Hello, hello! 👋🏻👋🏻
Welcome back to another edition of Tidbits covering all the recent things worth talking about in business, media, and technology.
🗺 World Affairs + Geopolitics
#1 – Pelosi Confirmed Details Of Her Trip To Asia, But Did Not Say If She’ll Visit Taiwan
The speaker of the U.S. House of Representatives, Nancy Pelosi, confirmed Sunday she will visit four Asian countries this week but made no mention of a possible stop in Taiwan that has fueled tension with Beijing, which claims the island democracy as its own territory.
Pelosi said in a statement she is leading a congressional delegation to Singapore, Malaysia, South Korea and Japan to discuss trade, the COVID-19 pandemic, climate change, security and “democratic governance.”Source: NPR
A few days ago, Biden and Xi had a lengthy call to discuss the issue. Unclear if anything was accomplished for either side.
Meanwhile, external forces may tie Pelosi’s hands.
Many in Taiwan think Pelosi needs to go now in order to show that US commitment to Taiwan is strong and that China’s intimidation will not work.
Congressional Republicans are also encouraging a visit.
Many choices in life resemble the trolley problem – Sometimes there are simply no good choices. Sometimes there are only two bad choices. It takes judgment and courage to choose between two bad choices. But it takes planning to avoid finding yourself in a situation where you only have two bad choices. This poor planning didn’t begin with Pelosi. This poor planning arguably began 50 years ago when US and China first re-established diplomatic relations without fully resolving the situation over Taiwan and leaving it up for future generations to resolve.
🤑 Economics + Markets
#2 – US Economy Shrinks For A 2nd Quarter, Raising Recession Fear
The U.S. economy shrank from April through June for a second straight quarter, contracting at a 0.9% annual pace and raising fears that the nation may be approaching a recession.
The decline that the Commerce Department reported Thursday in the gross domestic product — the broadest gauge of the economy — followed a 1.6% annual drop from January through March. Consecutive quarters of falling GDP constitute one informal, though not definitive, indicator of a recession.
The GDP report for last quarter pointed to weakness across the economy. Consumer spending slowed as Americans bought fewer goods. Business investment fell. Inventories tumbled as businesses slowed their restocking of shelves, shaving 2 percentage points from GDP.
Higher borrowing rates, a consequence of the Federal Reserve’s series of rate hikes, clobbered home construction, which shrank at a 14% annual rate. Government spending dropped, too.Source: AP News
#3 – China Approves First Homegrown Antiviral Covid Pill
China approved its first homegrown Covid antiviral, as regulators cleared a medicine from Genuine Biotech that was previously used to treat HIV.
The drug will compete with Pfizer Inc.’s Paxlovid, which was approved in China in February shortly before the country experienced its worst outbreak of the pandemic. Adding a homemade therapy to the country’s existing arsenal of vaccines to fight the virus could help China transition to life beyond Covid Zero.Source: Bloomberg
Will this change China’s pandemic management policies?
Paxlovid has been approved for a while but does not seem to have altered China’s pandemic policies. I have not seen any reporting on the efficacy of Genuine Biotech’s drug, though. Unclear if a domestic alternative would make a difference.
#4 – U.S. Regulators Won’t Accept Any Restrictions On China Audit Access, Sources Say
The U.S. public company accounting regulator will not accept any restrictions on its access to the audit papers of Chinese companies listed in New York, including where firms have been delisted, two people with knowledge of the U.S. agency’s thinking told Reuters.
The Financial Times reported on Sunday, citing sources, that China is preparing to categorize U.S.-listed Chinese companies into groups based on the sensitivity of their data, in a potential concession to try to comply with the U.S. rules.
A PCAOB spokesman Kent Bonham said the “PCAOB must have complete access to audit work papers of any firm it chooses to inspect or investigate – no loopholes and no exceptions.”
In May, an SEC official warned that the agency would need to be able to complete inspections by early November 2022 to meet a deadline that could land as early as 2023.Source: Reuters
The scope for a deal appears to be asymptotically approaching zero. Most (all?) Chinese ADRs appear likely to be delisted within the next 1-2 years.
👻 Cryptocurrencies + NFTs
#5 Coinbase Faces SEC Probe on Crypto Listings; Shares Tumble
Coinbase Global Inc. is facing a US probe into whether it improperly let Americans trade digital assets that should have been registered as securities, according to three people familiar with the matter. The company’s shares dropped 21%.
