Friday, January 19, 2018

Norway Wealth Fund Dumps Shipping Investments, Others on Ethics Grounds

This follows the recommendation to remove oil and gas investments from the benchmark.
Next up, the fund will begin shorting anything to do with cod or brown cheese and the transformation will be complete.

From Bloomberg via gCaptain:
Norway’s wealth fund dumped a series of companies involved in making nuclear weapons and excluded others based on human rights concerns as the $1.1 trillion investor steps up its scrutiny over how corporations behave.

AECOM, BAE Systems, Fluor Corp. and Huntington Ingalls Industries Inc. were excluded “because of their involvement in the production of nuclear weapons,” the central bank, which oversees the fund, said in a statement. An exclusion of Honeywell International Inc. was maintained on this criterion.

The world’s largest wealth fund takes into account ethical rules encompassing human rights, some weapons production, corruption, the environment, coal and tobacco when deciding on its investments. The fund sells its stakes before it announces an exclusion....MORE

"Dollar Crushed as Government Shutdown Looms"

From Marc to Market:
The US dollar is broadly lower as the momentum feeds on itself. Asia is leading the way. The Japanese yen, Taiwanese dollar, Malaysian Ringgit, and South Korean won are all around 0.45% higher. Asian shares also managed to shrug off the weakness seen in the US yesterday. The MSCI Asia Pacific Index advanced 0.7%. It is the sixth consecutive weekly gain. The dollar's drop comes as US yields reach levels now seen in year. The 10-year yield is at its highest level seen 2014, while yields from bills to three-year paper are at their highest level since 2008.

The risk of a US government shutdown beginning tomorrow may be providing the latest fodder for the dollar's sell-off. The Dollar Index is set to post its fifth consecutive weekly loss, the longest drop since April-May 2015. The House of Representatives voted to extend the spending authorization for a month (Feb 16), but the Senate is balking. The Democrats in the Senate, whose votes are needed, unlike tax cuts, Many Democrats in the Senate want a deal on the adults that were brought by their families illegally as children.

The dollar bears have not only pushed aside the rise in US interest rates but also economic data that suggests the US economy accelerated in Q4 17 (initial estimate will be reported next week). In addition, even disappointment, like the UK's retail sales report today, has failed to stem the greenback's slide. December retail sales fell a sharp 1.5%, the latest drop since mid-2016, and 1.6% excluding gasoline. The median expectation was for a 1.0% decline after a strong 1.1% and 1.2% rise respectively. Those November gains were revised lower by 0.1%. Household goods purchases fell 5.3%, while clothing was off 1%. The average monthly change in Q4 was zero, after 0.2% in Q3 and 0.4% in Q2.

Sterling softened on the news, but only after it made a new high since the UK referendum (~$1.3945) and it remained above $1.39. It has not had a losing session against the dollar since January 1. This is the third week it is rising on a trade-weighted basis as well.

The euro is knocking on $1.24 after having fallen to $1.2165 yesterday. The high from the middle of the week was nearly $1.2325. European assets markets are firm. The Dow Jones Stoxx 600 is up 0.45%, showing resilience in the face of yesterday's losses in North American. It is up in each of the three weeks of the new year. European bonds are mixed, but the peripheral yields are two-three basis points lower. Italy is lagging a bit, as the March election deters some investors....


Here's the last year of the Dollar Index (DXY). A trend appears to be emerging. 

Thursday, January 18, 2018

"Microsoft wants to patent mind control" (MSFT)

From The Register, Jan. 15:

Battling Zuck for the brain-computer interface
Microsoft has applied to patent a brain control interface, so you'll be able to "think" your way around a computer device, hands free.

Last year, Facebook claimed to have 60 engineers engaged in BCI [brain computer interface] but Microsoft isn't going to take this sitting down. It's erm, sitting down and thinking really hard.

The application Changing an application state using neurological data was filed last year, and published last week. The inventors recently filed a related patent for a continuous motion controller powered by the brain. (US 2017/0329392: Continuous Motion Controls Operable Using Neurological Data).
Brain patent screengrab
The team responsible for both includes principal lead scientist at the Applied Science Group in the Windows division, Kazuhito Koishida as well as Professor Jaeyoun Kim, who has developed an artificial eye. Another member of the team, Cem Keski, has years of experience developing hand gesture controls. So maybe PreCrime chief John Anderton's theatrical hand gesture UI, as shown in the movie Minority Report, isn't so far away....MORE
El Reg has the story tagged: "Emergent Tech"

Turkey’s Army Chief and the Head of National Intelligence Flew to Moscow Today

From Al-Monitor:

Russian jury still out on Turkey's Afrin offensive
Turkey’s army chief Hulusi Akar and head of national intelligence Hakan Fidan flew to Moscow today to hold talks on Syria and, as many commentators speculated, to secure Russia’s blessing for a planned Turkish offensive against the Syrian Kurdish-controlled enclave of Afrin.

Following their meeting with Russian Defense Minister Sergei Shoigu, the Russian Ministry of Defense posted a brief statement on its website saying the talks had focused on the situation in the Middle East as well as on “current topics of mutual interest.” The meeting was “held in a constructive manner,” the statement concluded but provided no further details.

The English-language Daily Sabah, the mass-circulation outlet that serves as a mouthpiece for Turkish President Recep Tayyip Erdogan, wasted no time in spinning the story to fit Turkey’s desired narrative. In quoting the Russian statement, it substituted the word “constructive” with “productive,” implying that the general and the spymaster had been given the green light to proceed with the offensive.

Photographs of the Turkish and Russian delegations assembled around a large oval table released by the ministry suggested otherwise. The Russians were grinning; the Turks were glum.

