Value Unleashed

The Geek's Reading List is a weekly publication written by Valitas advisor, Brian Piccioni. Brian has been part of the technology industry for a third of a century now. He has been a sell-side research analyst for the past 20 years, where he was ranked the #1 tech analyst in Canada for six consecutive years, named one of the best tech analysts in the world, and won a number of awards for stock-picking and estimating. The Geek's Reading List looks at recent developments in the technology sector by discussing articles that Brian compiled over the week. In his own words, the discussions are usually provocative, new, and counter-consensus. The sorts of things not being written anywhere else.

The Geek's Reading List

1) Wireless, Super-Fast Internet Access Is Coming to Your Home
2) Theranos voids two years of Edison test results: WSJ
3) Goldman Sachs Upgrades Tesla Hours Before Underwriting Its $2 Billion Offering
4) In Oracle v. Google, a Nerd Subculture Is on Trial
5) 4 hurdles that keep virtual reality from being mainstream
6) LendingClub Tumbles After Investors Suspend Debt Purchases
7) IBM Scientists Achieve Storage Memory Breakthrough
8) The myth of TV cord-cutting
9) BBC set to launch Britflix rival to Netflix after John Whittingdale approves subscription streaming
10) BitTorrent Inc. announces live streaming TV service powered by P2P
11) One billion hours on, and HGST still rules the roost for hard disk reliability
12) Tesla rolls out update to make it harder to crash a self-parking car
13) The empty brain … : your brain is not a computer
14) Google’s Tensor Processing Unit could advance Moore’s Law 7 years into the future
15) Chromebooks outsold Macs for the first time in the US
16) Filmmakers Ask “Pirate” to Take Polygraph, Backtrack When He Agrees
17) Updated Skimer malware infects ATMs worldwide
18) SAP Counting on Customers to Go All-In on Cloud Migration With HANA
19) Robots have been about to take all the jobs for more than 200 years
20) HP’s first 3-D printers are finally here

If there is one industry poised for disruption, especially in North America, it is broadband Internet service. A legacy of incompetent or corrupt policy choices have led to an industry bereft of competition which is excessively profitable, fat, stupid, and lazy. Wireless broadband of the type described in this article is an obvious solution, provided regulators do not step in and demand high license fees for the spectrum. License fees are essentially an entirely artificial barrier to entry imposed to ensure only entrenched players can buy new spectrum. I would argue there is no reason to believe spectrum is scarce within the context of modern radio technologies.

“In the gleaming but quiet headquarters of a startup called Starry—above the din of Boston’s Downtown Crossing—40 engineers are toiling to achieve a disruptive vision: delivering Internet access to apartments and businesses, cheaply and wirelessly, nearly 100 times faster than the average home connection today. The idea of gigabit-per-second wireless service to homes has been around for at least 15 years, but technology advancements make the idea far more plausible today. The high-capacity wireless technology involved—known by a chunky piece of jargon, “millimeter wave active phased array”—is now much less expensive and bulky thanks to advances in microelectronics and software.”

https://www.technologyreview.com/s/601442/wireless-super-fast-internet-access-is-coming-to-your-home/

2) Theranos voids two years of Edison test results: WSJ

Well – no harm no foul, I guess. Unless you happened to be somebody whose blood came back OK and now a problem has progressed for a couple years without treatment. This story just keeps getting better and better.

“Blood-testing firm Theranos Inc notified the U.S. federal health regulators that it voided results from its Edison blood-testing devices for two years, the Wall Street Journal reported on Wednesday, citing a person familiar with the matter. The company informed the Centers for Medicare and Medicaid Services that it has issued tens of thousands of corrected blood-test reports to doctors and patients, nullifying some results and revising others, the Journal reported, citing a person familiar with the matter. The corrected reports include the Edison results and many tests run on traditional laboratory machines, the Journal said.”

https://www.yahoo.com/news/theranos-voids-two-years-edison-test-results-wsj-032307616–finance.html

3) Goldman Sachs Upgrades Tesla Hours Before Underwriting Its $2 Billion Offering

This is not really about technology but it shows the depths to which sell-side research has dropped. Most brokers have a compliance department but some have a “compliance” department which is not tasked with compliance with the law but plausible deniability. The 2008 crisis showed that, no matter how egregious the conduct, nobody goes to jail and the worst you can expect is a small financial settlement as a cost of doing business.

