Month: February 2020

This NYT opinion piece contends that Michael Bloomberg’s US presidential campaign is taking a leaf out of Donald Trump’s playbook:

Take Mr. Bloomberg’s brazen spending, which has prompted claims that he’s an oligarch trying to bypass democracy by buying the presidency. Plenty of candidates would get defensive at such speculation. Mr. Bloomberg is unfazed. Who cares?! At least he’s in the conversation. More than that, the conversation is now centered around the idea that he could very well win.

The whole thing sounds Trumpian because it is. The Trump campaign was unabashed in 2016 and beyond about its plan to “flood the zone” with garbage or ragebait. The strategy worked in part because it engaged and energized his base. And, as Sean Illing detailed recently at Vox, it exploited a media ecosystem that is built to give attention to lies (in order to debunk them) and outlandishness (because it’s entertaining or newsworthy).

This reminded me of reading Matt Taibbi’s excellent book Insane Clown President. It’s essentially a mea culpa, with columns he wrote from the 2016 campaign trail followed by a commentary in hindsight, written soon after the elections. It demonstrates in real time how the candidate broke norm after norm, each supposed transgression further disqualifying him in the press as a serious candidate but in reality cementing his appeal with the population that voted for him. That process, it seems that Bloomberg recognises, has created new norms with fewer constraints, rendering propriety superfluous, an outright liability.

Report this week on how India’s infrastructure projects are increasingly being financed by foreign capital as Indian banks are shying away from project finance:

This is a sign that the domestic funding pipe, which broke after the debacle at Infrastructure Leasing and Financial Services Ltd, is yet to be completely fixed. Surely, when the country’s largest lender, State Bank of India, reported no growth in corporate loan offtake for the December quarter, it points to one thing. Lenders are still preoccupied with fixing legacy bad loans. Private sector lenders that have fared well, too have kept away from big sanctions.

Financing long-term capital expenditure in India has always been a problem. This RBI working paper from 2019 [PDF] on the under-developed state of the Indian corporate bond market describes how Development Finance Institutions in South East Asia were set up explicitly for financing projects that would begin paying off ten years or more after financing. However here:

In India, development banks were gradually converted into universal banks, based on the recommendations of the Report of the Working Group on the Development Financial Institutions (DFIs) (RBI 2004). 

Which means short-term deposits from individuals and companies are being used to finance long-term projects. This imbalance in liquidity creates several problems, not least that a default or delay by a project puts individuals’ bank deposits in jeopardy. The paper goes on:

In India, the proportion of firms using banks as the primary source of working capital is higher than most developing countries. Further, the proportion of loans requiring collaterals as well as the value of collateral (as proportion of loan) are among the highest in India. This indicates the prevalence of asset-backed lending in India, which is essentially a feature of a relatively less developed financial system with limited expertise to gauge the credit risk of unsecured lending.

As a result of this, the effective borrowing cost increases and therefore

The large corporates can raise debt from the overseas markets, the cost of which, even after adjusting for hedging cost, tends to be lower than the cost of borrowing through the domestic market-based sources.

Which brings us full circle. An underdeveloped corporate bond market leads to an over-reliance on banks and short-term savings account deposits to fund much longer-term projects, therefore requiring collateral, raising the costs of borrowing, making it easier to borrow from overseas.

Very interesting results from a study on macaques:

Essentially, they zapped different areas of the brain and observed how the monkeys responded. When the central lateral thalamus was stimulated, the monkeys woke up and their brain function resumed — even though they were still under anesthesia.

“The animal went from being deeply anesthetized to opening his eyes, looking around the room, and even reaching out for objects within only a few seconds of the stimulation turning on,” Redinbaugh describes. “Shortly after the stimulation ended, he went back into unconsciousness like nothing happened.”

These stunning effects suggest that there is a reciprocal relationship between two areas of the brain — the central lateral thalamus and deep cortical layers — and this relationship operates like an “engine of consciousness,”

William Gibson: 

For the moment, we live in both the physical world and in cyberspace, but the barriers between the two are blurring so as to become almost indistinguishable. “The online/offline distinction is going to be fully generational soon. Only old people will think of being on or off,” he says.

Soon, “being present in the moment” will mean having a choice of moments that we can be present in. One offline & many online. Although that is the distinction we make today. Tomorrow they will be equivalent.

This is ostensibly about AirPods, but it’s really about the possibilities of software:

… a simple tap of an AirPod or a quick voice command can take us to a different location via sound. Utilizing HomePods as sound receivers, an AirPods wearer would be able to “move” from the kitchen to family room. A quick tap of one AirPods, or Siri voice command could bring the wearer from the family room to kitchen to answer a family member’s question or simply to be “in” the room.