As the largest US trading platform, Coinbase lets Americans trade more than 150 tokens. If those products were deemed securities, the firm could need to register as an exchange with the SEC. Coinbase shares fell $14.14 to $52.93 in New York, leaving the stock down 79% this year.
Tensions bubbled up further July 21 when the SEC accused one of the company’s former employees of violating its insider-trading rules by leaking information to help his brother and a friend buy tokens just before they were listed on the platform. While the agency didn’t allege wrongdoing by Coinbase, the SEC said it had determined that nine of the dozens of digital tokens the men traded were securities — including seven the exchange says it lists.Source: Bloomberg
This is potentially a big deal with far-reaching consequences. If (some?) cryptocurrencies are considered securities, then there are very specific rules that people need to follow. If (some) cryptocurrencies are considered securities, then it’s very likely that many companies and VCs have likely violated security trading laws based on anecdotal behavior observed over the last few years (e.g. self-dealing, price manipulation, etc).
#6 Saudi Arabia’s Linear City
Intriguing concept. Can it solve the scalability issues that existing cities face where it is no longer possible to built without running into competing interests? Seems like it can offer micro-neighborhoods with scalable connections to other parts of the city, while maintaining optionality to build out and up. Too bad it’s in the desert. I hope it has a plan for water as the world gets hotter.
#7 – Russia to Cut Europe’s Gas Flow via Nord Stream to 20%
Russia said it would further reduce natural-gas supplies to Europe this week, lobbing another volley in its economic war with the West and raising new questions about Europe’s ability to avoid shutting down factories and leaving homes cold this winter.
Russian state-owned energy producer Gazprom PJSC said gas exports through the vital Nord Stream pipeline to Germany would drop to about a fifth of the pipe’s capacity, blaming sanctions-related problems with turbines that have already reduced flows. The fresh reduction in the pipeline’s capacity—from 40% currently to 20%—is expected to take effect Wednesday, Gazprom said.
Gazprom last month reduced flows to 40% of Nord Stream’s capacity, blaming a missing turbine that was stuck in Canada due to Western sanctions. Then, earlier this month, Gazprom halted the pipeline altogether for previously planned, routine maintenance. Last week, the pipeline started back up again, but Mr. Putin warned that sanctions threatened to force Gazprom to reduce flows again.Source: WSJ
Winter is coming.
#8 – How the German Economic Machine Broke Down
Germany’s economy hasn’t grown for nearly five years. Its recovery from the Covid-19 pandemic has been weaker than any major advanced economy. Its ability to fill its energy needs is in question. And now the country once known as the economic engine of Europe is teetering on the brink of a recession.
It’s a sharp turn of fortunes for Germany’s large manufacturing sector, which flourished over the past two decades just as other Western nations saw industrial jobs migrate to Asia.
Germany’s big and long-successful bet on manufacturing relied on four engines: Free and open global trade, surging demand from China, an efficient domestic workforce and cheap Russian energy.Source: WSJ
Talk about a comically bad situation. It outsourced infrastructure (including defense) for free and open global trade to the US. It relies on China for demand. And it outsourced energy to Russia. And all three partners want to go in a different direction.
Germany is the largest economy in Europe…but it’s effectively become a pawn in the larger great power competition.
💬 Media + Games
#9 – TikTok Owner ByteDance Used A News App On Millions Of Phones To Push Pro-China Messages, Ex-Employees Say
According to new claims by four former employees of the company, ByteDance already has used one of its apps to push pro-China messages to Americans: its now-defunct English-language news app, TopBuzz. ByteDance forcefully denies the claims.
The four former ByteDance employees, each of whom worked on TopBuzz, claimed that ByteDance instructed members of its staff to place specific pieces of pro-China messaging in the app. According to three of the former employees, TopBuzz staff sometimes promoted content by “pinning” it to the top of the app. One former employee remembered staff posting panda videos in the app, along with videos promoting travel to China. Another remembered a staff member pinning a video in which a white man talked about the benefits of moving his startup to China.
According to all four former employees, staff were required to provide evidence to ByteDance that the content had in fact been placed in the app as directed. Three of the former employees said staff were required to take screenshots of the live content in TopBuzz and send them back to the company.Source: Buzzfeed
Not a good look, especially if it concerns “news” rather than entertainment videos.
On the other hand, TikTok pushed back against stealth propaganda account requests.
Note that both of these incidents (e.g. pinning content to the top of the news app or allow un-labeled propaganda accounts) are not ways of influencing the underlying algorithms. They are rather efforts to override it.
Successfully Influencing the algorithm would be far more dangerous because it would be a more scalable effort than constantly posting / pinning propaganda manually.