“On Wednesday morning, Goldman Sachs’ research analysts upgraded the stock of Tesla from neutral to buy, raising Goldman’s six-month target for the stock to $250. “We do not believe Tesla shares are fully capturing the company’s disruptive potential,” wrote Goldman Sachs’ auto analyst Patrick Archambault. Shares of the electric car maker increased by 3% on Wednesday. Hours later, Tesla announced that it would raise about $2 billion in an equity offering with the help of Goldman Sachs.”

http://www.forbes.com/sites/nathanvardi/2016/05/18/goldman-sachs-upgrades-tesla-hours-before-underwriting-its-2-billion-offering/#77c5fc205e7c

4) In Oracle v. Google, a Nerd Subculture Is on Trial

To people who haven’t heard about this, Oracle is suing Google over Google’s use of the Java API (Application Programing Interface). Oracle’s efforts are rooted in a desire to appear relevant but a ruling in their favor would cause pandemonium in the software industry. As is typical the case is not about truth but about befuddling technologically ignorant jury members and the judge.

“The problem with Oracle v. Google is that everyone actually affected by the case knows what an API is, but the whole affair is being decided by people who don’t, from the normals in the jury box to the normals at the Supreme Court—which declined to hear the case in 2015, on the advice of the normals at the Solicitor General’s office, who perhaps did not grasp exactly how software works. In a world where Silicon Valley is coming into dominance, Oracle v. Google is an unusual instance in which the nerds are getting totally owned by the normals. Their judgment on the technologies they have birthed is being overridden by old people in black robes; their beloved traditions and mythologies around free and open source software are being scoffed at by corporate stiffs in suits as inconsistent hippie nonsense.”

http://motherboard.vice.com/read/in-google-v-oracle-the-nerds-are-getting-owned

5) 4 hurdles that keep virtual reality from being mainstream

The article has a misleading headline: it should be “4 uncritical and irrelevant platitudes about VR.” VR is an old technology which has been through a number of previous hype cycles though modern VR is much better than previous incarnations. Just like the hype about 3D printing, the hype surrounding VR is built on a number of assumptions which are mostly speculative. Regardless, like any display technology the replacement cycle will be very long and even if you believe unfounded growth projections the market will quickly saturate.

“Virtual reality is not like anything that’s come before it. This is something that you need to remember. As the moving parts of the virtual reality hype machine have come together into a churning monster, comparisons have been made to failed technology trends of the past: It’s going to be like 3D TV; It’s too expensive; It’s not good enough; We’re not ready for it.”

http://thenextweb.com/insider/2016/05/20/hurdles-virtual-reality-mainstream/

6) LendingClub Tumbles After Investors Suspend Debt Purchases

Creditors can be so fickle: find “faulty” internal controls and they don’t want to lend you money anymore. Go figure. At the core of most fintech companies is a willingness to accept higher risk and a lower regulatory/compliance burden. Oddly enough regulations are there for a reason.

“LendingClub Corp. shares resumed their slide in New York trading Tuesday amid a scandal that cost the chief executive officer his job, prompted investors to suspend debt purchases and spurred a U.S. Justice Department probe. The stock tumbled 11 percent to $3.52 at 1:23 p.m. following a regulatory filing from the company late Monday that said strategies to restore investor confidence and obtain new capital for loans might include equity or debt sales, fee changes or other moves that could be “costly or dilutive” to shareholders. The shares, which traded as high as $11.25 in January, plunged 51 percent last week after the surprise departure of Chairman and CEO Renaud Laplanche and the disclosure of faulty internal controls.”

http://www.bloomberg.com/news/articles/2016-05-17/lendingclub-shares-fall-after-investors-suspend-debt-purchases

7) IBM Scientists Achieve Storage Memory Breakthrough

Novel memory technologies are a bit like novel batteries in that there are many announcements but very few actual commercial products. Over a 35 year career in technology I’ve seen only flash memory become a significant part of the market – though I am hopeful Intel/Micron 3D Crosspoint technology will make a dent. One thing you can be sure about IB is that, no matter how brilliant their scientists, management will manage to screw it up and snatch defeat from the jaws of victory.