Turkish Foreign Minister Mevlut Cavusoglu remained evasive when asked whether Russia was on board for a Turkish operation. In an interview with CNNTurk, he said, “The Russians should not be opposed.” Cavusoglu said that Turkey was holding discussions with Syria’s top ally, Iran, which also has troops deployed along the Syrian Turkish border. Cavusoglu argued, however, “It is our right under international law. … We are going to do this. We need to do this. We do not care what the countries of the world have said.”...

Previously from Al-Monitor:
"Will Erdogan defy Russia and the US over Afrin?"

Bats, Blimps, and Giant Camera Chips: 2018’s Top Tech Quick Hits

From IEEE Spectrum:

A dozen intriguing tech projects to look for in the coming year

  • Moonward Ho!

    imgIn December 1968, Apollo 8 became the first manned mission to orbit the moon. A half-century on, SpaceX, Elon Musk’s spaceflight company, is vying to do the same thing, offering to send two private customers on a lunar flyby aboard its Dragon 2 capsule. Meanwhile, German startup Part-Time Scientists aims to land the first 4G LTE base station on the moon this year. The base station will relay signals between the company’s yet-to-be-launched rovers and mission control back on Earth, but it could also be used by future lunar explorers. Further-out moon ventures include an inflatable orbiting habitat being developed by Bigelow Aerospace. If all goes according to plan—admittedly, a big “if”—2018 could mark the beginning of the return of humans to the moon. And this time it’ll be for a good long stay. [For more on lunar plans in 2018, see “China Promises the Moon.”]

  • EU Doubles Down on Data Privacy

    imgOn 25 May, the European Union’s General Data Protection Regulation (GDPR) will take effect, with tough rules aimed at protecting the privacy of people living in the EU. Europeans already have many more privacy protections than, say, U.S. citizens, including the “right to be forgotten.” But the GDPR goes much further: It protects virtually every kind of data pertaining to individuals, including medical records, online transactions, and social media posts. It also gives EU residents the right to opt out of automated decision making—via a machine-learning algorithm, for example—and to demand an explanation when an automated decision involves them in some significant way. The GDPR applies to companies doing business in Europe as well as companies that handle the data of Europeans. Unsurprisingly, firms far and wide are scrambling to comply.

  • Blimp Cell Towers Head Skyward

    imgThis year, Altaeros Energies plans to launch the first of its tethered-blimp cell SuperTowers. Each aerostat, floating up to 600 meters above the ground, will provide coverage equal to 30 traditional cell towers. The blimps are intended for remote locations where broadband service is too difficult or costly to supply by conventional means. Several other companies aim to do similar things, including Google, with its Project Loon balloons, and Facebook, with its solar-powered Internet drone, Aquila. Altaeros’s other big push is in high-altitude wind turbines. Who knew you could build a diversified business around lofting tech-laden tethered balloons?

Related: Yesterday's "IEEE Spectrum Top Tech 2018"

Synthetic Booze

Not the powdered vodka I've mention a couple times but rather a compound to mimic the effects of alcohol.

From the un-bylined electron-stained wretches known only as FT Alphaville:

“It is not designed for binge drinking”
All those enduring enjoying a dry January should turn to the latest research offering from Jefferies. No more loss of judgement, the analysts promise, showcasing the potential for hangover free entertainment to disrupt the alcohol business.

They come direct from a good lunch with Alcarelle, “a company that has the goal of developing an alcohol-free adult beverage, which imitates the positive aspects of alcohol without the negative health aspects”.

From the gutter, all there is to see is blue sky:
Ideal product features of synthetic alcohol? The aspiration is to develop a product that is fast acting (15 mins for effects to take place), a one hour half-life (washes out in an hour), that is tasteless, odourless, with zero calories. We believe the finished product would likely be released as a bottled product that has already been diluted to a usable strength.
The company aspires to market approval by 2022, but how would synthetic alcohol work?...

Previously, as part of our coverage of the ethanol biz: 
Powdered Booze Can Reduce Arterial Cholesterol Plaque By 40%
From our intro to 2013's "Can Powdered Water Cure Droughts?":
...Some years ago I was approached by a company seeking financing for their powdered vodka. 
When I was done laughing I had some research done on the principals and decided against doing anything with them.  
As it turned out the SEC eventually shut down another of their enterprises, thus besmirching the otherwise pristine reputation of the Boca Raton investment community. 
The powdered booze however turned out to be real, albeit with a patent owned by General Foods rather than the scamsters. 
Who knew?
From Popular Science:...
If interested see also 2015's:
"Everything You Want to Know About Palcohol, the Powdered Alcohol Approved by Feds"

Engineering Addiction Into Your Product: Lessons From the Professionals

The pros in this case being the gaming gurus at Gamasutra, November 13, 2017:

Compulsion Loops & Dopamine in Games and Gamification
The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

This is a presentation I put up together for the Big Gamification Challenge 2018 organised by REACTOR in collaboration with the Anglia Ruskin university , UK To explain how to use Compulsion Loops to produce Dopamine in games and gamified apps I touch multiple subjects
  • Extrinsic vs Intrinsic Motivation and Rewards
  • Challenges and Skills
  • Anticipation, Churn and Retention
Most of the talk is based on my experience of some theories I found works best for game system design. Find the Presentation Slides Here .I also decided to write an article on that talk so here it is :

Compulsion Loops & Dopamine in Games and Gamification
What is Gamification really about?

When you talk about Gamification to people, one word that comes back a lot is "Rewards". Well that's not what Gamification (or Games for that matter) is about! Whaaaat? don't get me wrong here, Rewards ARE important, but that's not what it's about.  It's really all about Dopamine!
Dopamine is a drug produced by the brain. Simply put, it makes people do stuff seeking rewarding outcomes. Its responsible for addiction but also for things like seeking food or shelter.
Compulsion loops come from Behavioral Psychology and can be used to explain how games and Gamification makes the brain produce Dopamine. A compulsion loop is made of 3 steps:
  1. Anticipation
  2. Activity
  3. Reward

Counter intuitively Dopamine is produced at the first step : Anticipation. If you look at BJ Fogg's Behavior Model anticipation would be the "Trigger" moment when you think about what you will do and its hopefully rewarding outcome.

