Categories
AI technology

Nvidia is the maker of golden shovels and pickaxes

Nvidia dominated the news in the technology world last week in a way reminiscent of Netscape's 1995 IPO. That legendary IPO heralded the start of the Internet era, just as the launch of the iPhone in 2007 marked the breakthrough of the smartphone. Similarly, we will one day look back on Nvidia's stunning Q2 results, which launched the world into the AI era. This was the big bang of artificial intelligence.

Compared to last year's second quarter, revenue doubled from $6.7 billion to $13.5 billion, while profits rose 843% (no typo), from $656 million to nearly $6.2 billion. The outlook for next year is even brighter. What lies behind these stunning numbers and why does the "shovel and pickaxe maker" Nvidia earn more than the digital gold diggers, the AI application makers?

He was the founder in 1993 and is still the CEO in 2023: Jensen Huang of Nvidia. Image created with Midjourney.

"A new computing era has begun. Companies worldwide are moving from general-purpose to accelerated computing and generative AI."

Jensen Huang, CEO Nvidia

"A new computing era has begun. Worldwide, companies are moving from general-purpose to accelerated computing and generative AI," said Jensen Huang, founder and CEO of NVIDIA in releasing his figures. Usually CEOs believe too much in themselves and the creation of their own success, but Huang is absolutely right.

That's why in this week's newsletter I don't pay attention to other newsworthy events, such as the announcement of chipmaker Arm's IPO that may be a precursor to a definitive revival in the technology sector after a year of mass layoffs, but try to make sense of Nvidia's development in the suddenly rapidly changing technology world.

Ghost valley

"Everyone seemed pretty gloomy, looking at each other and wondering why nothing exciting seemed to be happening in the Valley anymore." It could be a quote from sentiment in the technology sector before OpenAI launched Chat GPT late last year, but it is a quote from Netscape founder Marc Andreessen about the atmosphere he encountered when he moved to Silicon Valley in 1994.

The personal computer had broken through worldwide in the 1980s, Microsoft dominated that market in software, and there were a few big players in the traditional world of mainframe computers and networking. But nobody's heart was beating faster from companies like HP, Novell or my favorite company name, Digital. (What an inspiring brainstorming session it must have been where they came up with that name).  

The success of the free Netscape browser and subsequent IPO completely changed that sentiment. Suddenly, large companies were developing applications for the Internet and Internet startups were getting serious funding - eBay was founded less than a month after the Netscape IPO, Amazon went public two years later, and that was less than a year before Google launched, to name a few examples.

Nvidia's recent success seems to echo the Netscape IPO. At Nvidia, the sales and profits led to investor enthusiasm, but at Netscape in 1995, jubilation arose around the share price. That is a major difference... The expected introductory price was $14 but demand was so high that a last-minute decision was made to double the introductory price to $28, something that rarely, if ever, happens because the introductory price is determined after months of talks with investors worldwide.

Netscape closed the first day of trading at a price of $75, which meant that the company had left billions on the table with its still too-low introductory price and the first buyers were able to book record profits on the very first day. From Wall Street to Main Street, as it is so nicely phrased, everyone was reading in the newspaper the next day about that miraculous invisible phenomenon called the Internet. (Unfortunately, I don't have time to explain to readers under 35 what a newspaper is, but think of it as a pile of printed out homepages with very large banners that you read for free at the hairdresser's, excuse me, hair stylist's.)

Cisco no disco, but briefly the biggest

The clamor around Netscape stock quickly died down because of relatively modest revenue and profit growth, mainly due to fierce competition from Microsoft that culminated in an infamous lawsuit (in which, incidentally, to my surprise, an offer Microsoft had made me at my first company Planet Internet to switch browsers was entered into evidence by Netscape).

Meanwhile, almost unnoticed, another much less sexy company grew to become the most valuable company in the world: Cisco. Products from this maker of telecommunications equipment were used by virtually every telecom company in the world, which rushed to offer the Internet as a new service alongside telephony, as well as in corporate networks that were massively connecting to the Internet.

In March 2000, Cisco was the most valuable company in the world with a market value of more than $500 billion. Its P/E ratio was a staggering 196, meaning an investor was willing to pay $196 for $1 of the company's profits at that share price. The party did not last long, and two decades later Cisco is a fine company, but it is worth only half of that sky-high valuation of the early 2000s. By comparison, anyone who had bought Apple stock for a thousand dollars back then would now have made over a 20,000% return and makeover $200,000.

Is Nvidia the Netscape, Cisco or Apple of 2023?

The Netscape browser opened up information and commerce to a global audience. The greatest value, however, turned out to lie not in the creators of the infrastructure (Cisco) or the creators of the application layer (Netscape), but in the developers of applications on that enabling technology: first Yahoo and eBay, then Amazon and Google.

Similarly, Facebook, Whatsapp, Instagram and later Tiktok benefited from the smartphone breakthrough, especially after 2010 when the iPhone 3 appeared and Android enabled good licensing versions for Samsung and Chinese smartphone makers such as Huawei. That technology, combined with globally cheaper subscriptions and data traffic bundles, led to exploding social media usage.

From the market value of Meta (owner of Facebook, Instagram and Whatsapp) of over $700 billion, as well as the over $200 billion market value of ByteDance (owner of TikTok and Lemon8), you would think that the greatest value is again in applications. Were it not for the fact that Nvidia is already worth a whopping $1.1 trillion, $1100 billion.

Share prices since Jan. 1, 2023. Nvidia shares rose a whopping 221%! That is not only extreme compared to the S&P 500 which so far rose an excellent 15% on its own, but also compared to all other dominant technology companies.

Analyst Stephen Guilfoyle says of Nvidia:

"The business is not as good as gold, but much better. Cash flows are growing at an amazing rate. Costs and expenses are under control. The balance sheet is beautiful. While growth in the data center business is beyond what I thought possible not too long ago, gaming also seems to be back on track."

Several analysts and investors have now raised their expectations for Nvidia stock to above $550 and even $600, which would mean that Nvidia will be worth more than Amazon.

There are only five

Excluding Saudi state oil drillers Aramco, Nvidia is already currently one of only five companies in the world that has reached the $1 trillion (thousand billion) market value milestone - along with Apple, Amazon, Microsoft and Google's owner Alphabet - and the only one that is not a household name.

Founded in 1993, Nvidia became known primarily as a maker of graphics cards for high-end gaming computers; everyone has one of those nephews in the family who would come over to give you a sweaty hand when you visited, before quickly hobbling back to the attic to continue gaming on his PC with an Nvidia GeForce graphics card. That was also the image investors had of the company for years.

Under Huang's leadership, Nvidia quietly developed into a formidable competitor to giants such as Intel. "We saw early on, about a decade ago, that this way of making software could change everything. And we changed the company from the bottom up and sideways. Every chip we made was focused on artificial intelligence," Huang told CNBC.

Anyone looking superficially at Nvidia is quick to make the mistake of concluding that the company only makes chips and is very sensitive to competing chips as already announced by Nvidia's own customers, including Google, Microsoft and Amazon. Only it turns out that the lead Nvidia has built up is far less easy to catch up with than widely thought. As the New York Times concluded, Nvidia has developed a competitive moat around AI chips.

Keith Strier, Nvidia VP Worldwide AI, explained well on LinkedIn that Nvidia makes the entire infrastructure, not just the chips, and that those components are very scarce.

Therefore, orders are being placed by various companies and even countries for years ahead; previously I wrote about orders from the Chinese Internet giants and from the Arab world. The rumor is persistent that orders are being made for billions for chips that Nvidia has not yet announced, let alone has in production.

The scarcity of components and manufacturing capacity could be an Achilles heel for Nvidia. After all, manufacturing is outsourced entirely to TSMC, but not entirely coincidentally, TSMC also makes all of Apple' s chips which seems to have a preferred position.

Conclusion: Nvidia example of completely new business form

It can be argued that Nvidia has built a better competitive position than Cisco ever had and the margins are arguably much higher. While Nvidia is an enabling technology, it is far less easy to replace than, say, Netscape once was. But it is also not an extremely scalable company like Google or even Meta because it depends on hardware production.

To understand Nvidia and the AI craze, it is interesting to see how, for example, ChatGPT uses Nvidia. The company OpenAI, whose shareholders include Microsoft, developed ChatGPT and together with Microsoft' s cloud service , Azure, and Nvidia built the cluster on which ChatGPT runs. Quickly summarized: Microsoft's cloud service Azure uses Nvidia's famous H100 chips for this particular application in a data center and the application ChatGPT uses the service.

OpenAI has licensed use of ChatGPT to Microsoft, which uses the technology in its Bing search engine, among others. But Microsoft also makes its own AI chips that will eventually compete with Nvidia.

It is like slowly finding out that your uncle on your father's side is married to your mother's sister, only on a prenuptial agreement and not in community of property.

It is crucial to understand that the AI applications we see today are almost all based on Large Language Models (LLMs), a type of artificial intelligence models designed to understand and generate human-like text from large amounts of data on which it has been trained.

The PT in ChatGPT stands for Pre-Trained: ChatGPT uses deep learning to process and produce text in a coherent and contextually relevant way. Because of its size, which includes billions of parameters, it can handle a variety of tasks, from answering questions and writing essays to generating creative content. Only, and here it comes, that pre-training, feeding the system with data, requires such extreme computing power that can currently only be provided by Nvidia.

