 Even Further

Apple today announced M2, beginning the next generation of Apple silicon designed specifically for the Mac. Built using second-generation 5-nanometer technology, M2 takes the industry-leading performance per watt of M1 even further with an 18 percent faster CPU, a 35 percent more powerful GPU, and a 40 percent faster Neural Engine.¹ It also delivers 50 percent more memory bandwidth compared to M1, and up to 24GB of fast unified memory.
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Compared with the latest 10-core PC laptop chip, the CPU in M2 provides nearly twice the performance at the same power level. And, M2 delivers the peak performance of the PC chip while using just a quarter of the power.²When compared to the latest 12-core PC laptop chip — which needs dramatically more power to deliver an increase in performance and is therefore found in thicker, hotter, more noisy systems with less battery life — M2 provides nearly 90 percent of the peak performance of the 12-core chip while using just one-fourth the power.³
Source: Apple

At Apple’s annual developer conference, the company announced the latest update to their chip. Even before others have had time to catch up to the performance of the M1 (+ M1 Max and M1 Ultra), the company is out with the M2 that further improves performance.

All of this performance is no longer necessary for the existing applications of the phone. It’s still additive for laptops and desktops, but sooner or later you have to wonder why Apple thinks they need all this compute (delivered locally on your device rather than through a datacenter). What’s coming next?

#12 TSMC Expects 30% Sales Rise Despite Global Economic Ructions

Taiwan Semiconductor Manufacturing Co. expects revenue to grow about 30% in 2022, signaling resilient demand for electronics despite global macroeconomic uncertainty.
Sales growth this year should accelerate from 2021’s 24.9%, which was in dollar terms, Chairman Mark Liu said at the company’s annual shareholder meeting on Wednesday. That’s in line with executive remarks in April that gave an official outlook of topping mid- to high-20% growth in 2022.
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“The current inflation has no direct impact on the semiconductor industry as the demand drop is mainly for consumer devices like smartphones and PCs while EV demand is very strong and partially exceeds our supply capacity so we are making inventory adjustments,” Liu said. “Utilization rate is full for the rest of the year.”
Source: Bloomberg

With all the fears of recession percolating, semiconductor stocks have been fairly weak. But TSMC is pouring cold water over that fire. No slowdown observed at TSMC…in fact, business is accelerating.