But first to explain how to create anticipation that generates Dopamine we need to dig a bit deeper into the Rewards and Activities that are anticipated.

There is a lot to say about rewards and a lot of ongoing research and it would take too much time to go through all of it here. If you want more on that you can find some reference at the bottom of this article. For the sake of simplicity I will divide Rewards into two categories :
  • Extrinsic
  • Intrinsic
When I do something for something else, that "something else" is an Extrinsic motivation to the activity (that's kind of important because a part of the "clusterfuck" surrounding the theoretical discussions on rewards and motivation is due to the confusion between "What" rewards are extrinsic to. Let's just agree that here we are talking about motivations that are extrinsic or intrinsic to the activity and we should be able to talk about what really matters : how does it work?

Intrinsic motivation is when I do something for itself. The thing I do is it's own reward.

Let's look at an example :
Say I am playing a video game because I love the story. Unraveling the story is it's own reward. This is an intrinsic reward. While playing I discover that the game mechanics are actually great and I like the challenge they offer me. Progressively I start playing more and more for the mechanics and less for the story. There is a shift in my motivation. I play the mechanics because I like them. This is still Intrinsic to the activity.
Now Let's imagine that for some reason the game designer tough it would be a good idea to add Achievements to the mechanics to reinforce the wanted behaviors. Every time I succeed at a challenge using the game mechanics I love I get rewarded with an achievement that tells me I'm doing it right. That's nice and I start seeking these achievements. As I keep playing I start doing it more and more for the achievements. I might even start grinding to get them, getting me through mechanics I don't like that much which makes the game designer quite happy.  What is happening is that my motivation is shifting from Intrinsic to Extrinsic. This shift is called the Over justification effect. Where I was doing something for it's own sake I am now doing it for an extrinsic reward. What's important to know is that this is a one way trip. It's easy to steal Intrinsic motivation and shift it to Extrinsic motivation but the other way is much harder. If at that point the game stopped to give me achievements I would probably stop playing... 
Over-Justification Effect
Intrinsic Motivation is the Unicorn of game design. If you have it in your game or app, protect it ferociously and harness it's power!! Ok... so how do we do that? Glad you asked! Well my friend we will use what's called "Scaffolding" with the Skills and Challenges that are intrinsically motivating in the activity....

We'll be coming back to the topic and probably to Gamasutra over the next few weeks. Until the next installment here's an overview of where we're headed with this stuff:
"If you think your smartphone is addictive, you ain’t seen nothing yet."
"Mark Zuckerberg’s radical decision to reinvent the News Feed is a plea for mercy." (FB)
Related: Monday's ""Facebook Can’t Be Fixed" (FB)", last month's "Engineer a Little Addiction Into Your Product - Redux" or the just posted "Cory Doctorow: Persuasion, Adaptation, and the Arms Race for Your Attention ".

Facebook's Statement on Social Media and Mental Health (FB)
"Hey, we've toned down the 'destroying society' shtick, Facebook insists" (FB)
"The Right to Attention in an Age of Distraction"
Climateer Line of the Day: Neurotransmitters and Facebook Edition
 "The short-term, dopamine-driven feedback loops we've created are destroying how society works.  No civil discourse, no cooperation; misinformation, mistruth. And it's not an American problem — this is not about Russians ads. This is a global problem."
—Former Facebook Vice President for Addicting Users, Chamath Palihapitiya
And many more, use the 'Search blog' box if interested.

Engineer a Little Addiction Into Your Product - Redux
My work here is done.

December 15
 Doctor And Dopamine - Dilbert by Scott Adams

December 21
 Dopamine - Dilbert by Scott Adams

There are three more in the series, very topical.

Previously in non-Dilbert commentary:
Dec. 11 
Climateer Line of the Day: Neurotransmitters and Facebook Edition
Dec 3 
"The Neurochemistry of Smartphone Addiction"
Sept. 25
Dopamine Labs: "Meet the tech company that wants to make you even more addicted to your phone"
Sept 24
"If You Want To Be Happy, Listen Up. Now! alternative title: The FT's Izabella Kaminska Is...".

And dozens and dozens more including  the namesake 2015 post "Want to Make Big Money? Engineer A Little Addiction Into Your Product

In 2018, Amazon will turn to private label goods (AMZN)

This article is going on three weeks old but combined with the Amazon post earlier today and especially yesterday's, helps give an outline of what's coming.

From Digiday, December 29:
Amazon has long honed the business of being the middleman — getting brands to sell on its site, letting shoppers pay for and receive those items fast and efficiently.

But 2017 was the year Amazon started taking steps to create its own brands. If done at the right price point, Amazon will be in a strong position next year to prove it not only can help other retailers grow, it can be a retailer itself. 

Amazon already has its AmazonBasics line of essentials like batteries and chargers. These items are largely commoditized, said Forrester analyst Sucharita Mulpuru-Kodali. It’s easy for Amazon to keep growing there: By bumping those products up in search results and pricing them right — which will be easy to do since Amazon owns the data — this line is poised to keep growing.

But the more interesting prospect is for private-label items that aren’t Amazon-branded. There are at least 19 brands Amazon owns and doesn’t operate under the Amazon brand name — from lingerie brand Arabella to furniture brand Strathwood. In October, Amazon rolled out private-label sportswear brands, including Goodsport (which competes with Champion), Rebel Canyon and Peak Velocity. Amazon may boasts fantastic brand recognition, but Amazon-branded panties are still a hard sell.

