Technology for the reconstruction
And other signals of change this week: Investors funding what needs to be built. New political rules for a new economy. All eyes set on Amazon. Postcards from the Tech Cold War
Technology for the reconstruction
The great Carlota Pérez, from UCL, talked in a (virtual) event this week, and gave what I find as a refreshing note of optimism about the crisis, which she sees as a “big eye opener”, and the potential trigger of a new “golden age”. This would be similar to other prosperity periods that, as her work shows, have come with every technological revolution. In the next one, the new set of core technologies will be digital, and they will have to be focused on building a post-virus society, hopefully better than the one we had before, that would have just proven not to be fit for purpose (Video)
Can the pandemic help us better focus our technologies on welfare generation? This Thursday, the FT published an opinion piece that is very aligned with Carlota Pérez’s vision. The point is that all these brilliant digital technologies that we have developed in the last few years have not been able to translate into productivity growth and, some could argue, into actual improvements in people’s quality of life. So now, with a crisis that we needs to solve and that has revealed some of our weakest points, we have the opportunity to use these technologies to transform the way we live and work (and start a new “golden age”?) (Story)
Signals of our need of a new technology infrastructure:
High speed internet access is becoming essential. Making fiber connections get closer to customers is going to be key in many markets. Like in post-war economics, building this infrastructure is expected to generate growth and jobs. British fiber provider CityFibre just announced they will crate 11,000 jobs to build an FTTH network (Story)
Satellites could be part of the “new internet access normal”: Elon Musk’s SpaceX launched 58 new satellites this week, as part of the company’s Starlink project to create a constellation of 12,000 satellites and provide connectivity globally. The FCC is considering to subsidize this initiative within its program to expand broadband access in US rural areas (Story)(Story2)
Enabling retailers to shift to e-commerce has become a very good business: Shopify, the Canadian companies which helps retailers “get online quickly and cheaply” has had a huge push as a consequence of the crisis, with its stock price almost doubling since January, to reach a $88bn market cap, larger than General Electric. Now the (obvious) question is if this will be sustainable (Story)
A part of the restaurant business could possibly become on demand: Delivery apps have become the only source of business for many restaurants this days, globally. There are complaints about abusive behavior by these apps, which are positioning as restaurants’ economic saviors, and asking for a large piece of the pie. Spending at restaurants has recently dropped -35% vs. last year, while revenue for delivery services has increased +140% (Story)
Technology is already helping us manage the pandemic:
Wearable devices are emerging as a good option for tracking the disease: Researchers have started to use Fitbit’s and Apple’s wearable devices as systems to monitor people’s health by areas, and try to identify the presence of the virus before symptoms are felt (Story)
Physically-distanced agriculture is on the way: UK farmers are going to test fruit-picking robots. This would be a solution to the problem that restricted movement is creating in Europe, where many of the workers picking harvests are migrants (Story)
Even Augmented Reality could have a role (and finally succeed): Semiconductor companies see a new opportunity in AR, with expectations that it will be used for physically-distance manufacturing (Story)
Governments will support these applications, also as a way to stimulate the economy: Singapore will increase public tech spending by $2.5bn to combat the virus. This includes the deployment of tools like sensors and contact-tracing wearables (Story)
It looks like a good time for startups, but some of the winners won’t be startups: In businesses like banking, the perception of financial risks is taking customers to embrace more traditional players, like big banks, more than fintech startups, or at least that’s what Morgan Stanley and Bank of America say (Story)
The “reconstruction” theme is attracting investors
Technology keeps pushing up the stock market: Stocks have largely resisted the pressure from the crisis, and a gap has been created with respect to the “real economy”, that many see as the potential trigger of a new financial crisis. Rather than pure speculation, behind this there is investors’ faith on the role that tech firms could play in the reconstruction of the economy, and their potential to capture some of the expected stimulus funds from the governments (Story)
Tech IPOs are proliferating: Palantir, the large and controversial data analytics company working with the US security agencies, among others, plans to file in the coming weeks and could start trading in Fall 2020 (Story). Snowflake , a company offering “data warehousing as a service”, from the cloud, is preparing an IPO on a $20bn valuation (Story). Vroom, an online car sales app, has just had a massively successful IPO, with share price going up +117% in the first day, to a $5.4bn market cap (Story). NetEase, China’s biggest gaming company after Tencent, also had a solid debut in Hong Kong, with shares raising +9% in the first day (Story)
Startups in “hot domains” are getting new money at high valuations: Instacart, a leading startup in the e-groceries business, with an app in which users pay “shoppers” to deliver groceries from local stores, has just closed a funding round of $225m at an implicit valuation of $13.7bn (Story), DoorDash, the largest meal delivery app in the US, is close to securing new funding at a valuation of $15bn (Story)
Large M&A deals keep happening: GrubHub, one of DoorDash’s key competitors in the food delivery space, is being acquired by an European alter-ego, Just Eat, which is valuing the company at $6.3bn (a +40% premium to the stock price in May) (Story)
