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Welcome back to another edition of Tidbits covering all the recent things worth talking about in business, media, and technology.
đĄ Defense and Cybersecurity
#1 U.S., EU Plan Joint Foreign Aid for Cybersecurity to Counter China
The U.S. and the European Union plan to introduce joint funding of secure digital infrastructure in developing countries, according to officials involved in the talks.
The effort marks the first time the EU and U.S. will work together to fund and help protect other countriesâ critical infrastructure against cyberattacks. By working together on cybersecurity, the EU and U.S. aim to help countries that otherwise might be eager to accept funding from China, an EU official said.
Initial projects, likely in Africa or Latin America, could be under way by the end of the year, officials said. Russiaâs invasion of Ukraine has underscored the importance of supporting telecommunications networks and other hardware in countries vulnerable to nation-state cyberattacks, they said.
Source: WSJ
In case you haven’t been paying attention, two of the largest megatrends that are now unfolding and accelerating are weapons (the exploding type) and security (especially cybersecurity but also offline defensive capabilities like counter-drone technologies).
đ€ Economics + Markets
#2 Fed Hikes Its Benchmark Interest Rate By 0.75 Percentage Point, The Biggest Increase Since 1994
Ending weeks of speculation, the rate-setting Federal Open Market Committee took the level of its benchmark funds rate to a range of 1.5%-1.75%, the highest since just before the Covid pandemic began in March 2020.
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âClearly, todayâs 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,â Powell said. He added, though, that he expects the July meeting to see an increase of 50 or 75 basis points. He said decisions will be made âmeeting by meetingâ and the Fed will âcontinue to communicate our intentions as clearly as we can.â
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âWe want to see progress. Inflation canât go down until it flattens out,â Powell said. âIf we donât see progress … that could cause us to react. Soon enough, we will be seeing some progress.â
Source: CNBC
After last week’s inflation data (which came in higher than expected), the Fed hiked interest rates by an aggressive 0.75%. This is the steepest rate hike trajectory in a very long time, and the Fed is on track to do more in the next few months.
The modern world runs on stability and predictability. Without stability and predictability, we are all deer in the headlights.
The world currently has neither. Prices are rising too fast in the real world (and declining too fast in the Capital world) for people to feel confident in making decisions. And the volumes of things are becoming too unpredictable (Are we facing shortages or excess inventory?).
This is not a good situation for anyone, but individuals and companies that have the balance sheet to outlast this uncertainty will have an immense advantage because many competitors are getting washed out.
As Jeff Bezos says:
I very frequently get the question: âWhatâs going to change in the next 10 years?â Thatâs a very interesting question.
I almost never get the question: âWhatâs not going to change in the next 10 years?â And I submit to you that that second question is actually the more important of the two.
Source: Bezos via The Collaborative Fund
Despite the near-term uncertainty, the long-term destination remains relatively unchanged. People still want more things at cheaper prices. People still want more convenience. People still want to be entertained in ever newer ways. The future still exists…but only for those that make it.
#3 Chinese Slowdown Pushes Youth Unemployment to New Highs
In China, an army of college students is set to enter the toughest job market in years, as Covid-19 takes the wind out of the broader economy and Beijingâs regulatory campaigns devastate industries long attractive to the countryâs young people.
Wang Shusheng, a student at a university in the eastern Chinese city of Hangzhou who is set to collect his diploma next week, said he has sent his résumé to more than 250 companies in the past few weeks, including some that he submitted at 2 a.m. during bouts of anxiety.
âAfter each job interview, I felt nothing but frustration,â said Mr. Wang, a 22-year-old philosophy major. After several months of trying, Mr. Wang now says he would gladly settle for a job that pays 5,000 yuan a month, the equivalent of less than $9,000 a year. Thatâs less even than the cityâs average per capita disposable income last year of about $10,000.
In May, youth unemployment hit 18.4%, according to government data released Wednesday, from 13.8% a year ago. The May rate is the highest recorded for youth since 2018, when Chinese officials began releasing the data.
Source: WSJ
Speaking of the importance of stability and predictability, China is an important place to monitor in this regard. China has probably been the greatest beneficiary of global stability and predictability from 1990-2015. China is a system that was built on stability and predictability. These two things are becoming much harder to find. In a system that can consistently deliver high predictable GDP growth, people have the confidence to invest and take risks and consume.
Years ago, the thoughtful China strategist, Dan Wang, noted that China’s greatest advantage is the people’s definite optimism. This is something that many US / western citizens have not felt for decades. But as stability and predictability becomes harder to come by, some of that optimistic edge may begin to erode (much like how it has already been eroding around the world).
This is important because China has played an immense role in lowering cost of goods and capital over the last few decades. A reversal on one or both of these fronts (which may already be under way) would be felt immensely around the world.