An October report by firm One Click Retail examined how Amazon’s private labels have performed. Amazon owns around 45 brands, and about 15 percent of its private-label sales come from those. The biggest one is women’s clothing line Lark & Ro, which had about $10 million in sales in 2017 to date when the report came out. Amazon’s Amazon Essentials clothing made about $3 million this year.
In apparel, Amazon’s most successful category with private label, L2 research found that the absence of major fashion brands that have traditionally abstained from selling on Amazon creates more room for private label to swoop in, a trend that would continue next year. 

“This is the uphill battle,” said Mulpuru-Kodali. “This is dependent on leveraging data and picking the right things to develop or manufacture.”...

January 18
Platforms: Amazon Could Make Billions From the Ad Business (AMZN)

January 17 
Frank Pasquale—From Territorial to Functional Sovereignty: The Case of Amazon (AMZN)

Lithium: After Four Years of Negotiating, SQM and Regulator Reach Agreement On Increased Production (SQM; ALB)

We haven't had much on the investment side o'lithium because our focus was cobalt which ended up being the top performing tradable commodity in 2017, he said modestly.
From Psst, Wanna buy Some Cobalt:
...Anyway, in 2015-2016 we had a series of posts on a trade to capitalize on Tesla's battery ambitions that we hoped would go beyond the "common knowledge" lithium action (which we had covered here on the blog for the prior ten years):
From Reuters:
Chile's Corfo, SQM strike deal in lithium dispute
Chilean development agency Corfo said on Wednesday that it had struck a deal with lithium company SQM , ending a long dispute over royalties in Chile’s Salar de Atacama, home to one of the world’s richest lithium deposits.

The deal frees the miner to apply for an increase in its production quota amid a demand boom and surging prices for lithium, which is used in the batteries that power electric cars.
Corfo chief Eduardo Bitran said SQM had agreed to overhaul its corporate governance board to ensure adherence to global standards, a key condition put forward by Chilean authorities. The deal also hikes the royalties paid by SQM to equal those established in a similar contract between Chile and SQM competitor and lithium producer Albemarle.

SQM, like the U.S.-based Albemarle, would be required to supply Chile with lithium at a favorable price, a stipulation intended to incentivize value-added production in Chile.
The deal also includes an option that would permit SQM to work with state miner Codelco to begin developing the Maricunga lithium deposit. Codelco, one of the world’s largest copper producers, has lithium assets in Chile but is currently not producing the metal.

“Our intention is to make it available for Codelco so it can ... make viable the development of a new activity in this area,” Bitran told reporters...MORE 
SQM Sociedad Quimica y Minera de Chile S.A. daily Stock Chart

Jan. 2 

August 2017 
Eighteen months ago we went with cobalt over lithium as the battery material that would be in shortest supply and think that is still a correct assessment. However, if long-suffering reader is interested the 'search blog' box has quite a few hits for 'lithium'.... 

YCombinator Is Going to Do More Biotech Deals

From Sam Altman at the YCombinator blog:

YC Bio
I’m excited to announce a new experiment we’re going to try: YC Bio. YC Bio is a new way for us to fund early-stage life science companies that are still in the lab phase.

Because biology is such a large field, we’re going to try concentrating on one sub-area at a time (we’ve found the companies working in similar areas get a lot of value from being around each other). The first area we’re going to focus on is healthspan and age-related disease—we think there’s an enormous opportunity to help people live healthier for longer, and that it could be one of the best ways to address our healthcare crisis.

We’ve been funding bio companies for a little while now, and we’ve learned a bit about what works and doesn’t. We will try to design the program in light of what we’ve learned, and almost certainly we’ll make a lot of changes as we go along.

This will be a special track like YC AI—the companies will go through the regular YC batch, but there will be a few differences....MORE

Yes, We Can Survive A Deadly Asteroid Impact Just As Our Early Ancestors Did

Today we'll be strolling the sunny side of the street.
Seriously. If you have a giant shadow pass over you at high speed, well....*

From Forbes:
There is new evidence that our early ancestors survived a kilometer-sized asteroid impact in Southeast Asia. The asteroid, which hit Earth around 800,000 years ago, was powerful enough to launch debris and dust across Earth's surface.

This asteroid impact is the most recent of this magnitude and provides a glimpse into the ability of early human ancestors to withstand an extinction level impact. While the exact location of the impact crater has not been found, scientists are honing in on the location through careful examination of telltale fragments from an asteroid impact.

The asteroid was large enough to impact human evolution in Southeast Asia and alter Earth's climate and block out the sun for up to years after the event. The kilometer-sized asteroid left behind strange mineral and rock alterations caused by sudden extreme pressures and temperatures. Scientists can use these altered rocks, called tektites, as telltale signs of an asteroid impact. The research team studied zircons within the tektites and found that the crystals were oriented at 90-degree angles, compared to all oriented in one direction for non-impact zircons.

Tektites are small glassy fragments that are ejected during a meteorite impact. Geologist Aaron Cavosie and his colleagues at Curtin University sought out tektites around Southeast Asia in hopes they could trace them back to the impact origin.

While remains from this asteroid impact 800,000 years ago have been found previously, scientists haven't been able to zone in on the location of the impact. Tektites have been found across Asia, Australia and as far away as Antarctica. The size distribution of the tektites was used to determine the impact was in Southeast Asia, perhaps near Thailand. The assumption is that larger tektites, which were found to weigh up to 20 kilograms, would be closer to the asteroid impact site....MORE

Did I mention "‘Potentially hazardous’ asteroid the size of the Burj Khalifa is heading towards Earth at 67,000mph"

Finance:Taking Modigliani-Miller To Court 60 Years On

From the Columbia Law School's Blue Sky blog:

The Modigliani-Miller Theorem at 60: The Long-Overlooked Legal Applications of Finance’s Foundational Theorem
June 2018 will mark the 60th anniversary of the publication of Franco Modigliani and Merton Miller’s classic article, The Cost of Capital, Corporation Finance, and the Theory of Investment

Widely hailed as the foundation of modern finance, their article, which purports to demonstrate that a firm’s value is independent of its capital structure, is little known by lawyers, including legal academics.  That is unfortunate, because the Modigliani-Miller capital structure irrelevancy proposition (when inverted) provides a simple, but powerful framework that can be extremely useful to legal academics, practicing attorneys, and judges.