Investors’ appetite is expanding to the “new space age”: The rather successful SpaceX’s mission to the International Space Station last month is seen as a sign of how private investors can now fund these type of “transformational” projects, and leverage the progress of technology since the old “Apollo days”, which has drastically reduced rocket-launch costs. A fund manager explains this in the FT, and talks about “fresh investment opportunities” (Story)
The new economy will need new political rules
And some are being built just now, as companies and policymakers address emerging trade-offs created by technology:
Security vs. Privacy: This week the debate on face recognition technologies came back to the press, after announcements from several “Big Tech” firms. Amazon said they won’t sell these tools to the police (Story). IBM will no longer offer the technology, due to risks of “potential racial profile and human rights abuse” (Story). Microsoft says commercialization will have to wait until new policy regulations are decided and implemented (Story)
Information vs. Privacy: Planet Labs, a company that owns a constellation of dozens of small imaging satellites, is exploiting the cost reductions in rocket launching, is going to add 21 more units to the fleet and says they will be able to take high-resolution pictures of 50cm strips of land, across the entire planet. Demand for them seems clear, with revenues having tripled in the last two years (Story)
People’s safety vs. freedom of expression: US and EU institutions are looking at regulating user content on social media, with very different approaches (Story)
Cybersecurity remains a key concern, with news of emerging threats appearing every week: This week researchers found 28,000 web pages set up to steal passwords from elected officials, lawyers and journalists (Story)
Amazon, at the center of these political debates
Is Amazon too powerful to be fair? Shira Ovide at the NY Times reminds us of the fact that Amazon is selling several hundred thousands of its own products under different brand names, compares this with practices that Walmart or Target have been doing for a long time, but claims that this time is different, as Amazon is better positioned to exploit its “dominance” as retail platform, due to how much information it has about the users (Story)
Even under pressure from the pandemic, their position seems unbeatable by competitors: This week the WSJ told the story of Thrive Market, an online organic grocer that saw an opportunity to capture market share during the pandemic, exploiting Amazon’s problems of overload, which took the e-commerce giant to reorienting its business to essential items, and made it delay their deliveries. Yes, this seemed like a clear opportunity, but it is not clear that it has helped Amazon competitors, because again, they’re too small to compete (Story)
Europe is going ahead with antitrust charges against the company: The EU is planning formal antitrust charges, that could be filed as early as next week, and that would be related to the company’s alleged mistreatment of sellers that use its platform (in favor of its own products) (Story)
Postcards from the Second Cold War
It looks like the recent US sanctions to Huawei will hurt: There were some discussions on potential loopholes that the Chinese company could exploit to get “indirect” access to US-built machinery, but this seems less clear this week, after Taiwan’s TSMC, the world’s largest contract chipmaker, has indicated that they will comply with Washington’s intentions (Story)
Huawei is struggling to localize its supply chain: The Chinese vendor needs to move its supply chain to China, and is trying to persuade its Japanese, Taiwanese and Korean suppliers to move their factories, but this is becoming difficult, as some of these companies are worried by a potential US retaliation against them (Story)
And the US is being pressed to do the same: The Americans are actually in a very similar situation to the Chinese, with only approx. 12% of their chip manufacturing done in US territory. The Congress this week passed bills to boost domestic chip production (Story)
As a short term response, Huawei is creating a “strategic reserve” of its most essential chips: The Japanese press revealed this week that Huawei might have stockpiled up to two years’ worth of “crucial” American chips, to shield its operations from the impact of the new rules (Story)
Vodafone is concerned about a potential Huawei ban in the UK: From a “collateral damage” perspective, the first effects of the US rules may be starting to be felt. Last week we saw how the British government was analyzing a potential ban against Huawei in the UK 5G networks. Now Vodafone warns that this could severely delay the UK adoption of the new wireless generation, as operators would be “forced to spend time and money replacing existing equipment” (Story)
In network technology, Huawei could be partially hedged through intellectual property: More warnings about collateral damage were described in Bloomberg this week. The fact that only one companies own more than 80% of the patents connected to 5G standards, and that only one of them (Qualcomm) is American, could neutralize Trump’s efforts to “Americanize” the country’s 5G supply chain. Huawei in particular is the company owning more IPRs in this space (Story)
Also, the US still depends on Chinese engineers for some of the most strategical technologies: On a different, but related topic, that also shows how many geopolitical debates are too simplified, a new research from a US think tank reveals that Chinese-educated researchers are responsible for a very significant fraction of the R&D of American companies on Artificial Intelligence (Story)
China is taking the Cold “Propaganda” War to social media platforms: Twitter has just announced that they have taken down 174,000 accounts that they have labeled as fake, and that have been linked to the Chinese government, which would have created them looking to push its narratives about the coronavirus (Story)