Another day, another Verstappen win - we’re witnessing the start of a dynasty in F1. But for the funniest video I’ve seen all week, here goes this post from r/formuladank.
Also, it’s crunch time for England in their game against Germany tomorrow, with an entire nation collectively biting its nails and hoping to win only its second EVER game in the knockout stages of the Euros. Good luck, I guess! Hopefully we don’t see any gems like these again:
P.S.: We’ll be off next week due to holidays, but will be back on 12th July.
Monday Musings
Super Apps are all the rage in Asia, Africa and most parts of the world where the building blocks of the tech world – cheap and frictionless access to data and the Internet, for starters – are not as easy to access as they are in richer countries. These developing countries, in many cases, have also leapfrogged economic development; i.e., they have skipped inferior and less efficient technologies and have moved directly to more advanced ones. The mobile phone is a good example of this, where developing countries have skipped the fixed line tech of the 20th century and moved directly to more advanced ones like mobile phones. In some cases, this has also meant that the infrastructure to support the advanced tech is still being developed – data flows like water in the West, but this is not necessarily the case all across the East. Super Apps eliminate pain points that multiple single-purpose apps present to users, such as storage, since most consumers own cheaper low-storage smartphones, and the high cost of internet data. Many of these single-purpose apps do not also have as much of a competitive advantage in the East as they do in the West, which allows frictionless, singular ecosystem-based Super Apps to break through and develop a moat in the market much more easily. Captured user data across a range of services enables Super App developers to continually refine their products, and, in a vicious cycle, create even more of a dominant position in the market. For the same reasons, however, it is not obvious that Super Apps will work in the West – single use apps already have deep moats and low storage and sparsely available data are not problems that plague consumers. Moreover, there is a lot more concern about privacy and the hoarding of consumer data, which would make the development of Super Apps potentially subject to antitrust and competition concerns.
Meanwhile, this week…
Tech giants are facing increased antitrust scrutiny in the US, Marc Andreessen shares his thoughts on technology and the future, and Google is facing the growing pains of transitioning into a large, ‘corporate’ organisation. Also, the success of mRNA holds immense promise over the next few decades, and M&A activity in AI highlights the focus of tech giants in the space.
One of the most critical developments to keep note of over the next few years will be the regulation of the tech industry that, for some, is both necessary and long overdue. The movement has already gained steam with the appointment of Lina Khan, author of the famous ‘Amazon’s Antitrust Paradox’, as the Chair of the Federal Trade Commission. Now, a bipartisan group of House lawmakers have unveiled bills that could make it harder for Amazon, Apple, Facebook and Google to complete mergers and prohibit them from owning businesses that present conflicts of interest. The bills:
Make it unlawful for a platform with at least 50 million monthly active US users and a market cap over $600 billion to own or operate businesses that present a clear conflict of interest.
Prohibit dominant platforms from giving their own products and services advantages over those of competitors on the platform.
Shift the burden of proof in mergers to dominant platforms to prove that their acquisitions are lawful, rather than the government having to prove they will lessen competition.
The regulation presents two conflicting views. On the one hand, it could be seen as stifling innovation and reducing economies of scale for dominant market players, limiting the benefits consumers derive from integration across platforms. For example, Amazon would not be able to offer Prime free shipping for some products, and Facebook could not allow for easy cross-posting to Instagram. On the other hand, it could increase competition, reduce monopoly power and the negative externalities that result from it, and increase consumer choice.
Two of the new bills introduced Friday could prove especially difficult for Amazon and Apple to navigate, given both operate marketplaces that include their own products or apps that compete with those of other sellers or developers that rely on their services, a risky set-up under the new legislation.
#2 Interview: Marc Andreessen, VC and Tech Pioneer
Marc Andreessen is a seminal figure of the tech world, as one of the founders of the internet as we know it today, as the figurehead and founder of Andreessen Horowitz (a16z), and as the writer of the famous Why Software is Eating the World, which foreshadowed the immense tech boom we’ve seen over the last decade. In an interview with Noah Smith, Andreessen expounds on his thoughts on technology and the future. Some key takeaways are:
Housing, education and healthcare are the three sectors with skyrocketing prices in a world where tech is driving prices down, and are ripe for disruption over the next decade with new technologies, businesses and industries that break their price curves.
Competition between an incumbent and a software-driven startup is “a race, where the startup is trying to get distribution before the incumbent gets innovation”. Andreessen is skeptical that most incumbents can adapt to the threat of a culture which is built to create software from the start, and it is proving easier in many cases to start a new company than try to retrofit an incumbent.
COVID enables CEOs to restructure their companies and increase efficiency and effectiveness, and combined with the overwhelming success of remote work and its potential beyond COVID, it is likely that we will see a huge surge in productivity growth over the next 5 years.