30,000 GPUs for ChatGPT

So when Hubspot, the tool I use to create this newsletter, announces, for example, an AI module claiming to be "Powered by OpenAI," not only Hubspot but also OpenAI earns from it, obviously Microsoft (because OpenAI uses Azure) and, above all, Nvidia. This kind of value chain will become commonplace in AI: specific applications developed on horizontal AI platforms like OpenAI, from which ultimately Nvidia always earns.

To complete the example of OpenAI with ChatGPT: only those involved know exactly how the system is put together, but the claim that no less than ten thousand Nvidia GPUs were used to make ChatGPT and another twenty thousand are needed to run nicely does not sound implausible. With a purchase price of $30,000, that's an order for a whopping $900 million for Nvidia.

What is unique about Nvidia's AI technology stack is that they are no longer motherboards or graphics cards that my nephew can pull right out of his PC, but software applications specifically designed for the capabilities of, say, Nvidia's flagship H100. Because depreciation on these types of systems is spread out over many years, it will be years before Nvidia is replaced - if any new, better technology comes to market than Nvidia offers, which does not seem likely at this time.

When Jensen Huang first used ChatGPT, he asked for a poem about Nvidia. So I asked for a poem about Nvidia, the H100 and revenue potential. This is the result.

In the realm of tech, where ambitions reside,
The H100 emerges, with potential untried.
Nvidia's beacon, shining so bright,
Promises profits, reaching a new height.
Markets await, their hopes taking flight,
For with this chip, the future's so right.
Nvidia stands poised, ready to soar,
With the H100, revenue's lore is in store.

Poem by ChatGPT about Nvidia and the H100

Next week another regular installment of my newsletter. Happy Sunday!

Categories
AI crypto NFTs technology

Ex-Google CEO Eric Schmidt is the man behind the biggest AI companies

It seemed like a quiet week on the technology front, until everything happened in the last few days. Former Google CEO Eric Schmidt announced a new nonprofit organization that hopes to solve the biggest scientific problems with AI, the stock price of Europe's fintech darling Adyen collapsed, crypto also took hits with a sharp drop in Bitcoin and XRP, a lawsuit was filed by disappointed Bored Ape NFT buyers against auction house Sotheby's and the fund with Arab oil billionaires makes $8 billion in profits on ... computer chips. At the last minute, a car from Croatia broke Tesla's records.

Bored Apes prices have dropped below $50,000, but readers of my newsletter can have this Midjourney-created sad ape for free.

Using AI to save the world?

Former Google CEO Eric Schmidt is building an ambitious new nonprofit organization to tackle major scientific challenges using artificial intelligence. Schmidt wants the new organization to attract top AI scientific talent to create breakthroughs in as many complex fields as possible, from drug discovery to materials science.

Schmidt unfolded his vision last month in an article in MIT Technology Review titled This is how AI will transform the way science gets done.

"With the advent of AI, science is about to become much more exciting - and in some ways unrecognizable. The reverberations of this shift will be felt far beyond the lab; it will affect us all," Schmidt wrote.

Previously, Schmidt invested in DeepMind (bought by Google), OpenAI, CloudMinds, Vicarious, Cogitai and Elemental Cognition. At least, so says the chatbot Pi from Inflection.ai, another AI company Schmidt invested in. Inflection.AI is a San Francisco startup that develops conversational AI chatbots. Two months ago, the company raised as much as $1.3 billion in a funding round led by Schmidt, Bill Gates and Nvidia.

Long list of Schmidt's AI investments

Pi forgot to mention Anthropic, SandboxAQ, Upstart, Rebellion Defense, Urban Engines and Mistral, which I wrote about earlier, so the old-fashioned overview on Crunchbase seems more complete. The various AI technologies these companies are developing include chatbots, quantum computing, cloud-based systems and AI that learns like humans learn. The applications of these technologies are diverse and far-reaching. They range from drug discovery and robotics to translation and personal assistants.

Schmidt has become the world's leading investor in AI, not shying away from investing in companies that are each other's direct competitors. This may yet lead to problematic situations in the future, but for now, no company seems to mind and his money, knowledge and network are welcome everywhere.

Nobody is always lucky, and Schmidt also suffered a personal setback in the outer category of "first world problems" this week, when it turned out that the superyacht Alfa Nero he thought he had snapped up back in June is still not released to him. Fortunately, Schmidt has another boat to get through the summer on, the nearly half-century-old converted icebreaker Legend. I don't know Schmidt personally, but have a soft spot for someone who converts a 1954 icebreaker.

Spotlight 9: Adyen, Bitcoin and XRP down, Nvidia rises again

I usually end my newsletter with a quick look at the major public tech assets that I believe most strongly influence the tech world, in a column for which ChatGPT coined the name Spotlight 9. The share price drop experienced by Adyen and the crypto world in recent days deserves more attention this time. Nvidia, maker of the chips needed to run AI applications optimally, on the other hand, is experiencing heyday with yet another billion-dollar order, this time from the Arab world.

Nvidia shares mostly seem to be moving in exactly the opposite direction from most tech stocks, which suffered from an overall market correction.

Adyen plummets due to slowing sales growth

What happened. Adyen's share price took a huge hit this week, falling about 39%. The Amsterdam-based company presented quarterly figures with an unexpected slowdown in revenue growth and a drop in profits, which led to a wave of selling of the stock by investors.

Adyen shares recorded a decline Friday for the sixth consecutive session, marking the longest downward trend since Sept. 1, 2022, according to Dow Jones Market Data. In these six days, the price plunged by more than 45%, the largest six-day drop ever in Adyen shares.

Adyen deserves credit for not taking part in all the rounds of layoffs in the tech world and even attracting over 500 new employees, whom it would probably normally have had a harder time bringing on board in a more competitive job market. Management chose the long term over the short term, and that is to be commended.

But in particular, the decline in growth in the world's largest market, the United States, is a bad sign. Competition in the U.S. (including Stripe, Braintree, Fiserv and PayPal) offers a similar service at a lower price, according to Adyen CEO Pieter van der Does, implying that Adyen will structurally lose either market share or part of its profit margin.

Adyen is named after the Surinamese word for "again," after the founders were previously successful with the payment company Bibit. Hopefully management will succeed in reviving a payment company again, in fact for a third time. Adyen, adyen!

After China, Nvidia also scores in the Arab world

Just last week I wrote about the billion-dollar order placed by the Chinese Internet giants with Nvidia; this week the Financial Times reported that the Saudi government, through the highly respected King Abdullah University of Science and Technology(Kaust), has purchased at least 3,000 Nvidia H100 chips, worth about $40,000 each, according to the Financial Times. In short, a $1.2 billion order.

The order size of the United Arab Emirates' order is not known exactly, but it is known that it involves "thousands" of Nvidia GPUs for its own open-source large language model, Falcon, developed at the state-owned Institute of Technological Innovation in Masdar City in Abu Dhabi. Together, these orders again mean several billion in revenue for Nvidia.

The question remains as to what margin Nvidia is making on the very expensive H100 chips, and a fascinating report appeared on Friday about this very subject , showing that Nvidia is making almost 1000% gross margin on the H100. It is notable that this article talks about a retail price per H100 of $25,000 to $30,000 while the FT calculates with the $40,000 common in the market.

In any case, this conclusion about Nvidia seems justified: 'with expectations of the AI accelerator market being worth around $150 billion by 2027, there's seemingly nothing else in the future but green.' It's simple, any AI player can't do without Nvidia's chips.

Bitcoin sensitive to something old-fashioned: rising interest rates

Bitcoin prices dropped suddenly late Thursday after reports of hundreds of millions in sales, causing carnage in the futures and spot markets.

Bitcoin fell 11%, but remains about 60% above where it started this year, beating other well-performing assets such as technology stocks. But a host of headwinds - from rising bond yields to regulatory pressure and economic weakness in China - are undermining the appeal of cryptocurrencies.

For example, XRP fell Friday for the fifth day, down 12%, as the U.S. Securities and Exchange Commission asked a federal judge for permission to appeal the ruling that Ripple Labs' XRP token is not subject to securities laws when sold to the general public. Despite the drop of as much as 20% this week, XRP is still posting nearly 53% gains this calendar year.

Notable links

I end this week with links to a few things that caught my eye, in no particular order.

Sotheby's sued by ape buyers

That's a headline no one could have imagined roughly three years ago. Buyers of Bored Ape NFTs are suing Sotheby's because, the argument goes, Sotheby's sale for $24 million of Bored Apes to FTX gave Bored Ape NFTs "an air of legitimacy."

Sotheby's allegedly said the buyer was a traditional collector rather than what later turned out to be a rogue crypto exchange, giving other buyers an overly rosy view of the demand for Bored Apes. Yet buyers of Bored Apes who now complain about the value resemble people who bought a ticket to the movie Titanic and complained afterwards that they already knew the ending.

#PrayforJustin

It is not to be expected that Justin Bieber would join the complainers, but very little fun has been had by the singer with his Bored Ape #3001. Bieber reportedly paid $1.3 million in ETH, but the monkey is currently worth only $39,000. Madonna and Steph Curry' s monkeys aren't doing much better. Fortunately, they can handle it.

Arm leads the way to stock market for Instacart and others

The Financial Times reports that some of Silicon Valley's largest private tech companies are dusting off long-delayed plans to take their shares public, with the upcoming IPO of chip designer Arm set to be a new gauge of market sentiment. Arm is expected to announce the IPO tomorrow, Monday, Aug. 21.