But I’m not convinced anyone really knows how to effectively influence AI algorithms, yet. They can certainly train an algorithm to show you more pro-China content, but unless you like that content to begin with, you’re going to get turned off pretty quickly because the algorithm will no longer be showing you what you like.
Right now, the algorithm is trained to show you what you like. Even without any overt propaganda efforts, I’m sure there are many pro-China videos it could already expose you to if it thought you would enjoy it. The West has very diverse opinions. There are many westerners that have pro-China views (perhaps just as many as the westerns that have anti-China views) that are already readily available online. If the algorithm isn’t showing it to you or you’ve shown your disinterest by quickly scrolling past them, is it possible to change this algorithm such that you see more of what you don’t enjoy and it successfully convinces you to enjoy it? I’m skeptical.
The most dangerous area remains information fed to kids. This is why all social movements and ideologies take decades to gain momentum. The easiest time to change someone’s mind is when they’re young. And if you do that for long enough, then eventually 30-50 years from now, maybe enough of society comes to believe whatever you want them to believe. But this is certainly not a strategy that nations-in-a-hurry can rely on. Most nations are running out of time. There’s only one, maybe two nations that I think have the luxury of time.
#10 – HBO: We Met in Virtual Reality
Filmed entirely inside the world of virtual reality (VR), this immersive and revealing documentary roots itself in several unique communities within VR Chat, a burgeoning virtual reality platform. Through observational scenes captured in real-time, in true documentary style, the film reveals the growing power and intimacy of several relationships formed in the virtual world, many of which began during the COVID-19 lockdown, while so many in the physical world were facing intense isolation.
The film follows Jenny, an American Sign Language (ASL) teacher, dedicated to building a welcoming community for deaf and hard of hearing VR Chat users, and two long distance couples growing their relationships in VR as they prepare to meet physically – DustBunny; a fitness dance instructor building a career in social VR dance classes and her partner, Toaster; and DragonHeart & IsYourBoi, a couple who met through an exotic VR dance community where they are both performers.
We Met in Virtual Reality tenderly documents the stories of people experiencing love, loss and unexpected connection, expressing vulnerability around mental health struggles and questions about identity, offering a hyper real journey into the human experience of an online world that may soon shape the future.Source: HBO
Might be something interesting to watch.
#11 – Durbin To Lob Bill At Visa, Mastercard
Sen. Dick Durbin is poised to introduce legislation that would take another swipe at credit card giants Visa and Mastercard by mandating a minimum number of competitive networks be available for routing credit card payments.
This time around, Durbin is adding more parameters with respect to how the credit routing provisions will be enforced. Those clauses seem directed at avoiding the types of shortcomings that his camp argues has let the card networks circumvent the existing debit routing rules.
The latest legislative proposal in the offing would ban credit card companies from pressuring merchants to use a particular network to satisfy security technology requirements or imposing penalties if they don’t meet quotas for a particular network.Source: Payments Dive
A decade ago, Senator Durbin successfully pushed through changes on the debit front as part of Dodd Frank legislation. The impact on debit has been minor, though. This bill seeks to make similar changes on the credit side, incorporating learnings from the debit side. Unclear if it will have greater impact on network competition on the credit side vs the original Durbin Amendment for debit.
#12 – Amazon Introduces A New Wallet For Sellers
Amazon said it’s rolling out a new digital wallet service for the “sellers” that offer goods and services on its digital marketplace. The retail giant said in an online post that the new wallet service will bring sellers a convenient way to hold proceeds from their sales or transfer it to their bank accounts.
Seattle-based Amazon already has been providing its sellers with other payments and financing tools, including business loans; American Express and Visa credit cards, with loyalty program rewards; and currency converter options for sending money worldwide.Source: Protocol
Amazon historically hasn’t done as much as it could in fintech / payments, but lately Amazon seems to be on the move. The launch of the seller wallet joins recent efforts like “Pay with Prime” on the consumer side.
Separately, I found these tweets from Rui Ma at Tech Buzz China very fascinating:
The US has very high card interchange fees compared to the rest of the world. This used to look like a bug, but it might end up being a feature. With such high fees and with everything becoming everything including fintech, it means SaaS software businesses have a lot more flexibility in monetization that might not be possible in other markets. A software business like Shopify seems to confirm this…they make comically low revenues directly from software but are successfully ramping up monetization through payments and lending.