The emergence of distributed consensus via blockchain has opened up innumerable use cases that can transform title to real-world assets, loans, insurance, unique digital goods, corporate governance, money and incentive systems.
Great software people tend to not want to work at an incumbent where the culture is not optimized to them, where they are not in charge. It is proving easier in many cases to just start a new company than try to retrofit an incumbent. I used to think time would ameliorate this, as the world adapts to software, but the pattern seems to be intensifying.
#3 Google Executives See Cracks in Their Company’s Success
As Google has evolved from that plucky startup with its ‘Don’t Be Evil’ motto (which, to some, could be seen as slightly ironic now), it has started to deal with all the problems that come with scale and becoming a monolith. In a time of record profits and revenue, which are reaching new highs every quarter, this concern may seem to be a tad premature. However, according to some Google executives, the company’s culture has been changing since Sundar Pichai took over as CEO, and the previous ethos of move fast and break things has been replaced by risk aversion and incrementalism. The problems are typical – bureaucracy, a bias towards inaction and a fixation on public perception. The lack of action extends into Google’s workplace culture, where problems have apparently been allowed to fester while tough decisions have been avoided. While the lack of decisive leadership has been criticised, there is however an acknowledgement that Pichai is a thoughtful and caring leader, and Google is more disciplined, organised and professional now. The seeming rifts within the company, then, seem to highlight the growing pains suffered by a company that is turning into an enduring titan of industry. It is critical for Google to avoid losing its affinity with the cutting edge of technology while it transitions into a large corporate.
During his time leading Google, it has doubled its work force to about 140,000 people, and Alphabet has tripled in value. It is not unusual for a company that has grown so large to appear sluggish or unwilling to risk what has made it so wealthy.
#4 The Story of mRNA: How a Once-Dismissed Idea Became a Leading Technology in the Covid Vaccine Race
It doesn’t need to be said that the last 15 months have been terrible, lifechanging and groundbreaking. As the world has locked down, digital transformation has accelerated by almost 5-7 years, and where tech was slowly but surely becoming more entwined into our lives, it now augments every aspect of it. Borne out of desperation and necessity, one of the most impactful breakthroughs has been the rapid adoption of mRNA technology, or synthetic messenger RNA, a variation on the natural substance that directs protein production in cells throughout the body. The Pfizer and Moderna vaccines work by making precise changes to the synthetic mRNA which enable any cell in the body to become an ‘on-demand drug factory’. Theoretically, the process of designing your own mRNA opens up a world of possibilities by directing your body to create any protein you desire, potentially presenting solutions for cancer and rare diseases. Moderna and BioNTech were able to solve the key problem that plagued mRNA for around 30 years – an immune response that sensed a chemical intruder and went to war. In Gartner’s Hype Cycle (yes, again!), mRNA was in the trough of disillusionment until a trigger (COVID) changed its trajectory and firmly put it on the path towards the ‘Slope of Enlightenment’ and commercial acceptance. While COVID has been awful, it has also led to the types of technological breakthroughs that are only possible in periods of strife, such as tanks and X-Ray machines in WWI, and flu vaccines, radar, jet engines and computers in WWII.
Cloaking mRNA so it could slip into cells to produce proteins had a staggering number of applications, Langer thought, and might even save millions of lives.
#5 Tech Giants Pursue Inorganic Growth with AI
M&A activity in the AI space can showcase several trends that the biggest companies in the tech world are focusing on. Pitchbook’s Analyst Note highlights a focus by tech giants on deep learning R&D, the optimisation of digital media, and conversational AI, and a few large deals, such as Microsoft’s acquisition of Nuance, could catalyse deal flow to higher levels. While recent deal values and counts have not risen, and tech giants have avoided acquiring commercially leading AI companies due to concerns about antitrust and high losses, recent activity suggests that they may now be ready to invest now in more commercially proven AI models. The deal values for Nuance and for Workday’s acquisition of Peakon signal M&A in the space moving to another level of maturity. FAMGA (Facebook, Apple, Microsoft, Google and Apple) are focusing on a few key areas: core AI software, natural language technology (NLT), AI core software and consumer AI. NLT, especially, is a faster-growing niche that tech giants are focusing on due to greater commercial and strategic synergies. Microsoft has exclusively licensed OpenAI’s language model, GPT-3, Google’s BERT model has advanced the field of language model training. Some other takeaways are:
An active pursuit of leading researchers in deep learning via M&A;
Consumer AI is the leading vertical application for acquisition, with Apple being especially active in the space to extend AI across its consumer ecosystem;
Conversational AI is a leading driver of M&A due to tech giants wanting to embed intelligent voice recognition across their products.
We believe AI leaders will want to develop verticalized solutions over time and will acquire specialized AI startups in niche fields including consumer and healthcare. Advanced approaches to deep learning will likely be important to align with the strategic priorities of AI leaders.
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