Instacart, software company Databricks and Socure, an identity verification startup, are among the other companies considered as candidates for an IPO, according to FT. Instacart's valuation is expected to be only a quarter of the valuation in its last private financing in 2021, which was around $40 billion.

It was announced yesterday that Softbank bought 25% of Arm shares from Vision Fund 1 at a valuation of $64 billion, roughly in the expected price range of the IPO. It is odd that such a large sale should occur just before the IPO, but Reuters reports the reason: the deal eliminates a possible dump of Arm shares after the IPO, as Vision Fund planned to monetize its stake soon after the IPO, while SoftBank has indicated it will remain a long-term strategic investor.

$8 billion profit

Softbank is actually buying back the shares, because in 2017 it sold these 25% shares of Arm for $8 billion to Vision Fund, whose major shareholders, the sovereign wealth funds of Saudi Arabia and Abu Dhabi, at a valuation of $64 billion, thus book a profit of no less than 100%: 25% of the shares for $16 billion minus the purchase price of $8 billion is still a pleasant $8 billion profit. The selling parties are the same countries that just placed the billion-dollar order with Nvidia, no doubt backed by their recent success with technology investments.

However, no one expects these IPOs to lead to a renewed bull market, but it does indicate that at least the stock market climate is not deteriorating further. So far this year, only $14 billion has been raised in IPOs on U.S. stock exchanges, compared with $241 billion currently in the record year 2021 for IPOs, according to data compiled by Bloomberg.

Food bank became tourist attraction

When a food bank is touted as a city's third tourist attraction, AI is quickly pointed to as the culprit. But the very "human surveillance" that compiles algorithmic content on MSN had somehow overlooked a list of tourist hotspots in which the food bank ranked number three. It is unclear how many tourists actually showed up at the food bank for a tour.

'You Should Kill Your Startup'

Couples Morin and Lessin's podcast "More or Less" discusses the biggest taboo in the startup world: when to give up and close the company. It's an unpopular topic and therefore deserves applause. It's not a podcast they recorded thinking "this one's going to be a hit".

Can't understand the dialogues on Netflix? You're not the only one.

Many people stream programs and movies with the subtitles always on - and not because it's cool, reports the New York Times. 'In big movie productions, professional sound mixers calibrate sound levels for traditional theaters with speaker systems that can deliver a wide range of sound, from spoken words to loud gunshots. But when you stream that content through an app on a TV, smartphone or tablet, the audio is "down-mixed" or compressed to send the sound through small, relatively weak speakers.

The solution: buy external speakers. For viewers on laptops or tablets, this is still the best test of various headphones showing that the most expensive models do not always offer the best sound.

The Rimac Nevera can go from 0 to 400 kilometers per hour and back to standstill in 24 seconds. Why, no one knows, but it's fun.

Marques Brownlee drove the fastest electric car in the world

The fastest electric car in the world comes from Zagreb, Croatia and is called the Rimac Nevera. The Nevera broke a special world record - the world record for breaking world records in one day (23). YouTuber Marques Brownlee drove the Nevera and this is what happened when he applied full throttle from a standstill.

The day before yesterday it was announced that the Rimac Nevera broke the Tesla Model S Plaid Track Pack electric car lap record at the legendary Nürburgring by a whopping 20 seconds. The Nevera's performance is downright absurd. The motors generate 1.4 megawatts of power, or 1914 horsepower and a whopping 2360 Newton meters of torque. The Dutchman in me is now thinking: what a big caravan could fit behind that! The Nevera accelerates from 0 to 100 kilometers per hour in just 1.74 seconds and has a top speed of 412 km/h. Can't get any faster, you'd think....

Car on dinosaur blood faster after all

How can a "regular" hybrid car with almost 900 HP less, which houses not only an electric motor but also an old-fashioned internal combustion engine running on dinosaur blood, the Mercedes-AMG ONE, still be 25 seconds faster than the Rimac Nevera? The answer is simple: cornering.

Every electric car owner does what Brownlee did in the video, which is press the gas pedal on a straight road. But the Nordschleife has 73 corners and the Nevera weighs 2150 kilograms, while the Mercedes-AMG ONE weighs "only" 1695 kilograms. Combined with the particularly efficient downforce (downward aerodynamic pressure) of the AMG ONE, ironically a quality that Mercedes' Formula One car has lacked for two years, the Nevera is simply too slow in the corners. Although slow is a relative term in this segment.

As an expert on the subject, since I am, after all, a former apprentice editor at the Dutch car show The Holy Cow and producer of the TV report on the 1987 Open Dutch Car Washing Championship, I recommend first watching the video of the Rimac Nevera on the Nordschleife and then seeing how the Mercedes-AMG ONE set the lap record.

Categories
AI crypto technology

Apple scores with Messi

This week there was no news that stood out everywhere, so I made a top 10 of things that caught my eye. The great little magician from Argentina is, of course, number one.

If Lionel Messi worked from home.
Image: Midjourney

1. Apple scores with Messi

No one will have failed to notice that Lionel Messi has been playing for Inter Miami, the club owned by Posh Spice's husband, for a few weeks now. But there is another owner, Jorge Mas, and he was retweeted (or rex-ed, what's that actually called since Twitter was renamed X?) by Apple CEO Tim Cook this week. The occasion was the doubling of subscribers to MLS League Pass, the pay subscription Apple offers worldwide to people who want to watch the U.S. soccer league.

Neither Apple nor the MLS disclose how many subscribers the service has, although as recently as last month it was suggested that the number was close to 1 million, before Messi's arrival. In any case, Apple is clearly pleased with Messi's impact on MLS Season Pass, because that's not how often Tim Cook retweets/rex-ed messages from people outside Apple.

You only have to buy Messi to be retweeted by Tim Cook

CNET analyzed Apple's strategy on streaming sports and is one of the first media outlets that seems to understand that the subscription to the MLS is an additional upsell; MLS matches and thus Messi's matches are not free for Apple TV+ subscribers. A monthly subscription to the MLS costs $12.99 or $49 for the rest of the season. It is extraordinary to read back now that as recently as April, there was laughter about the deal between Apple and the MLS.

Of course, it is odd that Messi is the only player in a team sport to benefit from the growth of subscribers to Apple TV+'s MLS subscription. The question is whether this will be replicated in other sports. Another question, of course, is how much Messi earns from each MLS subscriber and for how long; is it part of a subscriber's lifetime value or a flat fee per subscription?

There is plenty of speculation whether the Saudi league, which currently attracts any player who loves money, sand and shopping malls, will follow the same strategy as the MLS. That, of course, makes no sense: the MLS and its franchisees need money. The Saudis want to buy respect, charisma and reach and are even more likely to pay for worldwide broadcasts of their matches, rather than charge money for them.

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2. In Silicon Valley, everyone became Merlin the magician for a moment

'Forget AI. For a while, Silicon Valley was obsessed with floating bricks.' So headlined the Washington Post in a fine article about the craziness in recent weeks surrounding LK-99, the material hoped to be the room-temperature semiconductor that would change the entire world.

The article rightly states that the technology world is diligently looking for fundamental breakthroughs, such as AI, after a decade of few spectacular new applications became apparent. Hopefully, investment in companies working on carbon reduction and decarbonization will continue to increase.

Unfortunately, halfway through, the journalist briefly hits the mark: 'Cryptocurrencies and blockchain technology have been through several cycles of hype, but have yet to fundamentally change any sector except crime and money laundering. Technology designed to combat climate change, such as carbon capture and storage, has made no major progress for years.'

There is zero evidence that crime and money laundering have changed because of blockchain technology and cryptocurrencies. Zero. On the contrary: every transaction, while anonymous, is always visible on the blockchain, so the entire trail of transactions from a wallet is forever traceable to anyone on the Internet. Try that with the old-fashioned bank accounts through tax havens (Panama Papers, remember) or with the piles of cash of Pablo Escobar and consorts.

3. California is paradise and testing ground for self-driving cars

Following a state regulatory agency ruling, San Francisco will have robot cars on its streets 24/7. Good analysis explaining that this is a pivotal moment for the auto industry. Again from the Washington Post, which has excellent coverage of technology when you would rather expect that newspaper to focus on politics.

Once again, someone completely misses the point in this article, this time a mayor. " What will happen to our workforce if AI and driverless vehicles both come online at the same time? " she says. A bigger problem, of course, is that virtually no right-thinking person wants to be in politics by 2023, so we'll be stuck with mayors who talk about self-driving cars like retarded people talked about stagecoaches in 1910.

A populist politician's phony question has been the same for hundreds of years when confronted with innovations: 'But what will happen to the employment of the (choose your own preferred profession that no longer exists) chimney sweep/miner/video store worker?'

The answer is simple and has been the same for centuries: new occupations are emerging but hopefully advancing mechanization will eliminate heavy physical work and the work week can be further shortened to more time for fun things or self-development. There are people who got time to write a newsletter that way. No one benefits from further spreading the Chinese 9-9-6 culture: 9 to 9, 6 days a week.

The hope with self-driving cars, of course, is not that everyone will have their own self-driving car, but that transportation will be on demand; it is madness that the average car sits idle 95% of the time. Fewer cars means less CO2 emissions for car production and oh my goodness, this means unemployment for all the craftsmen in factories who currently screw antennas into the roofs of cars to receive FM radio.

4. Billionaires engaged in a race for and against AI

While technology experts are sounding the alarm about the pace at which artificial intelligence is evolving, philanthropists - including established foundations and technology billionaires - have responded with an increase in donations.