Sixty years ago, the field of finance lacked mathematical precision and conceptual rigor, relying heavily on anecdotes and rules of thumb.  With their 1958 article, MM, as both the pair of authors and their joint articles are referred to by economists, directly challenged conventional thinking by arguing that under certain idealized assumptions capital structure had no impact on firm value.

Because MM’s proposition was so out-of-step with conventional thinking, it was initially met with deep skepticism.  Ultimately, however, after debate, economists concluded that the argument was theoretically correct.  Given the initial assumptions (efficient and frictionless markets, no taxes, and only cash flows matter) the result (a firm’s value was independent of its capital structure) held.  Nonetheless, most practicing finance professionals ignored MM because their assumptions were so inaccurate as to render the conclusion irrelevant.

Academic economists, however, focused not on the MM result, but on their method of argumentation.   MM introduced arbitrage, which is today the cornerstone of finance, into financial economics.

Economists, however, were not finished studying capital structure.  And when they returned, they recognized that the MM theorem provided the key:  If capital structure affects value, it must operate through the MM assumptions.  This reverse MM theorem holds that capital structure can affect firm value only through information, market frictions, taxes, or the allocation of assets with consumption elements.

The reverse MM theorem provides a powerful framework to examine and evaluate capital structure decisions, which can be useful to lawyers as well as financial economists....MORE

Platforms: Amazon Could Make Billions From the Ad Business (AMZN)

From the advertising mavens at The Drum, a deep dive:

The stage is set for Amazon but is building an ad business a big enough priority?
Any predictions worth their salt for 2018 have zeroed in on the inevitable rise of Amazon ‘s ad business. Sorrell called out Amazon as the one to watch over a year ago. Whilst the duopoly of Google and Facebook continues to show exponential growth (in spite of the continued barrage of brand safety criticism and Facebook’s unexpected algorithm change) Amazon’s year-on-year upswing in ad revenue combined with the hyper-attention on voice and smart speakers has led to all marketer’s eyes locking in on what the Seattle-headquartered company does next.

Amazon doesn’t break out its advertising revenue in its earnings report but the “other” line for Q3 2017 reveals a business likely in excess of $1bn. One source quotes smart home speaker sales in the US tripling to 25 million in 2017 with 11 million sold in Q4. Another says that sales of smart home speakers were up 103% year on year. Either way, the growth is exponential. Whilst market share figures are hard to come by, Amazon is rumoured to account for 70-75% of that market in the US.

Before I go any further, a few more numbers for context. Data to understand how Amazon’s ad revenue breaks down is nigh impossible to come by, but it’s fair to say that today this dominated by display advertising and more latterly programmatic with the launch of X. There is therefore no significant revenue coming from search today, a landscape that Google still dominates with 65% share in the US and over 90% in most of Europe. In terms of revenue, however, Google takes almost 80% of all search ad revenue, so why then is everyone so excited about voice search and Amazon specifically?

The technology, and therefore consumer behaviour, is pivoting again. There was a time back in the early 2000’s, when search behaviour enjoyed a different question based format (remember Ask Jeeves) and before Adwords took its dominant position, the early movers were businesses now largely forgotten, namely Overture and E-spotting. Google quickly squashed them leading one to consider whether it is best to be a first mover or launch a superior product soon afterwards as a second mover. Many argue that Google Home’s smart speaker is a superior product but importantly Amazon got there first with Alexa. History, especially that of the mobile, is peppered with examples of devices and technologies being pioneered by one player (e.g. Nokia, Microsoft, Palm etc) and then these businesses fast losing their dominance to a product with superior user experience (e.g. Apple, Samsung).

According to Google’s own forecasts, by 2020, voice search will account for 50% of all searches globally. Google has rapidly pursued Amazon with its Home and Mini products enjoys a decade lead on Amazon in terms of understanding how to build an ad business and engage with brands and agencies. Conversely, Amazon provides direct access to consumer product and as a result has established relationships with manufacturers and retailers....

"Will Erdogan defy Russia and the US over Afrin?"

The Kurds got trouble.
The U.S. has proven itself to be an unreliable ally for the last fifty-five years since Kennedy okayed Diem's assassination so the only thing the Kurds have going for them is the fact Erdogan purged a lot of the army in his coup paranoia but unlike Stalin's purges probably won't extend the war for a year and cost a million troops.

From Al-Monitor:
Concerned that time is running against Turkey’s interests in the region, President Recep Tayyip Erdogan has ordered a military operation into Syria aimed at taking the Kurdish-held enclave of Afrin, only a stone’s throw from the Turkish border.

Turkish press reports say the army has already started shelling the enclave from across the border. Whether the main operation will go ahead is not certain, though. If it does, it will be a high-stakes move whose outcome, analysts say, remains uncertain.

Many believe this development reflects Ankara’s anger with the United States and Russia. Both powers are supporting Syrian Kurdish groups that Turkey considers to be its enemies.
Turkey’s failure to convince the United States to end its support for the Kurds and Moscow’s refusal to accept Ankara’s demand to prevent the same Kurds from participating in efforts to reach a Syrian settlement have left Ankara deeply frustrated.

Addressing supporters in the Black Sea city of Tokat over the weekend, Erdogan said Turkey’s operation would begin over the next few days. He said this would be a follow-up to Operation Euphrates Shield, the operation Turkey launched in August 2016 in northern Syria, with its Free Syrian Army allies, against the Islamic State (IS).

Ankara said at the time that the People’s Protection Units (YPG), the Syrian Kurdish group it considers a terrorist organization linked to the outlawed Kurdistan Workers Party, would also be targeted. Washington and Moscow prevented it from carrying out this threat.

