Crypto and the latest tech revolution
And also: Workers looking for purpose. Facebook under a perfect storm. Shifts in digital advertising. Incentives growing for VCs. Are Big Tech the secret weapon for the Second Cold War?
Crypto as a key infrastructure for the digital revolution
This week there were several discussion threads on how crypto / blockchain, and the “web3” paradigm that comes with it, could shape the digital revolution. This includes “decentralized apps”, a way to provide personalized experiences and trust with no need of an intermediate, centralized “authority”, and thus potentially disruptive for Big Tech companies
In Menlo Park, Andreessen Horowitz see “web3” as “the future of the internet”. They’ve just published a new report about the topic, which asks US policy makers to prioritize the development of a “decentralized digital infrastructure” (also one of the digital priorities in China today)
There has also been a debate on how all this would fit into Carlota Perez’s great “tech revolutions” framework, that includes a significant role for policy makers as enablers within every cycle. For some people, the “web3” could be a new “innovation age”. For others, it could be part of the “deployment phase” of the current “digital age”
The week
1. Consumers and businesses, after COVID
What is happening
Consumer trends:
The purpose of work is being reconsidered (at least in the West) after the pandemic (WSJ)(WSJ2)
Retail is in transition to a new balance. Sales at physical stores are now rising at the expense of e-commerce (Bloomberg)(FT)
Emerging risks:
New statistics on cyber attacks: they’re growing fast (FT)
Future of business: Inflation and the global supply chain crisis put pressure on post-pandemic recovery (WSJ)
Data this week confirmed that inflation is accelerating (WSJ)(Bloomberg). Some optimistic comments see this as a way to adapt to emerging customer needs, different from the previous ones (WSJ2)
Supply chain issues proliferate globally (WSJ). Car sales in China (WSJ), manufacturing output in Europe (FT) and Apple iPhone sales forecasts (Nikkei) are all impacted
Signs of potential recovery (from the chip shortage, in particular): Samsung and Intel re-opening their factories in Vietnam (Bloomberg); TSMC planning a new factory in Japan (WSJ)
What it means
In the uncertain post-pandemic landscape, people have started to see the moment as a turning point in their lives. At least that’s what the current massive exodus of workers from their previous jobs (20m people only in the US in the last 6 months) could be showing. At the same time, interest is growing on discussions about what jobs benefit humanity most.
In the short term, all this could contribute to inflation, due to a lack of workers that has already started to push up salaries. But longer-term, the optimistic view is that this could be a way to shift our activities to projects that benefit humanity society as a whole, aligned with some recent trends in innovation (see our comments on “Deep Tech” initiatives in the last few weeks)
On top of this, several comments this week pointed to inflation, and to the current supply chain crisis, as signs of a re-alignment of resources for a new era of (sustainable) growth. Maybe this is way too optimistic, but let’s dream
2. Platforms and digital enablers
What is happening
Facebook’s controversies continue
Operational changes have been announced, including restrictions for employees to access internal information (Bloomberg)(WSJ)(NYTimes)
Claims being made about people not trusting the company anymore (Bloomberg)
Facebook’s apps may have started to lose some competitive battles (e.g.: Instagram vs. Snapchat, TikTok) (NYTimes)(Bloomberg)
Food delivery platforms try to imitate Amazon and enter digital advertising, to exploit structural shifts in the industry (WSJ)(WSJ2)
Digital money: Crypto moving into mainstream
Connectivity: China leads in 5G for now, but the (still unmet) challenge is to expand beyond smartphones (WSJ)(WSJ2)
The car industry has high expectations, but few things have actually happened (WSJ)
New infrastructure models, based on cloud-centric open networks, are starting to be tested (and deployed) by entrants like Rakuten and Dish (WSJ)
Electric cars:
Tesla presents its factory in Germany (FT)
US states are moving to get a piece of the new manufacturing pie (FT)
Cloud:
Google wants to leverage multi-cloud and edge cloud trends (FT)
A French startup aims to be the European cloud infrastructure champion (FT)
What it means