In the camp of the faithful include former Google top executive Eric Schmidt and founder of LinkedIn Reid Hoffman. In the other corner of the ring, for example, is Pierre Omidyar, founder of eBay, along with the Ford, MacArthur and Rockefeller Foundations. For those with doubts about this topic - and those doubts are very understandable and also justified - I again recommend this piece by Marc Andreessen. But AI and crypto are not scary, just as it was not scary that humans learned to read

The first half of this excellent podcast from colleagues of the aforementioned Marc Andreessen is about how AI could benefit from crypto, and the second half about how crypto could benefit from AI - but the common thread is the tension between centralization vs. decentralization.

This again touches on the point about whether cash or crypto is worse for crime: the arguments opponents use always end up with a centralized system, without actually analyzing the problem.

The podcast also discusses where the intersection of crypto and AI can bring about things that are not possible by either alone. Together, the fields of AI and crypto have major implications for how we live our lives every day; so this episode is for anyone curious, or already building in this sector.

5. PayPal with its own stablecoin

PayPal came out with its own crypto currency that is pegged in value to the dollar. From a financial standpoint, using stablecoins is not much different from using a gift card: you can use your dollars to buy stablecoins and then use those stablecoins to buy various cryptocurrencies or make other online purchases.

Downright funny was to see the reactions. Some think the PayPal stablecoin is more important than a Bitcoin ETF arguing that PayPal is uniquely positioned to solve the huge opportunity for fiat onboarding - they have the banking relationships, regulatory framework and infrastructure to sign up millions of dollars to millions of wallets. Thestreet.com even calls PayPal the crypto leader for the next decade because it links 400 million customers to crypto. The question, of course, is how many of those 400 million ever use crypto. Those 400 million customers also have access to stamps, and how often does anyone moisten the back of such a sticky note?

PayPal's stablecoin is totally unimportant, says Bank of America but that name alone does not have the aura of total neutrality on this topic. He is often quoted in this newsletter and once again Michael Casey of Coindesk has the most thorough analysis: why the timing feels right.

I expect there will be great resistance from Washington to the PayPal stablecoin, because anything pegged to the dollar is, in the eyes of the average bureaucrat, not owned by the citizen, but by the state.

6. Worldcoin under increasing pressure

Speaking of citizen ownership, whose is identity? I've written about Worldcoin before because I think the idea of an anonymized affirmation of a human identity is important and fully endorsed. There is so much unnecessary fraud and deception on the Internet that an anonymized digital identity and reputation can be crucial. Suppose you buy something on eBay from someone who has done few transactions there but has an immaculate reputation on Etsy, Uber or on Airbnb, for example; then confirmation of such a good "portable" reputation would be extremely valuable for buyer and seller.

What Worldcoin is doing now is linking a human identity to an iris scan in exchange for obtaining free Worldcoin tokens. There is no useful application whatsoever as I describe above. It leads to harrowing scenes worldwide, such as in Kenya: 'Some people in line told local media they had traveled miles after friends said "free money" was being handed out. They admitted they didn't know why they had to scan their irises and where that information would go, but they just wanted the money.'

Surely someone with the intelligence of Sam Altman, the former top executive of business factory Y Combinator and founder of Open AI, should be able to couple that intelligence with the common sense to not want to do this with Worldcoin?

7. Nvidia gets $5 billion in orders from China

In June, I wrote that Nvidia's Keith Strier told the ATX Summit in Singapore that Nvidia has more orders than it can deliver, and that companies and even countries have been placing orders years in advance to ensure longer-term deliveries. Strier wrote about it himself:

'This is about compute, not just chips. AI requires a highly specialized compute infrastructure, a combination of hardware and software. Most importantly, the supply is finite. [...] NVIDIA GPUs (the chips, MF) are more than gold, they are the "rare earth elements" of AI. That is why the world's most advanced AI companies are raising capital to secure the supply of accelerated computing. Whether an enterprise or even a country, it is important to plan and budget for the computing power that will be needed to achieve and sustain leadership in AI.'

Strier was referring to this order, among others, as Baidu, Tencent, Alibaba and ByteDance (owner of TikTok and Lemon8) ordered for $5 billion, including $1 billion this year and $4 billion in 2024. There are countries and companies already trying to place orders with Nvidia for 2025 through 2028.

The Chinese companies are playing catch-up and are pulling out all the stops to continue their "old-fashioned" growth. ByteDance is trying to link TikTok with Lemon8 in an effort to boost usage of that app, and Alibaba, which along with Tencent Holdings and Baidu is responsible for the birth of China's Internet industry, is trying to persuade investors to support the policy of splitting the company into no less than six parts.

8. WeWork doesn't work, Zoom just does

Interest in WeWork has always completely passed me by; it always seemed like overpriced office space with moderately comfortable furniture. The absurd valuation to value a real estate marquee as a technology company came to a screeching halt around the failed IPO, and now the board is reporting, in part due to increased interest rates, that a bankruptcy of WeWork is not ruled out.

Meanwhile, Zoom is asking staff who live within 80 kilometers of the office to come to the office at least two days a week. A reasoned request, interpreted by the media as the end of working from home. It seems like some journalists don't speak to people; I hardly know anyone who works in an organization where working from home is possible, where the pre-pandemic work culture has been restored. It won't be every day, but working from home has become part of working.

9. The investor is on vacation

The investor is sitting on the beach.

Despite the billion-dollar order from China, Nvidia was the week's decliner, but that's not surprising after all the gains this year so far. Otherwise, it was doom and gloom for tech companies, so I thought it would be nice to look at what's happening at companies in the pre-IPO stage. This article on crowdfunding in Europe illustrates the increased interest in climate tech, in technology that combats climate change.

With the stock market climate continuing to allow few major IPOs in the coming months, it is especially interesting to follow which companies are being acquired rather than going public. With every company where a buyer knocks on the door, mild panic ensues. Therefore, this is an excellent article, explaining the steps to follow the moment a buyer comes forward.

10. A Steph Curry summer

Speaking of vacations; the summer hit of 2023 is obviously Roxy with "Anne-Fleur Vacation," but the one with the most extraordinary summer is undeniably basketball player Steph Curry. First he hit a hole in one at a charity tournament and last week he was on stage at his own Chase Center in San Francisco with the band Paramore. And the conclusion was: what a basketball this man can play.

Wishing all readers another Steph Curry summer, see you next week!

Categories
crypto technology

The new Internet hype is ... LK-99, a superconducting material?

When the five of the world's six largest companies publish their quarterly results, it is a major economic indicator and could be news. Unfortunately, instead of solid analysis, even the Financial Times and Washington Post preferred to publish uninspired opinion pieces about how boring the CEOs of Google, Microsoft and Apple are and how ostentatious and silly it is that Apple CEO Tim Cook always makes the v-sign in photos. Who cares, as long as he is not in every photo with his right arm extended?

Therefore, this week's news was the possible breakthrough of a superconducting material, LK-99. On Twitter, sorry, on X, the people who were experts on AI and mini-submarines earlier this year have been true alchemists since this week. Everyone was suddenly Merlin the magician.

LK-99 was the topic of conversation in the technology world last week
Image created with Midjourney

What exactly happened? Three Koreans published a paper on July 22 entitled "The first room-temperature  ambient-pressure superconductor." If their research findings are confirmed, it would at a minimum revolutionize the design of computers and consumer electronics, think iPhones with the computing power of a quantum computer, but space technology, medical technology and the way factories are designed in industry would also change forever.

After a year in which Meta, with $40 billion in the bank and 80,000 employees, underscored the tech world's idea vacuum with the launch of the app Threads, a bland spinoff of Twitter, many believers in the cult of technology went completely berserk over LK-99. As Wired described it:

'A return to a time of groundbreaking discoveries - the light bulb, the Manhattan Project, the Internet - where the impact of scientific discovery is tangible within the span of a human's earthly presence. "We're back," as one X-user put it.

-Wired

That superconductor at room temperature should theoretically be possible, it has been debated and written about for decades, but the world has never seen it happen. In short, it would be a discovery on the level of time travel, interplanetary life and a movie in which Tom Cruise looks older than 35.

The UFOs of science?

Unfortunately, false claims are so common in this area of research that physicists joke about USOs-"unidentified superconducting objects"-a pun on UFOs. Nature came up with a cold shower:
:

'Advances in superconductivity are often touted for their potential practical impact on technologies such as computer chips and magnet trains, but Inna Vishik of the University of California at Davis points out that this excitement could be misplaced. 'Historically, advances in superconductivity have had enormous benefits for basic science, but little for everyday applications. There is no guarantee that a material that is superconducting at room temperature will be practically useful, Vishik says.

At the moment, LK-99 seems like a mirage. Still, even I can't help but watch videos like this one tracking how last week scientists worldwide are trying to replicate the Korean experiment, although I understand as little about producing LK-99 as I do about making the cruffin, the miraculous combination of a croissant and a muffin.

Cleantech is hot

If it turns out that the gentlemen behind LK-99 have actually made a scientific breakthrough, then (apart from a Nobel Prize) there is at least plenty of investor money waiting for them:

source: Crunchbase

Many of the busiest investors in cleantech also became more active in 2023, according to Crunchbase. This is notable given that overall venture capital funding has declined, indicating that these industry-focused investors see many opportunities, particularly in "climate tech," technology that combats climate change.