đ» Cryptocurrencies + NFTs
#4 From Argentina To Nigeria, People Saw Terra As More Stable Than Local Currency. They Lost Everything
Valeria makes around $300 a month selling prepared food from her home in Buenos Aires. The 47-year-old was nervous about keeping the money saved in Argentine pesos because of the countryâs inflation rate, which passed an annualized 50% earlier this year. So she put more than $1,000 â all her savings, plus $500 her friend lent her to buy a new refrigerator â into TerraUSD (UST), a cryptocurrency stablecoin that was advertised as being pegged 1-to-1 with the U.S. dollar.
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Valeria had spent months learning about UST before starting to invest in various protocols about four months ago. In mid-May, the stablecoin lost its peg, meaning that its value diverged from that of the dollar, and its price plunged to mere cents. Valeria watched her savings dwindle to zero, unable to remove the money from the protocols, which had blocked withdrawals. âI invested in a stablecoin that today is worth $0.08,â she told Rest of World. âI feel sickened and helpless.â
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âThey scammed [me],â Mudasir, a UST holder from Pakistan, told Rest of World. âI have nothing left, not even a penny.â
Source: Rest of World
These stories are very sad.
#5 The Celsius Meltdown During Cryptoâs âBlack Mondayâ Risks âContagion Effect And Cascading Liquidations,â Top Analyst Says. Does Bankruptcy Loom?
One of the cryptocurrency marketâs biggest lending platforms, Celsius Network, was near the center of the wipeout this week that recalled epic crashes in more traditional markets such as 1987âs Black Monday, taking the total cryptocurrency market cap below $1 trillion. Between Monday and Tuesday alone, cryptocurrency markets saw over $1 billion in liquidations in just 24 hours.
By Tuesday, Celsius hired attorneys to explore a financial restructuring, the Wall Street Journal reported. Fear of systemic risk drove the value of the cryptocurrency market down, now holding below $1 trillion.Â
Source: Fortune
The crypto dominos continue to fall. Terra’s collapse is now spreading to other entities including Celsius. Without regulatory oversight, crypto has been (and continues to be) a gigantic blackbox. No one really knows who’s exposed to what and what each entity has been doing with people’s money.
#6 Crypto Tumult Spreads as Lender Babel Puts Freeze on Withdrawals
In a sign of deepening turmoil in the crypto community, Babel Finance became the second major digital-asset lender this week to freeze withdrawals, telling clients it is facing âunusual liquidity pressuresâ as it contends with recent market declines.
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Hong Kong-based Babel is considered one of the bigger lenders in crypto and often serves as a bridge between Asia and the West, with about 500 clients and a business focused on Bitcoin, Ether and stablecoins. In May, Babel reached a $2 billion valuation in a funding round with investors including Jeneration Capital and 10T holdings. Babelâs website shows that Sequoia Capital and Tiger Global are listed as its current investors. At the end of 2021, the firm had an outstanding loan balance of more than $3 billion.
Source: Bloomberg
First Celsius, then Babel.
#7 A Major Crypto Hedge Fund Is Wobbling As $10 Billion Three Arrows Capital Sees A Spate Of Liquidations
After $400 million in liquidations, a major hedge fund in the space, Singapore-based Three Arrows Capital, or 3AC, is reportedly facinginsolvency, and many dominos look likely to fall next.
3AC’s lenders continue to come forward as the fund, which managed $10 billion in assets in March, according to blockchain analytics firm Nansen, fails to meet margin calls and liquidates its cryptocurrency holdings, adding more downward pressure on the beleaguered market.
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Cryptocurrency lender BlockFi is among the most recent to liquidate some of 3ACâs positions, according to the Financial Times. BlockFi CEO Zac Prince confirmed its exit in a Thursday tweet: âBlockFi can confirm that we exercised our best business judgment recently with a large client that failed to meet its obligations on an overcollateralized margin loan. We fully accelerated the loan and fully liquidated or hedged all the associated collateral.â
Source: Fortune
#8 Tether Condemns False Rumours About Its Commercial Paper Holdings
Tether is aware of rumours being spread that its commercial paper portfolio is 85% backed by Chinese or Asian commercial papers and being traded at a 30% discount. These rumours are completely false and likely spread to induce further panic in order to generate additional profits from an already stressed market. Tether condemns such attempts which oftentimes see simple users take the biggest hit, while few coordinated funds increase their profits.
In its latest assurance opinion here, Tether announced that over 47% of total USDâź reserves are now US Treasuries and that commercial paper makes up less than 25% of USDâźâs backing.
Source: Tether
As bad as Terra, Celsius, and Babel were, they pale in comparison to the potential impact of Tether should Tether fall.
Finance and capital markets are always partially a confidence game. Whenever you have to tell people that things are “okay”, it does not inspire confidence.
đŹ Media + Games
#9 YouTube Reaches 1.5 Billion Users of Shorts, Its TikTok Rival
YouTube said it has reached more than 1.5 billion monthly logged-in viewers of Shorts, its short-form video feature that launched in late 2020 as a response to the surging popularity of TikTok.