The disclosure by US military that the US-led coalition in Syria was establishing a Border Security Force (BSF) to patrol the Turkish and Iraqi borders poured more fuel on Erdogan’s anger with the United States.

News about this force broke immediately after Erdogan said the operation against Afrin was imminent. Ankara interpreted this as a veiled warning that any Turkish incursion into Syria would be challenged....MORE
Just to make things interesting:

Syria to shoot down Turkish fighter jets if Afrin operation launched

Wednesday, January 17, 2018

Frank Pasquale—From Territorial to Functional Sovereignty: The Case of Amazon (AMZN)

Professor Pasquale has a very interesting way of looking at things, we are fans. *

From Law & Political Economy:
Economists tend to characterize the scope of regulation as a simple matter of expanding or contracting state power. But a political economy perspective emphasizes that social relations abhor a power vacuum. When state authority contracts, private parties fill the gap. That power can feel just as oppressive, and have effects just as pervasive, as garden variety administrative agency enforcement of civil law. As Robert Lee Hale stated, “There is government whenever one person or group can tell others what they must do and when those others have to obey or suffer a penalty.”

We are familiar with that power in employer-employee relationships, or when a massive firm extracts concessions from suppliers. But what about when a firm presumes to exercise juridical power, not as a party to a conflict, but the authority deciding it? I worry that such scenarios will become all the more common as massive digital platforms exercise more power over our commercial lives.
A few weeks ago, the Friedrich Ebert Stiftung (a think tank affiliated with the Social Democratic Party in Germany) invited me to speak at their Conference on Digital Capitalism. As European authorities develop long-term plans to address the rise of powerful platforms, they want to know: What is new, or particularly challenging, in digital capitalism? 

My answer focused on the identity and aspirations of major digital firms. They are no longer market participants. Rather, in their fields, they are market makers, able to exert regulatory control over the terms on which others can sell goods and services. Moreover, they aspire to displace more government roles over time, replacing the logic of territorial sovereignty with functional sovereignty. In functional arenas from room-letting to transportation to commerce, persons will be increasingly subject to corporate, rather than democratic, control. 

For example: Who needs city housing regulators when AirBnB can use data-driven methods to effectively regulate room-letting, then house-letting, and eventually urban planning generally? Why not let Amazon have its own jurisdiction or charter city, or establish special judicial procedures for Foxconn? Some vanguardists of functional sovereignty believe online rating systems could replace state occupational licensure—so rather than having government boards credential workers, a platform like LinkedIn could collect star ratings on them. 

In this and later posts, I want to explain how this shift from territorial to functional sovereignty is creating a new digital political economy. Amazon’s rise is instructive. As Lina Khan explains, “the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it.” The “everything store” may seem like just another service in the economy—a virtual mall. But when a firm combines tens of millions of customers with a “marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house…a hardware manufacturer, and a leading host of cloud server space,” as Khan observes, it’s not just another shopping option. 

Digital political economy helps us understand how platforms accumulate power. With online platforms, it’s not a simple narrative of “best service wins.” Network effects have been on the cyberlaw (and digital economics) agenda for over twenty years. Amazon’s dominance has exhibited how network effects can be self-reinforcing. The more merchants there are selling on (or to) Amazon, the better shoppers can be assured that they are searching all possible vendors. The more shoppers there are, the more vendors consider Amazon a “must-have” venue. As crowds build on either side of the platform, the middleman becomes ever more indispensable. Oh, sure, a new platform can enter the market—but until it gets access to the 480 million items Amazon sells (often at deep discounts), why should the median consumer defect to it? If I want garbage bags, do I really want to go over to to re-enter all my credit card details, create a new log-in, read the small print about shipping, and hope that this retailer can negotiate a better deal with Glad? Or do I, ala Sunstein, want a predictive shopping purveyor that intimately knows my past purchase habits, with satisfaction just a click away?
As artificial intelligence improves, the tracking of shopping into the Amazon groove will tend to become ever more rational for both buyers and sellers. Like a path through a forest trod ever clearer of debris, it becomes the natural default. To examine just one of many centripetal forces sucking money, data, and commerce into online behemoths, play out game theoretically how the possibility of online conflict redounds in Amazon’s favor. If you have a problem with a merchant online, do you want to pursue it as a one-off buyer? 
...MUCH MORE (the good stuff)
Jan. 5, 2018
Corporations Aren't People, Corporations Are Sovereign
Or at least they might be.
In Nebraska,
Part of Nebraska.
From the Lincoln Nebraska Journal-Star:
Senator proposes sovereignty as a way to economic development 
*Previously from the P-Dawg:
March 2015
Nudge This: "The Algorithmic Self"

The writer,  Frank Pasquale, is a professor of law at the University of Maryland, and is the author of the forthcoming book The Black Box Society: The Secret Algorithms That Control Money and Information.
And, on the off chance Bloomberg View's Matt Levine should see this, 38 footnotes!
If Interested here are a couple more pieces by Pasquale:
Algorithims Are Judging You

And writing at the Guardian, "Uber and the lawlessness of 'sharing economy' corporates"

Media: "Facebook’s Motivations" (FB)

From S:
The trepidation — and inevitable outrage — with which much of the media has greeted Facebook’s latest change to the News Feed algorithm seems rather anticlimactic. Nearly three years ago I wrote in The Facebook Reckoning that any publisher that was not a “destination site” — that is, a site that had a direction connection with readers — had no choice but to go along with Facebook’s Instant Article initiative, even though Facebook could change their mind at any time. A few months later, in Popping the Publishing Bubble, I explained why advertising would coalesce with Google and Facebook; that is indeed what has happened, which is the real problem for publishers. Facebook’s algorithm change simply hastens the inevitable.