KPMG releases bold report on Bitcoin and ESG

KPMG and bold, so far you could only come across those two words in articles about their go-to ski trips. Still, KPMG deserves kudos for publishing research on the ESG aspects of Bitcoin, because it can really only get criticism. On the one hand, from crypto fans who will sigh that KPMG wants to be modern and hitch a ride on the cryptohype; on the other, from many traditional KPMG clients who will wonder "what's wrong with KPMG, why are they writing about Bitcoin?

The most striking passage concerns the part about the ecological aspect: ' Bitcoin miners can be a useful ally in the transition to more renewable energy sources and reduce emissions, despite significant energy consumption.' Surely you rarely hear that, Decrypt also found. The wait is on for 'certified green-mined' Bitcoins. Highly recommended: the report is only 11 pages, provides an excellent overview of the state of Bitcoin and ESG, and can be downloaded here.

Spotlight 9: Apple, Amazon, Meta and Alphabet all rated differently

Winner of the week was the company with the bluntest axe: Amazon

I wanted to do a long discourse on the difference in how analysts and investors rate companies, versus the reality of market position, competitive advantage and structural earnings potential. In summary, my argument boils down to the fact that there are so many pure speculators in the stock market influencing the market, that the short-term share price is barely related to long-term company value. It works better if I take a few concrete examples. First, Uber: the company made a profit for the first time in its existence, but its share price fell because revenue was lower than expected. Maybe it's just a smaller, but more profitable, company than analysts expected. A few other examples following last week's release of quarterly earnings.

Meta is not mega

Take Meta, the maker behind Whatsapp, Instagram and Facebook. Collapsed completely last year when revenue fell apparently unexpectedly for investors. This led to doom-mongering that the company had peaked and would decline long term, enough to justify the stock's extreme discount relative to the rest of the market. We are eight months on and investors seem to be overreacting in the opposite direction, pushing the stock up in response to last month's earnings improvement, in which revenues rose and operating expenses fell due to the company's drive for efficiency (read: mass layoffs), leading to an increase in earnings. Is that vision?

Amazon scores at least in the short term

Another good example is Amazon: CEO Andy Jassy gets compliments for cutting costs while increasing sales. Under his reign, as many as 27,000 jobs were eliminated, and few things make investors as happy, as other people losing their jobs. The results caused shares to rise 8.3% at the end of the day Friday to $139.57, the best single-day performance since November and the highest price for Amazon shares in nearly a year.

An interjection stated: "Amazon's cloud business, which normally provides the bulk of the company's operating profit, exceeded expectations and showed signs of stabilizing. And herein lies my objection to this kind of short-term jubilation. Because I can still remember the years when analysts complained about all the investment that founder and former CEO Jeff Bezos made in all of Amazon's cloud services. 'Not a core business for an e-commerce company,' the analysts shouted in chorus.

The reality is that AWS is not only Amazon's biggest profit maker, but also provides the e-commerce branch with an unbridgeable competitive advantage over everyone else without such a cloud platform to handle all transactions. You read nothing about that, it's mostly about the $12 billion Jeff Bezos got richer on Friday. There is virtually no attention to the very way Bezos became successful: by consistently putting long-term interests ahead of short-term profits. (For fans of serious analysis of cloud services, this is an outstanding multi-page article comparing the cloud services of Amazon, Microsoft and Alphabet).

Does profit count above growth at Apple?

It is always nice to see what strategy Warren Buffett, the oracle from Omaha, is using. Buffett has invested as much as $151 billion in Apple, which is still less than 6% of the company by the way. He is looking over years rather than months and weeks, and that seems to have worked out nicely for the man. Apple posted declining sales but higher profits for the third quarter in a row, which resulted in 2% stock price decline.

I never make predictions, but on this one I will make an exception, looking purely at Apple's products: forget the Apple Vision Pro, which is a product with a very long horizon, but look at the Mac owners switching to laptops with the new Apple chips, the expectations about the new iPhone 15, the services (iCloud, Apple TV etc) and the wearables, especially the Apple watches, and I think Apple will post significantly higher profits in the first and second quarter in any case, plus sales will start to rise again. I'm writing it down in the calendar for Apple's quarterly earnings in 2024. Curious to see how wrong I will be.

Categories
AI crypto technology

Worldcoin proves: people give away their eyeballs for a few coins

The technology industry is increasingly suffering from excessive attention to tech founders. Elon Musk continues to dominate the spotlight, whether he is reviving Twitter or tearing it down, depending on whom you ask. Still, the most significant news of the past week was the unveiling of Worldcoin. This project drew attention because of its shiny "orb," which scans the iris of new users, and because of the involvement of co-founder Sam Altman, also the CEO of OpenAI.

It was the week of Barbie and Oppenheimer, or Barbenheimer, and Worldcoin's Orb. Photo: created with Midjourney

Two months ago I wrote about Worldcoin and the company behind it called Tools for Humanity, which then presented itself on its 1-page website with the slogan "a technology company committed to a more just economic system" and raised as much as $115 million for the Worldcoin project.

The goal, the founders say, is to create a global identification system that will help reliably distinguish between humans and AI, in preparation for when intelligence is no longer a reliable indicator of being human. At Worldcoin, verification of humanity is ensured through the use of an Orb, a sphere: a biometric iris scanner.

Shiny happy orb people. Photo: Worldcoin

But according to Alex Blania, CEO and co-founder of Tools for Humanity and Worldcoin project leader, there is a bigger purpose than just identification as a human being:

'We seek universal access to the global economy, regardless of country or background, and accelerate the transition to an economic future where everyone on earth is welcome and benefits'

The definition of a pyramid scheme?

Who is not moved to tears by this noble endeavor? Who is against being welcome on earth? Coindesk visited Worldcoin's headquarters in Berlin and from this brilliant article, "Inside the Orb," the impression emerges that Altman and Blania possess a unique combination of talent, otherworldliness and opportunism.

So they talk about Worldcoin as a crucial step toward a Universal Basic Income (UBI) for the entire world population, because these men think big. 

But they are particularly vague when the question is asked who should then pay for that universal basic income for our planet. Altman says of this:

"The hope is that when people want to buy this token, because they believe this is the future and there will be an influx into this economy. New token buyers is how it gets paid for, eventually."

Sam Altman, co-founder Worldcoin

Aha, so the influx of new buyers funds the system. That rings a bell, and I asked ChatGPT, the product of Sam Altman's other company, OpenAI, what the definition of a pyramid scheme is. Here it is:

'A pyramid scheme is a business model in which members are recruited through a promise of payments or services for enrolling others in the system, rather than providing investments or selling products. If recruiting multiplies, recruiting soon becomes impossible and most members cannot benefit; pyramid systems are therefore unsustainable and often illegal.'

I'm not saying Worldcoin is a pyramid scheme. Only that ChatGPT says it looks a lot like one.

Free coins for your iris

A cult of personality is emerging around Sam Altman reminiscent of the golden years of Steve Jobs and Elon Musk. Entire articles are devoted tothe 400(!) companies in which Altman has invested.

Partly for this reason, people lined up in several places around the world last week to have their eyes scanned by Worldcoin's orb. The media cheerfully helped make the hype as big as possible, with service journalism like this article in India, "Sam Altman's Worldcoin is here: how to get your free coin.

Even the tweet in which Altman jubilates that every eight seconds someone has their iris scanned by Worldcoin was included in the article.

Because the system works stunningly simple: download the free Worldcoin app, scan your eyes at an orb, get a World ID and your Worldcoin app instantly receives 25 free Worldcoins; except in America, as Gizmodo experienced. But it's customer onboarding with a simplism and efficiency that would be the envy of a schoolyard drug dealer.

Critics have a point

Twitter would not be Twitter (oh no, it is also no longer Twitter but is now called X, but more on that later), if it were not for a number of astute critics who have analyzed Worldcoin well, such as here and here.

Ethereum founder and widely acclaimed ethicist within the blockchain industry Vitalik Buterin immediately warned of the possible, unintended, bad consequences of Worldcoin's approach:

'Risks include inevitable privacy breaches, further erosion of people's ability to surf the Internet anonymously, coercion by authoritarian governments and the potential impossibility of being simultaneously secure and decentralized.'

Vitalik Buterin, co-founder Ethereum

For now, let's believe Blania and Altman's promise that iris data will be immediately deleted from the orb and not stored. But how many fake orbs will be used by criminals to defraud consumers of their iris scan?  

In any case, the question is justified whether a centrally run company should undertake this kind of initiative. World ID is effectively a universal passport, why should it be developed by a commercial company?

Remember, for all the fancy promises and goals, this is a commercial organization and the founders and backers own 25% of all Worldcoin. That's a higher tax rate than VAT. Even stranger: from Asia, I cannot see the pages in the white paper that deal with these tokenomics at all, because they are shielded. A problem more people faced. Why are they shielding information from the same people who are allowed to have their eyes scanned?

Decrypt summed up Buterin's objections well, although the schematic objection Buterin shared in his blog post is also illuminating:

Vitalik Buterin's schematic representation of the problem

'Proof of Personhood' is relevant, but not in this way

Cybercrime will only increase in the age of AI, so there is a need for proof that you are dealing with a human being and not a computer program. Just not in the way Worldcoin is tackling the problem. Michael Casey of Coindesk puts it this way:

'The risk is not with the technology per se - we have known for years that AI is capable of destroying us. It is that if we concentrate control of these technologies with a handful of overly powerful companies motivated to use them as proprietary "black box" systems for profit, they will quickly move into dangerous, humanity-harming territory, just as the Web2 platforms did.