Admittedly, Apple is the only entity that’s even close to being able to deliver this sort of tech. It’s a combination of consistent hardware, fine-grained geo-fencing, identity & permissions and only then the actual audio-switching software.

This bit in the article took me back to an idea I had had years ago:

Another example involves utilizing AirPods to deliver different sound experiences to different people despite being in the same location and looking at the same thing. As an example, a single presentation shown in a school or office setting can end up delivering a dozen different experiences to those in attendance.

As an engineering undergrad student, I wondered simplistically if frequency division multiplexing could mean that different groups in a single movie theatre could enjoy different movies. The video and audio feeds would be FDMed; each group’s glasses and earphones would extract different video and audio signals. You’d get the experience of enjoying a movie together in a theatre even if you were split between what movie to watch.

The traditional path a startup takes is building a product (MVP or not), then outreach to find the right audience. This writer discusses a counterintuitive process of building an audience first, and then building the product (“audience-first products”):

Having an audience will give you a unique perspective on the world. You’ll receive instant, high-quality feedback on the ideas you share. People are taught to hunt down interesting people, ideas, and opportunities. But masters of the Internet attract them. Sharing ideas attracts like-minded people, who double as a feedback loop to make you smarter and more interesting.

It also has this advantage:

If you have a built-in audience, you don’t need to raise money. If you write well about a common and specific problem, Google will send you lots of free traffic.

The writer makes it clear that this is more appropriate for building bootstrapped companies with focused audiences, than those that increasingly use capital as a moat. Of course, once you have a product and an audience that finds in it real value, you can always scale.

Budget 2020 increased already-high tariffs on imported electric vehicles, in all forms:

The customs duty on completely built units of electric commercial vehicles have been increased from 25% to 40%, whereas the one with the internal combustion engine has been increased from 30% to 40%. The tax on semi-knocked down forms of an electric passenger vehicle, three-wheeler has been increased from 15% to 30%, whereas semi-knocked down electric, buses, trucks and two-wheelers has been raised from 15% to 25%. 

“Government hikes duty on import of electric vehicles by 5-15%”, The Economic Times, Feb 2020

This is of course protection, to incentivise domestic manufacturers of EVs. I am reading Reset by Subramanian Swamy, who describes the effect of decades of such protectionism by successive Indian governments during the twentieth century:

…we sought to produce everything that we could, and the items that we could not, we strived to produce sometime in the future through an enforced programme of import substitution.

In such an environment,

… even if the market was small, there was practically a guarantee of making profits, for the price was fixed on a cost-plus basis, and the unequal distribution of income ensured enough buyers to make the production beat the break-even point… what we lost was the price and quality that could have come from competition, and therefore the tax-paying consumer became the ultimate loser.

The policy has had one part of its desired effect: Elon Musk of Tesla has declared that duties make it impractical to launch in India:

For other countries, we pay in part for the local factory by selling cars there ahead of time. Also, gives a sense of demand. Current rules in India prevent that, but recent changes in sales tax give hope for future changes.

— Elon Musk (@elonmusk) August 1, 2019

But as the book describes, it is extremely unlikely that being protected from Tesla and other world-class EV manufacturers is going to allow domestic car companies to create even better vehicles. If and when tariffs are loosened, customers will choose with their wallets. These tariffs will only delay the inevitable.

…fairly unique product cultures often develop within each company. This typically stems directly from the personalities and proclivities of the founders & senior executives within the organization and ultimately permeates throughout the entire organization… Through my time in Silicon Valley, I’ve found four specific product cultures dominate tech companies: engineering-driven, data-driven, design-driven, and sales-driven product cultures.

This article then goes on to describe each one of these cultures. Definitely a useful read if you’re a product manager, good read if you’re in the tech industry, but also helpful if you’re not – whether you’re a passionate user of a product or evaluating making a significant purchase of subscription to one, it helps to have a sense of the company’s culture. It’ll inform the decisions they make, features they’ll get around to building, the way they’ll address issues, treat your data. And therefore help you set better expectations with yourself.

Some more thoughts on the auto-industry’s inevitable EV discontinuity (earlier):

As a bottom-up EV company, Tesla also seems to be fundamentally software-driven. This isn’t necessary to build EVs, but it is probably going to be the model for successful auto manufacturers after the shift to EVs, regardless of whether Tesla itself wins or not.

A manufacturer having a continuing relationship with a specific vehicle after it has been sold to a customer is a novel concept. This is more like an iPhone that receives continual software updates over a certain lifetime that not only makes new features available but also makes existing hardware behave better.

This is a fundamental change. For example, to a Quora question about “Does Tesla update or change its cars with each model year?“, this answer:

Digit 10 of the VIN is the ‘model year’, but for Tesla this is the year the car was manufactured, not a ‘model year’ per se.  From when it was introduced in June 2012 the car has been continually updated.  