The video giant, part of Alphabet Inc.’s Google, announced the milestone on Wednesday, trumpeting the ascent of what executives called “the multiformat creator”âsomeone who produces both long and short videos. In 2021, YouTube started putting Shorts posts directly within its main app and has encouraged the platform’s biggest stars to produce videos tailored for the format.
Source: Bloomberg
#10 Facebook Is Changing Its Algorithm To Take On Tiktok, Leaked Memo Reveals
Facebook employees were recently given a new directive with sweeping implications: make the appâs feed more like TikTok.
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In an internal memo from late April obtained by The Verge, the Meta executive in charge of Facebook, Tom Alison, spelled out the plan: rather than prioritize posts from accounts people follow, Facebookâs main feed will, like TikTok, start heavily recommending posts regardless of where they come from. And years after Messenger and Facebook split up as separate apps, the two will be brought back together, mimicking TikTokâs messaging functionality.
Source: The Verge
This is potentially an enormous change. The era of the internet based on your (initially real-world) connections (and later replaced by mostly digital connections with influencers) is ending. The coming era of the internet is based purely on your interests.
đ Commerce
#11 Amazon CEO Andy Jassyâs First Year on the Job: Undoing Bezos-Led Overexpansion
Amid one of the worst stretches for financial performance in Amazonâs history, Mr. Jassy is working to cut back the excesses of an e-commerce operation the company expanded at breakneck pace during much of the Covid-19 pandemic. At the same time, heâs trying to resuscitate languishing sales in that business and drive growth in other divisions.
Much of his effort is aimed at reversing course on e-commerce initiatives put in place under his mentor, Executive Chairman Jeff Bezos, before he handed over the reins last July.
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âWell, at AWS we did things this way,â was a common refrain in such meetings that rubbed some leaders the wrong way, said the people who attended. Some teams found that Mr. Jassy often tried to apply things he learned from his AWS days to very different parts of the business, such as logistics, that werenât applicable, they said.
Source: WSJ
Interesting article reviewing Jassy’s first year as Amazon CEO.
There’s a broader story here, too, about the challenges of succession at platform companies. Increasingly as the world becomes dominated by platforms that span many different types of businesses, few employees (and successors) can truly understand the full scope of the business the way that the founder(s) can. Jassy certainly knows AWS, but what else? The same challenges arose when Tim Cook took the reigns of Apple from Steve Jobs. Cook knows manufacturing, but Apple is much more than its manufacturing machine. Whether succession works or not can only be known with hindsight.
#12 What Is ONDC, India’s Project For An Open E-Commerce Network?
India’s government in April launched its Open Network For Digital Commerce (ONDC) as a prospective alternative to dominant global giants Amazon.com (AMZN.O) and Walmart (WMT.N) in its fast-growing e-commerce market.
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ONDC is a non-profit company whose network will enable the display of products and services from all participating e-commerce platforms in search results across all apps on the network.
For example, if both Amazon and Walmart’s Flipkart integrate their platforms with ONDC, a user searching for a Bluetooth headset on Amazon would also see results from Flipkart on the Amazon app.
Source: Reuters
We first discussed this back in Tidbits #54. India finally launched its ONDC network to break down the silos in e-commerce (joining prior / existing efforts in identity, payments, and financial data). This is a very bold and fascinating move worth watching.
#13 Walmart And Roku Are Partnering On âShoppable Adsâ For Your TV

Walmart and Roku are partnering to introduce what they call âshoppable ads,â which will let you buy something directly from an ad on your TV. It seems like the new ad format is intended to streamline the shopping experience so you donât have to switch to your phone or computer if you see an ad for something you might actually want to buy.
Viewers simply press âOKâ with the remote on a shoppable ad and proceed to checkout with their payment details easily pre-populated from Roku Pay, Rokuâs payments platform. From there, tapping âOKâ on the Walmart checkout page places the order. A Walmart purchase confirmation is then emailed with shipping, return, and support information.
Source: The Verge
đšâđ» Technology
#14 Alibaba And Tencentâs Darkening Clouds
But [Alibaba CFO’s] suggestions that Ali Cloudâs 50 per cent year-on-year growth rate was sustainable proved overly optimistic. Today, growth has stagnated at its cloud computing division, with sales up just 12 per cent in the first quarter of 2022 from a year earlier. Top rival Tencent reported its cloud arm shrank in the same period.
The faltering cloud businesses reveal how Chinaâs tech giants are struggling to regain their footing as they battle a regulatory onslaught from Beijing and a slowing economy caused in part by a draconian coronavirus regime that has paused commercial activity in much of the country.
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Competition from politically favoured vendors such as national champion Huawei and state-backed telecoms companies including Tianyi Cloud, run by China Telecom, and Tsinghua Unigroup is adding to the pressure.
Source: FT
Interesting article from FT discussing the challenges at China’s public cloud companies.
It’s a bit disappointing to see China’s cloud industry growing slower than US peers despite being much smaller and less mature. There’s theoretically a lot of cloud transformation potential in China, but it’s progressing in a very uneven way.