“For the first time, scientists at IBM (NYSE: IBM) Research have demonstrated reliably storing 3 bits of data per cell using a relatively new memory technology known as phase-change memory (PCM). The current memory landscape spans from venerable DRAM to hard disk drives to ubiquitous flash. But in the last several years PCM has attracted the industry’s attention as a potential universal memory technology based on its combination of read/write speed, endurance, non-volatility and density. For example, PCM doesn’t lose data when powered off, unlike DRAM, and the technology can endure at least 10 million write cycles, compared to an average flash USB stick, which tops out at 3,000 write cycles.”

http://www.prnewswire.com/news-releases/ibm-scientists-achieve-storage-memory-breakthrough-300269117.html

8) The myth of TV cord-cutting

Actually, cord cutting is a reality and the impact is being felt by pay TV vendors. The point the author appears to be making is that since the US broadband market is entirely dysfunctional due to a legacy of bad regulation, they will figure out how to make you pay up regardless. That’s as may be only as long as the regulatory and technological context allows the US telecommunications infrastructure to continue sliding farther and farther behind the rest of the world. Either the regulatory environment will swing in favor of consumers or technological progress (i.e. via advanced wireless technology, see item 1) will disrupt the broadband industry.

“You’ve heard the rumors, maybe even felt the temptation. Everybody else is doing it, right? Cutting the cord and watching TV over the Internet. Except it’s not true. Cord-cutters are rare beasts, like white rhinos or Beyonce-haters. And there are good reasons for that. To begin with, even if you drop pay TV, you still need an Internet connection — generally provided by the very same companies, folks like Comcast and Verizon Fios. And their subscription packages are hedged to ensure that if your TV bill goes down, your Internet bill will go up. At the same time, cord-cutters often lose out on a huge swath of content that’s available only through pay TV, including a lot of high-demand sports.”

https://www.bostonglobe.com/news/politics/2016/05/09/the-myth-cord-cutting/BMgsx8CkNw1lxGz4aCb0yO/story.html

9) BBC set to launch Britflix rival to Netflix after John Whittingdale approves subscription streaming

It seems to me “still in the early stages of development” is pretty much at odds with “set to launch”. Nevertheless I figure that eventually many content owners such as BBC will set up their own streaming services and bypass the need for a company like Netflix. Of course, there is no chance every one of them will be able to collect a $10 monthly fee so prices will have to come down a lot. Essentially you will “pick and pay” streaming services or put up with advertising or more likely both.

“The BBC is to push ahead with plans to launch a British rival to Netflix, after getting the go-ahead from the government to develop a new subscription streaming service. The project – which is understood to have the working title, Britflix – is believed to be a collaboration between the corporation and ITV, its main commercial rival, and is still in the early stages of development.”

http://www.telegraph.co.uk/news/2016/05/15/bbc-set-to-launch-britflix-rival-to-netflix-after-john-whittingd/

10) BitTorrent Inc. announces live streaming TV service powered by P2P

Traditional streaming services require sizeable data centers to deliver content. BitTorrent’s approach is entirely different in that users both stream and supply (presumably legal and licensed) content. The problem with this and pretty much any emerging streaming service is content: if you don’t have enough people won’t use it and if people don’t use it you won’t have enough “peers” to stream the content.

“BitTorrent Inc., the company behind the BitTorrent peer-to-peer file sharing protocol, is planning to launch a live streaming TV service with both free and paid options. The company claims it will have better performance than existing services that broadcast live channels over the Internet. Unveiled today, BitTorrent Live is “a multichannel, live, and linear video streaming platform” based on a peer-to-peer live video streaming protocol that BitTorrent has been developing for a few years. No availability date was announced, but BitTorrent said it will be available on Apple TV, iOS, Android, and Mac.”

http://arstechnica.com/information-technology/2016/05/bittorrent-inc-announces-live-streaming-tv-service-powered-by-p2p/

11) One billion hours on, and HGST still rules the roost for hard disk reliability

This article is interesting due to the comments regarding why they choose rather unreliable HDDs: namely due to availability. HDDs will be around for a long time but are probably going to be rare in laptops within the next year as SSD prices drop and are going to be pushed off to archive storage as enterprises shift to much faster but more expensive all flash arrays.

“The company continues to substantially stick with Seagate 4TB units, in spite of somewhat worse failure rates, due to a combination of better pricing and availability. Backblaze says that it typically orders disks 5,000 to 10,000 at a time, and while it has found suppliers of Seagate and (Western Digital-owned) HGST that can handle these orders, it has struggled to do so consistently for Western Digital and Toshiba disks. This availability concern also pushes the company toward 4TB units over 6 or 8TB ones; although the pricing of those is starting to make them cost-effective, their bulk availability is still limited.”

http://arstechnica.com/information-technology/2016/05/one-billion-hours-on-and-hgst-still-rules-the-roost-for-hard-disk-reliability/

12) Tesla rolls out update to make it harder to crash a self-parking car

This update sounds a way of pushing product liability onto the driver rather than the vendor. Any self-driving car should simply not be capable of causing a collision and rather than perfecting that angle it seems the company is focusing on making sure the driver is legally responsible for whatever happens to the car’s hapless victims.

