Moonshots are hot again
And also: After COVID, a digital-first society; Amazon wants to enter healthcare; Apple shows incremental iPhone innovation; OpenAI automates code creation; Advertising business models, under question
Moonshots are a hot topic for investors (again)
Ark Invest, the tech-centric fund managed by the celebrity investor Cathie Wood, had already popularized the idea that it pays off to bet on “moonshots”, emerging businesses that can transform the world and create massive value, just like Google or Amazon have done in the last few years. Ark’s investments in Tesla (that they recently downgraded) or in cryptocurrencies have been widely commented since 2020
This week, Goldman Sachs announced a similar fund, the “Future Tech Leaders Equity ETF” and said that they aim to “stay on the right side of disruption and innovation”, by identifying the “next tech moonshots”
At the same time, Christopher Mims from the WSJ, in his weekly column this weekend, talked about research on technology’s progress speed, and mentioned work by J Doyne Farmer (a famous physicist) showing that choosing the right technologies to develop is a more important driver for success in innovation than other (typically overvalued) management skills
The week
1. Consumers and businesses, after COVID
What is happening
Uncertainty remains on the short-term future of travel and restaurants
US restaurants have started to close again (WSJ)
US airlines tell investors that they expect softness in bookings in 3Q21. The travel industry see difficult times ahead (WSJ)(SkyNews)
In London, people are returning to offices, but many have abandoned the city center, and are avoiding public transport (Bloomberg)(Bloomberg2)(Bloomberg3)(WSJ)
Cybersecurity consolidating as a key risk
Telegram emerging as a hub for cyber criminals (FT)
Darktrace (a cybersecurity provider) raised forecasts (FT)
Decentralized Finance perceived as a tool to hide “dirty money” (FT)
The supply chain crisis is starting to be seen as a long-term problem (FT)
What it means
We still don’t know when we’ll be free of COVID, but it is increasingly clear that some things will have changed forever (less people in city centers, less business travel) and many activities becoming “digital first”
As more things shift to digital “by default”, the impact of cyberattacks, and the incentives to do them, will grow. This week we saw several signs of an increasing volume of cybersecurity incidents, including the discovery of a new Apple / iOS vulnerability
Current stress on global supply chains could drive long term changes on companies’ operations (e.g.: more local / fragmented supply chains)
2. Platforms and digital enablers
What is happening
Platform news:
Amazon wants to enter the healthcare market: Alexa at operating theaters and consulting rooms, AWS’s cloud computing services for hospitals, consumer-facing healthcare services (including health forecasts using AI) (FT)
Netflix accelerates new content releases globally, looking to recover momentum. Some people believe that they are incrementing the quality of TV worldwide, but at the expense of “Americanizing” the content (WSJ)(FT)
Digital enablers:
Devices: Apple unveiled new iPhones and a new AppleWatch. Analysts think there were few innovations, and the WSJ sees a “clever pricing move” (via storage). Good reception in China (WSJ)(NYTimes)(WSJ2)(WSJ3)
Connectivity:
Globalstar and other satellite-broadband firms are hurt, as new iPhones won’t finally have a satellite connection (WSJ)
Dish hires IBM to build their 5G network (WSJ)
Cloud: Oracle’s cloud revenues disappoint investors (Bloomberg)
Chips: Shortage continues, and TSMC will raise prices (FT)
What it means
Everyone sees the American healthcare industry as ripe for disruption. Hospitals’ digitalization and people wearing connected sensors may accelerate the case. Amazon may be the best positioned Big Tech to do it. A lot of money is at stake, so incumbents will try to resist (probably using data privacy risks as an argument)
Apple’s event this year has been an incremental one (as many others in the past). A good outcome for the company could be the positive reception in China, a market representing 20% of iPhone’s sales, where 5G proliferates and where Huawei has left space in the premium segment
Higher chip prices will contribute to higher inflation, with semiconductors almost having become essential components of almost everything, in an increasingly digital-centric economy
3. Financing digital innovation
What is happening
Tech-focused investment vehicles proliferate. Goldman Sachs launches an Ark Invest competitor, looking for “moonshots” (FT)(Bloomberg)
Chamath Palihapitiya, the ex-Facebook guy turned into tech (and SPAC) investor, also advocates for long-term bets, but he reserves “the right to be wrong” (FT)
A forthcoming research paper evaluates the improvement rates of different technologies, and this could help investors select the right technology themes (WSJ)
Key themes for the future:
Next computing platform: the smartphone market has not saturated yet, and there are no clear alternatives (for now) (NYTimes)(FT)
Future AI: OpenAI presents a code-generating software tool (FT)
Batteries: More problems for Tesla due to battery limitations. China’s CATL unveils an innovative, safer sodium-ion battery (Bloomberg)(Bloomberg2)
Biotechnology: Gingko, a Synthetic Biology startup, works to reprogram biological organisms for specific tasks (NYTimes)
What it means
“Moonshots” are hot again, with investors looking for exposure to the few long-term themes expected to concentrate value creation in the future. As suggested by the WSJ, ”picking the right horse to ride” may have much more impact than the skills of the executives “riding the horse”
The substitution of smartphones by an alternative computing platform might not happen any time soon. Market data this week shows the industry is alive and well
OpenAI’s tool to automate code creation suggests plenty of practical applications, but also plenty of challenges and potential ethicaldilemmas for the future
Likewise, Synthetic Biology is becoming a very promising field, but also with lots of potential issues
4. Building new rules for the (digital) game
What is happening
Customer protection: privacy & safety:
The WSJ published a week-long series of articles discussing contradictions in how Facebook deals with users’ safety. The share price has not been affected, and some blame incompetence rather than bad intention (WSJ)(WSJ2)(NYTimes)
The NYTimes believes that Apple’s (and Google’s) new privacy policies will ”reshape the internet”. Facebook and Ad Agencies are exploring alternatives (NYTimes)(NYTimes2)
Tension increases globally, between social apps and governments aspiring to control them. E.g.: Brazil / Bolsonaro, Russia / Putin (NYTimes)(FT)
Antitrust:
China’s antitrust wave continues. This week the local Big Tech were asked to stopblocking links from rivals. Both Alibaba and Tencent immediately committed to comply (Bloomberg)(WSJ)
Tech geo-strategy:
Huawei shows its strength in an internal event, and commits to “seize the ground of 6G patents” (Nikkei)(Bloomberg)
What it means
Advertising-centric business models are increasingly under question, as shown by the debates in the press this week:
First, by turning apps into “attention-hungry” algorithms, these models create contradictions for companies like Facebook, when they try to preserve users’ online safety. And these trade-offs are now targeted by policymakers
Also, internal industry competition, with Apple positioned as a “privacy champion” are making these models more difficult to execute
Huawei has survived (relatively) well, thanks to China’s huge internal market. The battlefor 6G standards could turn into a new battlefield for the “Second Cold War”