The story for media is for all intents and purposes unchanged: success depends on building a direct relationship with readers; monetizing that relationship (likely through subscriptions, but not necessarily); and leveraging Facebook as an acquisition channel for those long-term relationships, not short-term page views. If anything this change will help reader-focused publications: users will be more likely to see links shared by their friends, enhancing the word-of-mouth marketing that is the foundation of reader-centric publications.

What I find far more compelling is the question of Facebook’s motivation. Facebook CEO Mark Zuckerberg wrote on Facebook:
One of our big focus areas for 2018 is making sure the time we all spend on Facebook is time well spent. We built Facebook to help people stay connected and bring us closer together with the people that matter to us. That’s why we’ve always put friends and family at the core of the experience. Research shows that strengthening our relationships improves our well-being and happiness.
We feel a responsibility to make sure our services aren’t just fun to use, but also good for people’s well-being. So we’ve studied this trend carefully by looking at the academic research and doing our own research with leading experts at universities. The research shows that when we use social media to connect with people we care about, it can be good for our well-being. We can feel more connected and less lonely, and that correlates with long term measures of happiness and health. On the other hand, passively reading articles or watching videos — even if they’re entertaining or informative — may not be as good.
Based on this, we’re making a major change to how we build Facebook. I’m changing the goal I give our product teams from focusing on helping you find relevant content to helping you have more meaningful social interactions. We started making changes in this direction last year, but it will take months for this new focus to make its way through all our products. The first changes you’ll see will be in News Feed, where you can expect to see more from your friends, family and groups. As we roll this out, you’ll see less public content like posts from businesses, brands, and media. And the public content you see more will be held to the same standard — it should encourage meaningful interactions between people…
Now, I want to be clear: by making these changes, I expect the time people spend on Facebook and some measures of engagement will go down. But I also expect the time you do spend on Facebook will be more valuable. And if we do the right thing, I believe that will be good for our community and our business over the long term too.
Forgive the longer-than-usual excerpt, but there is a lot here. Zuckerberg:
  • Implicitly admits that time spent on Facebook may not “well-spent”, and cites research suggesting that many common activities on Facebook may not be good for you
  • Introduces the change as a shift in goals from delivering relevant content (a “perfect personalized newspaper”, as Zuckerberg called it in 2014)
  • Suggests that the time spent on Facebook may decrease due to these changes (sending Facebook’s stock down)
In an interview for the Daily Update, Vice-President of News Feed Adam Mosseri argued that this would benefit Facebook in the long run:
This change is primarily focused on doing right by our community, because we actually believe that by doing right by the community in the long run will be good for the business and so we just try to take a long term approach to any question like this.
I absolutely believe the last part of that quote: Facebook is taking a long-term view, and it would only make this change were it right for the business. I’m just not entirely convinced that Zuckerberg and Mosseri are telling us the entire story.

Facebook’s Believability
Start with Zuckerberg’s claim that this change will reduce “the time people spend on Facebook and some measures of engagement.” Mosseri said that would be mostly due to less time spent watching video, given that video content would likely be hurt by this algorithmic change.

That in and of itself is certainly interesting; Zuckerberg has been pushing the importance of video on earnings calls for some time now, and no wonder: TV advertising money remains the proverbial gold-at-the-end-of-the-rainbow for all advertising-based tech companies. Is Facebook giving up on its leprechaun dreams?

I don’t think so, and not just because forgoing all of that potential revenue would be quite unbelievable....

AI: "Google moves into Shenzhen in latest China expansion" (GOOG; NVDA)

Not saying that Google's Tensor Processing Unit chips are a threat to NVIDIA (yet) but, at the same time NVIDIA's Mr. Huang was publicly stating the GOOG was no threat, his research peeps were saying "we should make those thingies."

From TechCrunch:
A month after announcing plans to open its first AI lab in China, Google is expanding again through a move into Shenzhen.
The U.S. tech giant has opened an office in the Chinese city, which borders Hong Kong and known for being a global hardware hub, according to an internal email obtained by TechCrunch. This isn’t a fully-blown Google campus, instead the company has taken up space within a serviced office starting this week.
“We have many important clients and partners in Shenzhen. We’re setting up this e-suite office to be able to communicate and work with them better,” a spokesperson told TechCrunch in a statement confirming the news.

Here’s the short email that was sent to staff:
Hello China Googlers,
I hope your 2018 is off to a great start! I want to give you all a heads up about a new workspace we’ve opened in Shenzhen. As you may know, we have a number of Googlers in China who travel to the Shenzhen area for business on a regular basis. We’ve heard a lot of feedback that there was a need for a space to work from while in the area—so, after a few months of scouting, we recently signed a lease for a serviced office in Shenzhen. The space opened this week and is now up and running. We’re hopeful this will provide Googlers with a comfortable base to work from in the area.
Shenzhen is home to Tencent, the $500 billion firm behind WeChat, and mobile giants Huawei and ZTE, while the likes of Alibaba and Baidu are also present. The city has a thriving maker community, which includes global hardware accelerator program HAX....MORE
If Interested see also:

November 2016
Artificial Intelligence: What Could Derail NVIDIA? A Lab in Shenzhen; A Basement in Moscow; An Office in Bristol (NVDA)
Novermber 2017
"Sequoia Backs Graphcore as the Future of Artificial Intelligence Processors" (NVDA; INTC)
Jan. 16 
"Can Chinese AI Chip Makers Compete with Nvidia?" (NVDA)

"Swiss town denies passport to Dutch vegan because she is ‘too annoying’"

From Yahoo News:
A Dutch vegan who applied for a Swiss passport has had her application rejected because the locals found her too annoying.