A perfect storm is over Facebook right now. To social and political pressure, this week we add internal tensions (employee dissatisfaction, and restrictions on internal access to information) and competitive challenges (Instagram losing steam vs. competitors). As we’ve said before, they probably needs to accelerate the exploration of new business models
Digital advertising is having a profound shift. E-commerce and (now) food delivery platforms (with ads much closer to where actual transactions happen) and even Apple (after blocking inter-app tracking in iOS) are winning, at the expense of Facebook and (partially) Google
5G remains a promise for now. Most connections are from smartphones, and China (including Huawei) is still the leader. Open network technologies could help expand the technology, with a step-change in efficiency
3. Financing digital innovation
What is happening
New figures confirm that we’re in a VC boom: VCs got a record return ($500bn) from IPOs and SPAC deals during 2021 (FT). LatAm is seen by many as the next opportunity (FT)
A crisis in China’s tech sector: Risks for investors might be growing, even if China keeps its commitment to liberalization (FT)
Emerging themes for investors:
Batteries: Nature says they can help cars be safer and more climate friendly (Nature). GM spends a lot of money to address a battery-related issue in Chevy Volt (WSJ). Taiwan’s startup Gogoro is entering the Chinese market, and investors see that as a very good sign for the company’s coming IPO (FT)
Space: High expectations on SpaceX’s new rocket, which could drastically change space travel economics (FT). Meanwhile, Virgin Galactic delays commercial flight plans (WSJ)(Bloomberg)
Biotech: Crispr emerges as a big promise for pharma, after the success of mRNA COVID vaccines (FT). But volatility is to be expected, as seen this week with a failed clinical trial for a new drug (Bloomberg)
Materials: Hedge funds take positions in uranium, betting on growth of nuclear energy, in the transition to green (FT)
What it means
Money keeps flowing to innovation projects. The recent figures from IPOs and SPAC deals this year show that incentives for VCs keep growing. So, we should expect that money availability won’t be the bottleneck for the emerging themes
One more week, we see confirmation that batteries have become a key enabler for electric cars’ market success. Only through innovative battery technologies will electric cars be safe and clean enough to deliver on expectations
The success of SpaceX in creating a new (massive) rocket that is expected to radically improve space travel economics shows how the private sector can deliver long-term innovations with high potential impact. This creates even more incentives for money to flow to this type of projects
4. Building new rules for the (digital) game
What is happening
Customer protection: privacy & safety:
Facebook still under massive pressure. This week they: (1) Offered to open their algorithms to regulators (Bloomberg); (2) saw an emerging employee dissatisfaction (NYTimes); (3) saw the problem expanding from the US to the UK and the EU (Bloomberg)
Apple’s proposal of internal scans in the iPhone to block illegal content is seen by experts as a privacy violation (FT)(Bloomberg)
Antitrust:
Europe: internal discussions within the EU (on how severe they should be) may delay plans to regulate Big Tech (FT)
In China, online broker apps are the new target (WSJ)
Tech geo-strategy:
An ex-Pentagon expert claims that the US has already lost the AI fight against China (FT)
In the US, Big Tech argues that antitrust could weaken the country vs. China. Some disagree (Bloomberg), but others claim that the new ”cold war” will be won by not “sabotaging” own tech companies (WSJ)
Meanwhile, LinkedIn has left China under too much ”compliance pressure”, but Microsoft is making efforts to show that their commitment with the country / market remains (WSJ)(FT)(WSJ2)
What it means
Apple is facing potential public pressure, as they start to understand the privacy trade-offs implicit in the company’s ”pro-user” policies within the iPhone. An example of this is the proposal to use automatic, internal scans within people’s iPhones, to identify illegal content. Yes, the tool does not send data out of the devices, but it can be seen as “invasive” anyway
Big Tech lobbyists have been insisting on the risk that antitrust actions against these companies could compromise the US ability to compete vs. China in the “Tech Cold War”. This resonates with some opinions at the business press this week, and it might actually help reduce the pressure. If that’s the case, we might expect changes in tech giants’ business models (e.g.: more involvement in defense projects?), with potential implications on employee satisfaction and consumer trust…