#13 – Shopify’s Bet on the Future Goes Off Course
Shopify has always been a company that makes the big strategic bets our merchants demand of us – this is how we succeed. Before the pandemic, ecommerce growth had been steady and predictable. Was this surge to be a temporary effect or a new normal? And so, given what we saw, we placed another bet: We bet that the channel mix – the share of dollars that travel through ecommerce rather than physical retail – would permanently leap ahead by 5 or even 10 years. We couldn’t know for sure at the time, but we knew that if there was a chance that this was true, we would have to expand the company to match.
It’s now clear that bet didn’t pay off. What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful 5-year leap ahead. Our market share in ecommerce is a lot higher than it is in retail, so this matters. Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust. As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that.Source: Shopify
Are people going back to pre-pandemic habits when it comes to online vs offline? Or is this simply a reflection of the shift from products to services at the moment? And is this further compounded by company specific challenges at Shopify due to underinvestment in logistics?
🍪 Semiconductors + Chips
#14 – House Passes Bill To Boost U.S. Chip Production And China Competition, Sending It To Biden
The ultimate version, known as the Chips and Science Act, includes more than $52 billion for U.S. companies producing computer chips, as well as billions more in tax credits to encourage investment in chip manufacturing. It also provides tens of billions of dollars to fund scientific research, and to spur the innovation and development of other U.S. technologies.
The U.S. also makes few of the most advanced types of semiconductors, which are largely produced in Taiwan, the epicenter of rising political tensions with China.
Much modern warfare requires sophisticated semiconductors — each Javelin missile launching system contains hundreds, for instance — leading U.S. defense officials to worry about the nation’s reliance on foreign producers for its chip supply.Source: CNBC
$52 billion is a pretty small amount of money in the land of semiconductors. TSMC alone almost invests that amount per year. But the passage of the bill does signal growing bipartisan focus around similar issues. Congressional gridlock is reality, but some things can rise above the fray when external pressures force minds to focus.
💉🔬 Health + Science
#15 – AlphaFold Reveals The Structure Of The Protein Universe
It’s been one year since we released and open sourced AlphaFold, our AI system to predict the 3D structure of a protein just from its 1D amino acid sequence, and created the AlphaFold Protein Structure Database (AlphaFold DB) to freely share this scientific knowledge with the world. Proteins are the building blocks of life, they underpin every biological process in every living thing. And, because a protein’s shape is closely linked with its function, knowing a protein’s structure unlocks a greater understanding of what it does and how it works. We hoped this groundbreaking resource would help accelerate scientific research and discovery globally, and that other teams could learn from and build on the advances we made with AlphaFold to create further breakthroughs. That hope has become a reality far quicker than we had dared to dream. Just twelve months later, AlphaFold has been accessed by more than half a million researchers and used to accelerate progress on important real-world problems ranging from plastic pollution to antibiotic resistance.
Today, I’m incredibly excited to share the next stage of this journey. In partnership with EMBL’s European Bioinformatics Institute (EMBL-EBI), we’re now releasing predicted structures for nearly all catalogued proteins known to science, which will expand the AlphaFold DB by over 200x – from nearly 1 million structures to over 200 million structures – with the potential to dramatically increase our understanding of biology.Source: DeepMind
This is a big deal.
#16 – Persuading The Body To Regenerate Its Limbs
Levin began his talk, and a drawing of a worm appeared on the screen behind him. Some of the most important discoveries of his career hinge on the planarian—a type of flatworm about two centimetres long that, under a microscope, resembles a cartoon of a cross-eyed phallus. Levin is interested in the planarian because, if you cut off its head, it grows a new one; simultaneously, its severed head grows a new tail. Researchers have discovered that no matter how many pieces you cut a planarian into—the record is two hundred and seventy-nine—you will get as many new worms. Somehow, each part knows what’s missing and builds it anew. What Levin showed his audience was something even more striking: a video of a two-headed planarian. He had cut off the worm’s tail, then persuaded the organism to grow a second head in its place. No matter how many times the extra head was cut off, it grew back.
“Regeneration is not just for so-called lower animals,” Levin said, as an image of Prometheus appeared on the screen behind him. Deer can regenerate antlers; humans can regrow their liver. “You may or may not know that human children below the age of approximately seven to eleven are able to regenerate their fingertips,” he told the audience. Why couldn’t human-growth programs be activated for other body parts—severed limbs, failed organs, even brain tissue damaged by stroke?Source: The New Yorker
It’s a bit old…had this article open for over a year but only got around to reading it recently. Well worth the read. What a fascinating world we live in with so much left to understand.