Still, there is at least one positive aspect that can emerge from the Worldcoin project. It draws attention to the need for some sort of proof of humanity, which may give impetus to the many interesting projects that seek to give people more control over their identity in the Web3/AI era.

The answer to proving and elevating authentic humanity could lie in capturing the "social graph" of our online connections, relationships, interactions and authorized credentials through decentralized identity models (DID) or initiatives such as the decentralized social networking protocol (DSNP) that is part of Project Liberty.

Or it could still lie in a biometric solution like what Worldcoin is working on, but hopefully with a more decentralized, less corporate structure. What is clear is that we need to do something.

Portable identity and reputation

Casey's line of thinking leads to a system of identification and reputation, where you can use services anonymously, but share your identity and reputation if you wish. My Uber score, for example, is 4.96, but if I want to book a room through Airbnb, I do so as a completely unknown individual.

This is why a landlord is the first to ask for a passport copy, while it would also be valuable for Airbnb and the landlord to know that at least as a passenger in an Uber, I did not demolish or vomit under the cab. Such a system where you as a user carry your online reputation with you and decide for yourself to share at a time you deem appropriate would be extremely useful in the digital economy.

Universal basic income for the world's population is so far-reaching that it should be introduced through normal democratic processes. Let's not leave that kind of major social issue to a few men from Berlin; historically that has not proven to be a happy combination.

Twitter becomes X

It can't have escaped anyone's notice, Elon Musk is turning Twitter into X. What a romantic he is, isn't he, to name his company after his youngest son? He explains that in the coming months "your entire financial world can be orchestrated" from X. Because Musk wants to make Twitter a "super-app," an all-encompassing app that merges information, communication and transactions. Similar to China's highly successful WeChat. Musk wants to get rid of the hated ad model as soon as possible.

Musk will look eagerly at South Asian Grab and GoJek, which will allow users to not only order cabs (on cars or scooters), but also pay their bills and even hire personal shoppers to go to the store of your choice to do your shopping. Of course, with a margin for Grab and GoJek on each transaction.

Every second Musk spends on the overrated Twitter remains a waste of time and a waste of his talent. I still hope one day Musk gets angry about Alzheimer's, cancer and the mental health of humanity and uses his undeniable talents to solve those problems, for example with a biotech company. Musk has mastered development of software, hardware and mechanical innovations, how hard would biotech be for him? 

The informative podcast More or Less, from the couples Morin and Lessin, discussed Musk's plans for Twitter in detail this week. It's the only podcast I know of, by the way, in which two couples discuss a specific industry, noting that ex-Wall Street Journal reporter Jessica Lessin is the astute founder of the online trade magazine The Information and Dave Morin is an investor who previously started Path, the most beautiful app of a failed social network I've ever used.

Notable links this week

Bill Gates has a podcast

Speaking of notable podcasts: Bill Gates has started a podcast called Unconfuse Me, and the first edition featured actor Seth Rogen and his wife Lauren as guests. Apparently that's a trend, to appear as a married couple on a podcast. I can hear you thinking, "Bill Gates has a podcast with Seth Rogen, doesn't that sound like Kermit the Frog with Scooby Doo as a guest? It certainly sounds that way, but it turned into an unexpectedly candid conversation about Alzheimer's, home care and recreational drug use, among other topics. Playback at double speed is not recommended.

Barbenheimer does nearly $1.2 billion in a week, Oppenheimer breaks IMAX projectors

The box office success of Barbie and Oppenheimer is unexpectedly huge: Barbie is expected to end the weekend with sales of $750 million and Oppenheimer is approaching $400 million. Even more strikingly, I found that the 70 millimeter version of Oppenheimer in the IMAX is so complex that the film is sometimes out of sync with the sound and even literally breaks. So much for all the doomsday scenarios that "old-fashioned" cinemas would lose out in the streaming era. Good feature films are drawing more audiences to theaters than ever.

Barbenheimer, but made by AI

If Barbie and Oppenheimer were squeezed into one movie, this would be the trailer. I say it too often about AI applications, but it's incredible that this was created entirely by AI: image, sound, video. Above all, the speed at which these kinds of applications are developing is unparalleled. The last time I was so stunned by a technology on the Internet was over 25 years ago when George Michael presented video in a Web browser.

Spotlight 9: Party Q2 at Google and Facebook

Yes, I know they are actually called Alphabet and Meta these days, but admit it, who reads on when those names are in the headline? It was the week when the second quarter results were released so there was a lot of movement in the stock markets. This web page contains a short, handy overview of the results of the major tech companies.

Meta and Alphabet rise, Microsoft falls. Investing in the stock market thus seems like a sprint, not a marathon.

The short-sightedness in the stock markets was demonstrated for the umpteenth time this week. Alphabet and Meta made sharp price jumps, due to higher-than-expected sales while partly driven by currency differences. Granted, Alphabet made 28% more sales on cloud services and that will only increase in the AI era.

However, Meta lost a whopping $21 billion in 18 months on investments in Reality Labs, Meta's business unit that is doing something with all the buzzwords of the last two years, including Web3, Metaverse, AR, VR and anything with difficult glasses. Result: 10% share price gain. How is it possible?

Microsoft, which has taken a tremendously strong position in the field of AI by incorporating OpenAI into the Bing search engine *and* invested as much as $10 billion in OpenAI, a guaranteed hit, was not understood by investors because the investments in AI "do not lead to higher sales right away. Result: 2% decline.

The pink cloud is a schematic representation of my brain as I look at the stock market and see Meta rising, while Microsoft is falling. Photo: created with Midjourney

CNBC doesn't get it either and explains it some more:

'The growth in AI has the potential to drive Microsoft's two largest businesses: the public cloud Azure and the more traditional and market-leading productivity software Office.'

CNBC

That is exactly how it is, but investors apparently had a horizon this week that ended with the Friday afternoon drinks.

Until next week, happy Sunday!

Categories
AI crypto technology

The journalist who became a billionaire as an investor, quits

This week a couple of human interest stories stood out. The richest Welshman, Sir Michael Moritz, who as a journalist at Time was once blacklisted by Steve Jobs, left Sequoia Capital after nearly 40 years. And while CEO Sam Altman traveled the earth meeting world leaders, OpenAI turned out to be led by Mira Murati, a virtually unknown 35-year-old Albanian woman.

Image: Midjourney. Prompt: man with gray hair walks away, San Francisco skyline in background.

The little kingdom

The first time I came across the name Michael Moritz was in 1992 when Frans Straver, with whom I would later found Planet Internet, and I were graduating together from the University of Amsterdam on the sexy subject of "success and failure factors of interactive media in the consumer market. At that time, only mustachioed accountants had computers and only the bigger drug dealers used cell phones.

If you were looking for a serious book about the computer industry, there was nowhere to turn but the American Book Center in Amsterdam. There we found the fantastic book, which by then was almost a decade old, by Moritz, entitled "The Little Kingdom," about how Steve Jobs developed the Mac at Apple in the early 1980s.

"So much of what has happened is connected to Apple and the story of this extraordinary company that I find that Apple's breadcrumbs have been strewn across my life's path," said Moritz, who regrets that he never settled his spat with Jobs before his death. The book planted the seed in Frans and me that it was possible for two young guys to set up a successful company in the technology world, something we had never considered until reading Moritz's book.

Of course, when I moved to America in the late 1990s for my next startup after Planet Internet, Moritz was the first investor on whose door I knocked. Tried to knock on the door actually, because I never got beyond the inbox of the intern of the assistant of the junior associate at Sequoia who kindly declined me. Later I understood that Sequoia, and Moritz in particular, received thousands of business plans a year during that dotcom boom but made only a few dozen investments.

From Airbnb to Zoom

Michael Moritz was born in Wales to Jewish parents who had fled the rise of the Nazis in Germany. He was stationed in San Francisco for many years as a Time journalist and wrote widely about the world of technology. Don Valentine, the founder of Sequoia and the man who invested in Apple, Atari, Cisco, Oracle and Electronic Arts, among others, saw something in the British journalist and offered him the chance to work as an investor.

Over the next 38 years Moritz worked for Sequoia, the investment company strung together successes. Under his reign, Sequoia invested in virtually every company whose apps we have on our phones or computers today, or which we use for work directly or indirectly, including Google, Dropbox, Linkedin, Yahoo, Airbnb, PayPal, Instagram, YouTube, Whatsapp, Nvidia, Zoom and OpenAI.

In one of his rare interviews, Moritz said:

"One of the things that is undervalued in our industry is how much you can learn from someone decades younger than you. Those are the people who might go on to do unusual things; they understand something very well, are independent thinkers and obviously smart and gifted."

Early this century, Moritz also initiated Sequoia's lucrative expansion into China. He was chairman of Sequoia from the mid-1990s until 2012, when he relinquished day-to-day management of the company due to "a rare medical condition that is treatable but incurable." Still, he remained a partner of Sequoia until his announced departure this week.

In recent years, Moritz apparently focused more on e-commerce and led Sequoia's investments in Stripe (estimated valuation $50 billion), Klarna ($6.7 billion), Instacart ($12 billion) and Getir ($6.5 billion). He will gradually transfer positions on the supervisory boards of those companies.

