Time
for (probably) the final 2018 edition of “Things from my Newsblur”. As usual, the most investment-related stuff
is at the end, though this version does give a glimpse at a future theme and an
update on Greece. Before that it’s a
mixed bag of spying, left turns, Fortnite, London Underground and music!
This is the most important story written this year; it’s about a
unit of the Chinese PLA allegedly embedding tiny microchips in server
motherboards bound for US corporations. Either
Bloomberg have researched and written an exceptional exposé that suggests every
national security fear about “made in China” isn’t nearly paranoid enough. Or this is one of the most irresponsible and
dangerous pieces of journalism in many years; “fake news” would be a massive
understatement. Since the original
story, both Apple and Amazon have pushed back exceptionally aggressively on
this story with Tim
Cook (Apple CEO) demanding a retraction and Amazon’s Chief Security
Officer, Stephen Schmidt, providing an adamant
and clear rejection of the story.
Bloomberg for its part doubled
down, with a follow-up story a few days later.
(Jordan Robertson & Michael Riley, Bloomberg Businessweek)
A great article on how a small, cheap and simple change –
installing various rubber items at intersections where there are left turns –
is improving pedestrian safety in NYC.
The greater incidence of pedestrian injury when cars make left turns was
known for a while, but not understood.
NYC combed through its trove of data on accidents, finding that left
turns by cars cause 3x as many pedestrian and bicycle casualties as right-turns. Armed with the data, they studied the causes
and came up with a redesign of the streets that is both simple and cheap! Government can work sometimes!
(Karen Hao & Amanda Shendruk, Quartz)
Thankfully, OM’s kids aren’t old enough to play Fortnite because
if they were at least one (no prizes for guessing which one) would definitely
be addicted! This article looks at how
Fortnite has become a crazy phenomenon and some of the behavioral and
psychological tricks it’s employing to stay there.
(Nick Paumgarten, New Yorker)
Our Man’s first job saw him battle the masses at Bank station a
couple of times each day; it isn’t a cherished memory. This look at the challenging renovation of
the entire Bank/Monument train stations complex is fascinating. Amazingly, Transport for London opted for the
most innovative option and the result will be a truly transformational change,
despite substantial engineering and construction challenges. What challenges? Well it’s all taking place deep underground,
and there is one small rectangular shaft through which everything (including
the diggers) has to descend. The process
has been described as
trying to redecorate your living room with all the items being sent in through
your letterbox.
(Ian, at his blog Ian Visits).
An oral history on the back story of how the ubiquitous compilation
series came to rule the market.
Amazingly, it continues to prove resistant to the numerous
playlists/compilations available through online streaming. It sold an amazing 3.2million albums in the
UK in 2017, managing to outsell the leading artist (Ed Sheeran).
(Mark Savage, BBC)
Marc Andreessen’s seminal WSJ article that “Why
Software Is Eating the World” came out over 7-years ago, thus we cannot be
surprised by its increasing prevalence in our lives. This blog post by Tren Griffin highlights how
the emergence of mobile and the cloud has led to a new subscription based business
model for software companies that is both increasing their reach and speeding
up the pace of change. Subscription
business models in software (think Netflix, as the most basic example) will
have profound changes across the economy.
Why? It is an almost 0% marginal
cost business – that is, once the code is written it is infinitely divisible
(me watching Yes, Minister on Netflix doesn’t affect you watching it on
Netflix, at the same time!) and distribution costs via the cloud are negligible
(i.e. no producing disks, packaging, paying for retail space, etc.). This affects simple financial metrics (like
total addressable market and company valuation) but also has profound impacts on
more important things like employment. It
isn’t robots (like C3PO) that’s going to take your job but software that
automates parts of it and makes businesses more efficient. This will also start to disproportionately
impact white collar jobs that have been largely immune from the technological
changes of the last decade. Think of the
payroll software that means you need 3-4 people in that department not 5-6, or
the legal software that does large parts of a junior person’s case research.
(Tren Griffin, at his blog 25IQ)
[Spoiler Alert – Can you see a Software Thematic position coming
soon…]
Greece is the word, people!
You know OM has previously mentioned that he thinks Greece will be the
largest position in the portfolio at some point next year. Everything is slowly but surely lining up;
it’s exceptionally cheap, the fundamentals are improving yet are being ignored
because it’s hated. Our Man is hoping
2019 sees the technicals bottom and that the upcoming elections set the stage
for the narrative to change and investors to return. Thankfully, Lyall Taylor’s long but excellent
post saved Our Man having to write about the difference between the improving
reality and people’s assumptions! (Lyall
Taylor, at his blog The LT3000 Blog)
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