“A posting on Reddit today indicates that Tesla is rolling an update out to its vehicles to require that drivers confirm the direction of travel when Summon is activated — possibly a direct response to last week’s news of a Model S in Utah that autonomously crashed into the back of a parked trailer while in Summon mode. As with other Tesla software upgrades, the latest update is happening over the air. Summon, the self-parking feature that first rolled out in January, can be activated two ways: using a phone app, or via the gear selector from inside the car. Prior to this update, a self-parking maneuver initiated from inside the car using the gear selector would’ve caused the car to drive itself forward by default (though the driver could choose reverse from the center display). Now, the driver will need to choose forward or reverse each and every time they trigger Summon.”

http://www.theverge.com/2016/5/17/11691708/tesla-model-s-update-self-parking-car-crash-summon-mode

13) The empty brain … : your brain is not a computer

This is an excellent article which more or less demolishes a lot of the stuff you’ve been reading about artificial intelligence over the past few years. The one major point I disagree with is the idea the brain will never be simulated: it is a physical thing and there is nothing magical preventing its simulation. Thanks to my friend Duncan Stewart for this item.

“Our shoddy thinking about the brain has deep historical roots, but the invention of computers in the 1940s got us especially confused. For more than half a century now, psychologists, linguists, neuroscientists and other experts on human behaviour have been asserting that the human brain works like a computer. To see how vacuous this idea is, consider the brains of babies. Thanks to evolution, human neonates, like the newborns of all other mammalian species, enter the world prepared to interact with it effectively. A baby’s vision is blurry, but it pays special attention to faces, and is quickly able to identify its mother’s. It prefers the sound of voices to non-speech sounds, and can distinguish one basic speech sound from another. We are, without doubt, built to make social connections.”

https://aeon.co/essays/your-brain-does-not-process-information-and-it-is-not-a-computer

14) Google’s Tensor Processing Unit could advance Moore’s Law 7 years into the future

Articles like these simply reiterate that most people have no idea what Moore’s Law is. Regardless, it is not exactly new that a special purpose piece of hardware such as this does something faster than a general purpose computer. The thing is that the number of applications for special purpose systems tends to quite small compared to the number of applications for general purpose systems.

“Forget the CPU, GPU, and FPGA, Google says its Tensor Processing Unit, or TPU, advances machine learning capability by a factor of three generations. “TPUs deliver an order of magnitude higher performance per watt than all commercially available GPUs and FPGA,” said Google CEO Sundar Pichai during the company’s I/O developer conference on Wednesday. TPUs have been a closely guarded secret of Google, but Pichai said the chips powered the AlphaGo computer that beat Lee Sedol, the world champion in the incredibly complicated game called Go.”

http://www.pcworld.com/article/3072256/google-io/googles-tensor-processing-unit-said-to-advance-moores-law-seven-years-into-the-future.html

15) Chromebooks outsold Macs for the first time in the US

Chromebooks are flying pretty much below the radar screen for most people. These are essentially low cost netbooks with limited on board storage and which use cloud services for a lot of their function. The low cost makes them well suited for K-12 students and the reliance on connectivity makes control of what goes on a lot easier. Essentially Chromebooks are actually accomplishing what the iPad was supposed to do.

“Google’s low-cost Chromebooks outsold Apple’s range of Macs for the first time in the US recently. While IDC doesn’t typically break out Windows vs. Chromebook sales, IDC analyst Linn Huang confirmed the milestone to The Verge. “Chrome OS overtook Mac OS in the US in terms of shipments for the first time in 1Q16,” says Huang. “Chromebooks are still largely a US K-12 story.””

http://www.theverge.com/2016/5/19/11711714/chromebooks-outsold-macs-us-idc-figures

16) Filmmakers Ask “Pirate” to Take Polygraph, Backtrack When He Agrees

What is interesting about this is not so much the courtroom drama but the fact that polygraph tests are in any way considered a valid tool. They are complete pseudoscience which can easily be spoofed. Using polygraph results is not altogether different from permitting horoscope readings in the courtroom.