A hefty crank start

Forbes estimates Moritz's wealth at $5.2 billion, thanks largely to his holdings in Internet companies. Moritz and his wife donate most of it to charities, mainly through their own foundation, Crankstart. They are in quite a hurry to do so, judging by the report on the website:

"In 2022, we awarded $200 million in grants, 60 percent of which were to nonprofit organizations in the San Francisco Bay Area. The grants ranged in size from $1,000 to $18,500,000 and went to 363 organizations."

Other eye-catching donations included $20 million to the American civil rights movement ACLU, $50 million to his alma mater the University of Oxford, and no less than £75 million to the same university to spend on scholarships for children from low-income families. Moritz had not lost sight of the fact that he himself had once enjoyed a scholarship.

What I personally found remarkable was that Moritz is funding the famed literary Booker Prize through Crankstart for at least five years, after the previous sponsor pulled out. But unlike that sponsor, Moritz did not want to attach any name recognition to his donation because he and his wife believe that the Booker Prize is a prestigious award that should be associated with the name of the prize, not the name of the sponsor.

The similarities between Steve Jobs and Sir Alex Ferguson

In 2009, Moritz released a revised version of his book on Apple entitled "The Return to the Little Kingdom: Steve Jobs, the Creation of Apple and How It Changed the World. The book remains highly recommended for anyone interested in innovation and creativity.

To my surprise, Moritz, still a die-hard Manchester United fan despite having lived in San Francisco for nearly half a century, wrote a book on leadership with legendary manager Sir Alex Ferguson in 2015.

In an interview about that book, Moritz shared some observations about the similarities between Steve Jobs and Sir Alex:

"When it comes to leadership, I think there are similarities. In their own way, they are both perfectionists. With Sir Alex, I was looking for a way to explain what I think are the basic principles of good leadership. I don't think they are very different between Silicon Valley and the soccer field, and they are universally applicable. The problem with the principles of leadership is that they are pretty easy to list, but very difficult to apply.

Sir Alex, Steve, they both had the energy to consistently push, urge, persuade others toward a goal that they themselves envisioned. I think the big difference between management and leadership is that the leader can persuade people to do the impossible."

Time for a new book?

Things get even more interesting when Moritz shares his own investment criteria. "When I want to invest I start with a market opportunity, because if a company starts in a market that looks unchanging and doesn't look like it's going to grow, it's not going to be a great company. Furthermore, we are looking for people who are completely obsessed. People who love nothing more than to work on the product or service they have come up with."

In the Netherlands, many investors employ the archaic cliché "it's about the guy, not the tent"; but Moritz cites as the first criterion precisely a large market, prone to change. That's an interesting angle. A top entrepreneur in a small market is not so interesting in this view.

And that begs the question of whether Moritz, time and health permitting, would like to write a book for the first time sharing his own views on entrepreneurship, innovation and leadership, rather than writing about people like Jobs and Ferguson.

My favorite book for tech entrepreneurs is "The Hard Thing About Hard Things: Building a business when there are no easy answers' by former entrepreneur Ben Horowitz, now best known as co-founder of venture capital firm Andreessen Horowitz.

Horowitz is an exception, because just as many former top athletes turn out to be bad coaches, few successful entrepreneurs manage to develop into good investors. Let me stick to myself: when people ask me for advice on investing, I always reply that although I worked as an investor for many years, I never said I was good at it. That's why I became an entrepreneur again.

Moritz, now knighted Sir Michael, has no entrepreneurial experience whatsoever. Apparently, that was no impediment to achieving extreme success as an investor. It is high time someone with his amazing track record, huge network and sharp pen, shared his knowledge and experience in the form of a new book.

The driving force behind OpenAI is a 35-year-old Albanian woman

Founder and CEO of OpenAI Sam Altman visited as many as 22 countries in recent weeks including Israel, Jordan, Qatar, the United Arab Emirates, India, South Korea, Japan, Singapore, Indonesia and Australia. Altman met with students, venture capitalists and leaders including Indian Prime Minister Modi, South Korean President Yoon Suk Yeol and Israeli President Herzog. Earlier in his trip, Altman met with British Prime Minister Sunak, German Chancellor Scholz and French President Macron. (Remember, with dark brown shoes?)

The subject of all the conversations was the question: can AI be trusted, or are government measures needed? So it was instant news when Reuters saw Friday on the LinkedIn page of OpenAI's "Trust & Safety Leader" Dave Willner that he had left quietly after a year and a half. Willner talked about family reasons, which of course is possible.

But I also note that according to his LinkedIn profile, with 18 months of employment, Willner has already secured a sizable number of options in OpenAI, which at the estimated company valuation of $27 to $29 billion for OpenAI are worth enough that the Willner family's life would not be significantly improved if he stayed with the company for another year or so. After all, the difference in quality of life between earning 10,000 Euros or 20,000 Euros is far greater, than the difference between 10 million or 20 million in the bank.

Until a successor is found, Willner's team (apparently there is a Trust & Safety team at OpenAI) is managed by the CTO, Mira Murati. Who is this woman, who is still completely unknown on ChatGPT itself?

Mira Murati? Doesn't ring a bell, ChatGPT says of its own boss.

CEO Magazine came out with a portrait of Mira Murati last week. Although, portrait; from the lack of a posed photo and the absence of literal quotes from Murati, it may be concluded that she had not collaborated on the article.

Although Murati is unknown on her own ChatGPT, the competitor, Google Bard, does have some information about her:

"Mira Murati is the Chief Technology Officer of OpenAI. She is a brilliant engineer who has worked on several AI projects, including ChatGPT, Dall-E and Codex. She is also an advocate for the regulation of AI because she believes it is important to take precautions to prevent the misuse of AI.

Murati was born in Albania and studied mechanical engineering at Dartmouth College. She then worked as an intern at Goldman Sachs and Zodiac Aerospace before joining Tesla as Senior Product Manager of the Model X. In 2016, she joined Leap Motion. In 2018, she joined OpenAI and was promoted to CTO in 2021."

There are several things remarkable about this. First, Murati's description on Bard is almost literally identical to the one in the CEO Magazine article. That raises the question of which source had the original information and which source clumsily copied it? It's fodder for lawyers in the AI world, where real and fake or original and copy seem completely interchangeable.

Second, Murati must be something of a prodigy, because it is rare for someone with the study of mechanical engineering to make a career in software so quickly. One study is about how, for example, the Tesla X is put together, the other about the software that makes the car self-driving.

Third, it appears that Murati moved to Canada from Albania at the age of 16. I asked Bard if Murati moved alone, or with her parents. Bard replied that 'Murati and her husband Sokol fled to Canada with their two children in 1993.' But in 1993, Mira Murati was five years old, which is also on the early side in Albania to have already started a family. In short; there is still a lot to improve on Google's AI activities.

Murati and Moritz: America first

There is a striking parallel in the lives of Mira Murati and Michael Moritz. Both came to America from a small European country, where they had the opportunity to expand their knowledge at excellent universities and then to exploit their potential in top companies.

I am not saying that every Ethiopian is a potential top entrepreneur or that there is a brain surgeon hiding in every refugee from Aleppo, but in the month when a cabinet falls in the Netherlands over a few thousand additional immigrants a year, I do argue for a rational immigration policy. Europe is old, so is Asia; several continents are aging rapidly. At the same time, there are people in previously unexpected places who can contribute much to the world, if only they are given the chance.

Of course, my perspective is colored, because I too once came through an exchange and scholarship from Amsterdam to a university in San Francisco, where I first saw the Internet. Moritz and Murati came to the San Francisco Bay Area from Wales and Albania. But where in Europe or Asia would they have been as welcome as there? And where would their origins play such a minor role? What European or Asian venture capitalist would give a journalist a chance as an investor, or a young Albanian woman the technical leadership of a billion-dollar company like OpenAI? That should make entrepreneurs, voters and policymakers think.

Spotlight 9: Ripple continues to amaze, but for how long?

The chart is not upside down; there were only declines among the leading investments in the tech sector except for Ripple.

It was a week full of sadness and gloom in the tech corner of the stock markets. But where I expected a correction to Ripple's huge price jump after last week's court ruling, XRP remained fairly stable while the other major crypto currencies, Bitcoin and Ethereum, both fell.

So I downloaded from Coinmarketcap the XRP price data for the last 30 days and asked OpenAI's Code Interpreter to plot the price against trading volume. From there, this interesting graph rolled out:

The red line indicates the trading volume, the blue line the price.

Trading volume in XRP has declined dramatically over the last week, following a huge spike in the days immediately following the court ruling. The falling blue line representing the price now parallels the red line of falling trading volume.

That means the price can no longer be driven by increasing demand. Investors who believe in XRP are holding on. But not enough new buyers are entering the market at the current price to offset the number of sell orders. A further correction of XRP seems inevitable.

And bad news for crypto enthusiasts: anyone who bought XRP a year ago should certainly be happy with a 105% rise. But that's still a lot less than the 160% price jump Nvidia made in the last year, driven by the AI hype that requires strong processors.

Notable links this week

The White House on Friday invited representatives of seven leading companies in the AI field and announced a covenant of sorts with them, in which the companies pledged, among other things, to add digital watermarks to their systems. (So if all goes well, we'll soon know who had copied the text from whom about Mira Murati: Bard or CEO Magazine?)

The participating companies have been regular topics in this spot in recent weeks, namely Microsoft (with Bing), Google(Bard), OpenAI(ChatGPT), Anthropic(Claude), Inflection(Pi), Amazon and Meta(LLaMA).