Nancy Holten, 42, moved to Switzerland from the Netherlands when she was eight years old and now has children who are Swiss nationals.
However, when she tried to get a Swiss passport for herself, residents of Gipf-Oberfrick in the canton of Aargau rejected her application.
Ms Holten, a vegan and animal rights activist, has campaigned against the use of cowbells in the village and her actions have annoyed the locals.
The resident’s committee argued that if she does not accept Swiss traditions and the Swiss way of life, she should not be able to become an official national.
Ms Holten told local media: “The bells, which the cows have to wear when they walk to and from the pasture, are especially heavy....MORE
The Swiss Bovine Special Forces are practicing air-mobile vertical insertion techniques should Ms Holten prove obstreperous:

Note identifying bell (and more disconcertingly, lack of diaper)

"Albert Edwards Warns Of ‘Surprise’ From The East, Explains ‘How To Call 10 Of The Last 1 Crashes’"

Via the Heisenberg Report:
We’ve been looking for surprises and one thing that can catch us out is if the Bank of Japan starts tightening. If it actually follows the Fed and the ECB and announces some sort of tapering.
This could be far more important than the Fed. A lot of major trends start with Japan. People don’t focus on Japan enough in my view.
That’s what Albert Edwards said earlier this month at SocGen’s annual strategy conference in London, and it’s notable for a number of reasons.

For one thing, implicit in the notion that Kuroda might one day soon decide to leave Neverland is the notion that Japan might just be achieving some measure of “success” when it comes to escaping the deflationary doldrums. This is something Edwards explores in his latest client note and happily, he credits our buddy Kevin Muir (The Macro Tourist) for the inspiration.

“A big hat tip to the excellent Kevin Muir at The Macro Tourist who got me thinking about Japan,” Edwards writes, in a note dated last Wednesday. “Could things be going so well in Japan that an unexpected tightening causes the yen to surge at a time when almost all investors, including myself, expect neverending yen weakness?” Albert goes on to ask.

The first chart Edwards presents in the note shows that although inflation itself is still of course “subdued” in Japan (and we use the scare quotes because that’s an understatement), the deflationary mindset may finally be dissipating in what I guess is a testament to Kuroda’s contention that “what we need is a positive attitude and conviction.”
Say what you will about Kuroda, but one thing you can’t say is that he lacks “conviction” and it would be hard to argue that he doesn’t harbor a “positive attitude”.

Edwards goes on to note that while the market is laser-focused on i) what the blockbuster econ numbers coming out of Europe (factories can’t even keep up with demand at this point) might mean in terms of the ECB potentially deciding not to extend APP beyond September and ii) what Trump’s tax bill may mean for a revival of the stateside reflation narrative, no one is paying attention to Japan where “a change in the deflationary mindset may yet be at hand.”

Of course vanquishing the deflationary mindset has the potential to become a self-fulfilling prophecy by pulling forward consumer spending. Maybe Kuroda’s “think happy thoughts” approach wasn’t so stupid after all.

Albert does note that wage growth has yet to pick up despite a tightening Japanese labor market, but he also reminds you that “rising hours worked means income growth is growing by 2% yoy in nominal terms [and] unlike the US and UK, income growth is outstripping consumer spending by a wide margin and the savings ratio has risen.”
The implication: a sustained increase in consumer confidence could very well lead to an uptick in consumer spending which could in turn boost GDP further (and hell, if Nomura is right, “Mrs. Watanabe” could be emboldened to spend more by virtue of the ~¥3.2trn in unrealized Bitcoin profits “she” is sitting on)....

Shipping: Today's Word Is 'Overcapacity'

Two via gCaptain, January 10. First up, from Bloomberg:

More Mega-Ships Are a Big Problem for Cargo Carriers
Container shipping companies are bracing for a challenging year — they will have more space available for carrying goods than the amount of cargo that’s out there.

Corrine Png, chief executive officer of research firm Crucial Perspective, estimates freight-carrying capacity on container ships will rise 5.9 percent this year, outstripping demand growth for the first time since 2015.

That’s largely because more than 40 huge container vessels ordered at least two years ago are ready to be delivered for service, creating an abundance of ship stowage. With some of the space expected to be left empty, container lines could be forced to charge lower fees for shipping goods, even as they try to overcome years of accumulated losses in an industry downturn that has seen at least one company collapse.

More than 90 percent of global trade is transported by sea. The five charts below show what’s in store for shipping companies.

1. More space to carry goods: As more large vessels are delivered and put into service in 2018, ships’ cargo-carrying capacity is expected to expand the most in three years....

And from The Loadstar:

Carriers Beginning to Postpone ULCV Deliveries Amid Overcapacity and Softer Demand
Where contracts allow, ocean carriers are starting to postpone deliveries of new ultra-large container vessels (ULCVs) in the face of the return of the twin challenges of cellular overcapacity and softening demand.

Alphaliner claimed today that Cosco has deferred 10 of the 28 ULCVs it was due to receive this year to 2018 and Yang Ming has pushed back delivery of three 14,000 teu vessels into next year.
Despite these deferrals, Alphaliner calculated there would still be some 1.5m teu of newbuild containerships entering service this year of which 1.2m teu is slated for delivery before the end of June.

And it forecasts that January will be a record month for deliveries, with no less than seven 19,000-21,000 teu vessels expected to join the global fleet – equating to an extra 250,000 teu of capacity.

They include the 21,413 teu OOCL Indonesia, the CMA CGM Antoine de Saint Exupery (20,776 teu), MOL Treasure (20,182 teu), Cosco Shipping Taurus (20,119 teu) and Marseille Maersk and Manchester Maersk sister ships (each 20,568 teu)....


Jan. 4
Global Fleet Capacity to Bulge as More Containerships are Delivered in 2018; Baltic Dry Index Down 21%, Hyundi Heavy Up
I'm going to have to learn how to say "Boom-and-bust cycle" in Korean..... 

IEEE Spectrum Top Tech 2018

From the Institute of Electrical and Electronics Engineers:

Here are some of the technologies you’ll be reading about this year
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