“Not all alleged downloaders are eager to pay up though. In fact, many don’t respond to the settlement letters they receive or claim that someone else must have downloaded the film using their connection. This is also true in the case Dallas Buyers Club filed against California resident Michael Amhari. The filmmakers claimed that Amhari downloaded a pirated copy of the movie after he was linked to a pirating IP-address and demanded a $10,000 settlement. However, Amhari denies any involvement, and when the copyright holders demanded a polygraph test to prove it, he agreed. However, soon after, Dallas Buyers Club’s attorney retracted the offer.”

https://torrentfreak.com/filmmakers-ask-pirate-take-polygraph-backtrack-agrees-160518/

17) Updated Skimer malware infects ATMs worldwide

A number of years ago I was served a bunch of counterfeit bills by a BMO bank machine. Fortunately, I was in a position to get my money back. That had to be an inside job – they don’t just give drivers a sack of money and tell them to fill up the machines so somebody in the ATM service business was laundering counterfeit money through the machines. That’s also probably how viruses get installed on the machines. The sad reality is that most ATMs were designed long ago and run vulnerable Windows XP rather than a more robust operating system.

“Researchers from Kaspersky Labs warn that the Skimer malware, first spotted in 2009, is once again infecting ATM machines worldwide. An improved version of Backdoor.Win32.Skimer has been discovered infecting machines worldwide. The new Skimer allows criminal access to card data, including PIN numbers, as well as to the actual cash located in the machine. The malicious installers use the packer Thermida to disguise the Skimer malware which is then installed on the ATM. If the ATM file system is FAT32, the malware drops the file netmgr.dll in the folder C:\Windows\System32. If the ATM has an NTFS file system, netmgr.dll is placed in the executable file of the NTFS data stream, which makes detection and analysis of the malware more difficult.”

https://thestack.com/security/2016/05/18/skimer-atm-update-kaspersky/

18) SAP Counting on Customers to Go All-In on Cloud Migration With HANA

Both Oracle and SAP are suffering from the same problem, namely the centralized database paradigm which has been their bread and butter is not particularly relevant in a cloud based world. Not only that but the alternative to staggeringly expensive data base licenses free open source software which is already in broad use. As the article briefly mentions the challenge is not in getting new customers but hanging on to a shrinking pool of the one you have.

“SAP, EMC and the other usual suspects are all saying the same things. They are in the fight for their lives to win and keep enterprise IT customers. That’s because they are scrambling for a market that is shrinking and being disrupted by cloud computing. SAP’s effort in the cloud, the HANA Cloud Platform (HCP), “is the key to the company’s future—it is that simple,” said SAP Enterprise Platform President Steve Lucas. He’s right, because the company is all-in on the HANA in-memory platform, S/4HANA ERP applications and HCP. There is no turning back for SAP or its customers. As much as SAP and the other established vendors want new customers, the battle is much more about retaining current ones.”

http://www.eweek.com/enterprise-apps/sap-counting-on-customers-to-go-all-in-on-cloud-migration-with-hana.html

19) Robots have been about to take all the jobs for more than 200 years

The article takes a walk down memory lane and shows that the current hysteria about robots “takin our jerbs” is nothing new even though all that has actually happened is that labor productivity increased along with the standard of living. Most of the consumer products we have today, in particular the electronics, would not exist if not for extensive automation. It is almost impossible to assemble a smartphone by hand, let alone an integrated circuit.

“Technology has always triggered fears of mass unemployment. In 1811 it was the Luddites, who assumed they were done for. In the 1930s, it was vaunted economist John Maynard Keynes, who implicated technology as one reason for the unemployment of the Great Depression. The same persistent fear has been playing out in the pages of newspapers for the last century …”

https://timeline.com/robots-have-been-about-to-take-all-the-jobs-for-more-than-200-years-5c9c08a2f41d#.itjdf3q4c

20) HP’s first 3-D printers are finally here

HP is late to the 3D printing game but it knows a few things about the potential end markets since it already sells a lot of high end printing gear to enterprise customers. Despite what you might read the technology can’t printed electronics nor is it likely anywhere near fast enough or cheap enough (by a couple orders of magnitude) to replace injection molding. Nevertheless, assuming the device do what they are supposed to do, their speed and quality may increase the total addressable market for 3D printers.

“HP Inc. — the PC and printing portion of the old company that emerged from last year’s corporate split — today announced what it calls the first production-ready commercial 3-D printing system, one that it intends to spearhead a years-long campaign to remake manufacturing. It’s called the HP Jet Fusion 3D Printing Solution, and the company says the two models it has introduced are aimed at model shops and 3-D print service companies. (They’ll hit the market later this year and early in 2017 with prices starting at $130,000.) Companies like Nike and the automaker BMW have been trying it out. Nike sees possibilities in personalizing its shoes and other athletic wear. BMW wants better ways to build prototypes.”

http://www.recode.net/2016/5/17/11689270/hp-3d-printers