Part of this is by design – the majority of cabin controls are via the 17-inch touchscreen, with software updates pushed to the car via its onboard 3G connection every couple of months.  Sometimes these are cosmetic tweaks, sometimes bug fixes to the software itself, and sometimes new feature introductions such as ‘creep mode’ and ‘hill hold’.

Physical changes to the car also happen continuously.  Some are to introduce new features – such as parking sensors (park distance control) or electronic folding mirrors – and it may or may not be possible to retrofit changes to existing cars depending on the feature.

Some changes are under the covers, such as redesigned suspension arms, or more subtle, such as the recent change to the bezel around the instrument cluster.

Bottom line – Tesla continually tweaks the car to introduce new features, or to improve existing features.  There is no such thing as a ‘Model Year 2014 Tesla Model S’.

In fact, Tesla’s global over the air software update system means that 

Doug Field, a former Apple Inc. and Ford Motor Co. F -1.70% engineer who is now Tesla’s engineering chief, notes that, rather than “batch large changes all at once,” Tesla continues to make tweaks after a product launches, much as the software industry does.

This means it can seamlessly make major changes to basic elements of a car that would have required manufacturers to otherwise make a major recall [1]:

Tesla shipped an over-the-air update that, according to CR’s testing, improved the braking distance by 19 feet. It’s a wild idea: your car automatically downloads some code, and it’s instantly safer… CR’s director of auto testing (and the person who originally flagged the issue), said he’d “never seen a car that could improve its track performance with an over-the-air update.

And this, perhaps unimaginable just a few years ago:

… the automaker remotely unlocked the full battery pack capacity of Model S/X 60/60D vehicles with 75 kWh battery packs [for Florida customers in the mandatory evacuation zone looking to escape the path of Hurricane Irma in 2017]

This was because

Tesla used to offer the option to buy a Model S or Model X with a 75 kWh battery pack software-locked at a capacity of 60 kWh. The option would result in a less expensive vehicle with a shorter range, but the option to pay to remotely enable the longer range at a later stage… a representative confirmed that the company has put in place the emergency measure to temporarily extend the range of the vehicles of Tesla owners in the path of Hurricane Irma.

And while I can’t find coverage of this feature having been implemented, an idea of what is possible:

We are going to move all info and settings to the "cloud" (aka server) so any Tesla you drive in the world automatically adjusts to you

— Elon Musk (@elonmusk) August 20, 2017

This means a car that’s actually gets better over time, as this writer states, describing improvised auto-pilot, an improvement in the range of its long-range models, a speed boost, automated wipers that used “the first production deep neural network trained with over 1 million images for the detection of water droplets in a windshield and additional weather cues” and the braking improvements above. 

Finally, it also means the manufacturer has a relationship with the car and therefore the end customer unmediated by dealerships. This is transformational to the company’s organisation and to the economics of selling cars, but we won’t get into the details here.

That a major publicly-listed international car manufacturer, EV or not, has adopted this system of building and maintaining cars is a genie that can no longer be put inside a bottle. It has to become mainstream now.

[1] Update: Of course, not everything can be fixed via software: “NHTSA said there are no known crashes or injuries associated with the Model X recall. The recall covers 14,193 U.S. vehicles and 843 in Canada. Tesla will arrange for the replacement of the mounting bolts and will also replace the steering gear if needed, Transport Canada said.”

From this piece:

For most people, retirement means they are finally free to do whatever they want without worrying about money. They could finally leave their jobs, travel around the world, and set their schedules so it fits their rhythm of life.

However, this is a low bar for freedom. Giving away thirty-plus years of your life to an indifferent career is like spending all your youth with a partner that you’d rather not be around. When you finally break free of that job or relationship, you’ll be left wondering what else you could have done with all that misspent energy.

And

The problem with freedom-as-leisure is that it is fundamentally asymmetrical. You have to work significantly more hours for each hour of leisure you may gain, which means that if you hate your job, you have to accumulate a lot of misery before you can cash it in for freedom.

As long as you aren’t working to payoff immediate debt, according to the article you can reframe the way you think about work

This is where you realize that work isn’t about retirement; it’s about working on the things you’d do if money wasn’t even a factor… not because they’re profitable, but because you enjoy the hard work it takes in building them.

The first thing that the freedom-in-work model does is that it lowers the threshold of money you need to continue your work. When work in itself is fulfilling and worthwhile, you become more content with a minimal lifestyle.

This is because money no longer serves as a reliable signal of your worth and priorities. In the freedom-as-leisure model, the amount of money you made from your job was of utmost importance. If money was the only justification for your continued employment, that salary better be high enough to make your time worth it.