In effect, Meta is thereby acknowledging OpenAI's lead and, by making its technology open source, hopes to attract so many developers from outside the company that it can still catch up with LLaMA 2. A smart strategy by Meta, which is distinctive from the closed AI platforms of OpenAI and Google.

It continues to be amazing how quickly AI applications are improving. After text and photos, now it's video's turn, and Twitter user Nathan Lands shared a nice overview.

Two weeks ago, I described my doubts about Mark Zuckerberg's jubilation about his new app Threads, the AliExpress version of Twitter. Granted, because of Instagram's installed base, hundreds of millions of people will try Threads. But the app is too sloppy, boring and predictable to generate much repeated use unless improvements are made to the app quickly.

This journalist explains in great detail all the shortcomings of Threads. A good point: why is there only an app for cell phones and Threads cannot be used on a computer, if the platform is about text messages? I wonder how long it will be before the first significant updates are released by Meta, because it would be good if a serious competitor to Twitter emerges.

Christopher Nolan and Hoyte van Hoytema literally and figuratively make great films

In all the digital opulence, film writer and director Christopher Nolan is a blessing. He filmed the masterpiece Oppenheimer on 70 millimeter IMAX film and does not use Computer Generated Images (CGI) in his films. This video shows how the film is literally pasted together from fifty-three rolls of film of three minutes and twenty-four seconds each. In total, the film, which has a duration of three hours and nine seconds, is 17.7 kilometers long and weighs 272 kilograms. That's another entertainment experience than watching Love Island on your iPhone.

Nolan finds CGI "too safe, the image does not seem to contain the threat of, say, a real explosion, however small. He shoots on film because it most closely resembles the image the human eye perceives. That and more can be seen in this video in which Robert Downey Jr and Christopher Nolan answer the most frequently asked questions on the web about them.

For those of you who are going to see Oppenheimer in theaters next week; go to the IMAX and I'd love to hear how you liked it.

Happy Sunday!

Categories
AI crypto NFTs technology

Two Dutch startups with a global market

I don't normally write about my own work, preferring to try to share background, tips and insights that I hope will be of use to you as a reader. But because it is often asked for, this time I like to tell you about two investments I am excited about. Of course, I also cover notable things in the tech world, such as the jubilant crypto world about Ripple, Elon Musk's new AI company, traffic jam dodging by drone and Lionel Messi's deal with Apple. But now first, iXora and Unveil.

Ede-based iXora has developed a form of liquid cooling technology(immersion cooling) that allows data centers to save more than 30% in energy and space, because it eliminates the need for fans as with the usual air cooling of computers. And the latest generation of chips gets so hot that air cooling becomes too inefficient and expensive, but also socially unacceptable given the CO2 emissions. That makes the market potential of iXora huge worldwide.

Amsterdam-based Unveil links top photographers to collectors through its own marketplace based on blockchain technology. Through a careful curation process, collectors worldwide find new high-quality work in a user-friendly way. Collectors can buy the physical work, a print, a digital version in the form of an NFT, or both. Unveil can play a crucial role in the explosion of AI-generated fakes; it guarantees authenticity.

I have previously worked with these entrepreneurs with great pleasure and success, their companies are forerunners in fast growing global markets and sustainability is an important part of their proposition. And not unimportantly, there is also an opportunity for you to participate as an investor even with a small amount, whereas this is usually reserved only for vc funds with very deep pockets.

Please note that this is not an advertisement for investing in these companies. I explain what my considerations were for investing, but I want to emphasize that investing in startups has the very highest form of risk. Simply put, my advice is: only do it with money you could lose. And above all, do it because you support the companies' goals.

Why does Warren Buffett store in the Veluwe?

Earlier this year at CES in Las Vegas, iXora signed a licensing deal with the American company Lubrizol, a subsidiary of Berkshire Hathaway, the investment company of the legendary Warren Buffett. Why would such a global player license technology from a Dutch startup?

Hypotherm Rack Management (HRM) from iXora. Server in and done. Crucial: fits into a standard 19-inch rack, the standard in data centers worldwide.

The answer is that huge demand for energy-saving solutions has accelerated worldwide since de Russia's invasion of Ukraine the helmeted Russian neighbor visit. On top of that, energy consumption in data centers plays an extremely large role, because next to real estate and equipment, energy costs are the biggest expense. Data centers are still full of energy-guzzling fans, which will become obsolete with iXora's liquid cooling.

When using the iXora solution, a data center can accommodate more servers per square foot, with lower energy costs and therefore a reduced carbon footprint. Add to this the huge increase to cloud and streaming services in recent years and the current explosion of AI applications, making it irreversible that heavy server-intensive applications will dominate the market. Conclusion: immersion cooling is hot.

Own experience with data centers

My personal experience with data centers goes way back, for example, I was a very satisfied customer with Flabber and 925 for many years with the innovative hosting company True. (Jort Kelder and I even shot a lightly humorous movie in their data center 15 years ago.) So when True founder Vincent Houwert, after selling True and some wanderings in the Caribbean, couldn't resist getting back into business and started iXora, I was immediately interested.

With Planet Internet, I have been a customer and reseller of data center services for many years, and in the process I have experienced, through trial and error, how complex data centers operate. Although it is a multi-billion dollar business, it is one in which every dime is turned over. I always compare data centers to drinking water from the tap: everyone needs it and uses it, but every penny spent on it is a penny too much so the margins are thin.

Data center owners hate risks and opaque investments. This is precisely why I find iXora so interesting: it is the only party in the world that enables immersion cooling in the existing infrastructure of a data center.

In a billion-dollar market, of course, there are plenty of competitors, but they either only cool the chip, leaving the rest of the motherboard to give off heat and fans remain necessary, or their solutions require the installation of entire jacuzzis into which the servers are submerged.

But I know from experience that data center owners have a huge aversion to this kind of geekiness, because there is a chance of leaking fluids into their data centers where miles of cables run under the raised floors. And no one wants to use robotic arms to hoist a server out of such a bathtub, which is necessary just to replace a simple hard drive.

iXora's solution is deliberately designed for easy installation and maintenance. Nothing robotic arm or bathtub: an iXora chassis fits into the globally common 19-inch rack, and anyone who can lift a computer can slide a server into an iXora HRM.

The team knows the customer

That simplicity in the solution is rooted in the experience of the iXora team, which has literally and figuratively grown up in data centers. Besides inventor Vincent Houwert, who previously founded hosting company True, iXora's founders are CEO Job Witteman, previously founder and 17-year CEO of the Amsterdam Internet Exchange AMS-IX, and CCO Vincent Beek, who has decades of commercial experience in the international technology world. And Erwin Bleeker joined iXora in February as Compute Specialist after spending a few years at Dell explaining how a data center works ;-).

iXora webinar Thursday, June 20

More information about the opportunity to participate in iXora is in this two-page summary. Investing is possible from as little as €5,000 and depending on your contribution there is a bonus of up to 30%. If you want to know more about iXora, I recommend watching the webinar next Thursday, July 20 at 8 p.m. in which CEO Job Witteman explains what iXora does with immersion cooling. why it is important for the world and how you can contribute to .

The Manhattan Project by Andrea Camiolo. Unveil guarantees the creator and the number of copies, in this case a series of three.

Unveil cures what is real, in the age of fake

I write a lot about AI because it is the market in which the most progress is currently being made, with the largest potential market, which is virtually every earthling. At the same time, I worry about how AI will make it possible to manipulate all forms of sight and sound.

As you may know, I have a great love for photography, a passion that unfortunately comes with a commensurate lack of talent. My former colleague Alexander Sporre with whom I worked at business site 925, though, is a talented photographer. But Alexander is also a talented entrepreneur, and he and a number of partners have jumped into a big hole in the market with Unveil.

I believe in Unveil's proposition, in the explosion of AI-generated photos, to act as a beacon and marketplace of originality and authenticity.

What makes Unveil unique?

The developments in the field of AI are so rapid that there is a huge need worldwide for an independent party to guarantee the authenticity of digital work. Without such an independent party as Unveil, it is already no longer possible to tell whether a photo is real, or generated with AI.

Third generation marketplace

I see Unveil as a third-generation marketplace. In the first form, marketplaces were generic, think Marktplaats in the Netherlands and Craigslist in America, with a large unfiltered supply. (Both, by the way, bought by eBay for hundreds of millions.) The second generation marketplaces were a curated part of a large generic offering, think Uber Black and Airbnb Plus, or the Dutch Catawiki, effectively a curated version of eBay. 

In the latest generation of marketplaces, of which Unveil is a forerunner, you will only see a carefully curated, high-level offering with a select small group of providers, who are often exclusively affiliated with a platform. Unveil has already attracted over 1,500 photographers, including a large number of top international photographers such as Bastiaan Woudt and Paul Cupido.

Global market, always traceable

Unveil connects digital art with physical prints on the blockchain, making art photography traceable as a globally tradable product, with the goal of providing royalties to the creator on the one hand and guaranteeing to the collector that the work purchased is authentic, with guarantees about the number produced. This solves a huge problem worldwide.

Proven business model: marketplace

From a financial perspective, it is crucial that the business model of a marketplace is proven and highly profitable, especially in this market, based on a 12.5% commission. Such a solid commission combined with the prices that renowned photographers receive for their work offers very good prospects for Unveil.

The team

Besides Chief Product Officer Alexander Sporre (ex-Richemont, co-founder Stories, art photographer), Unveil's founders are also Chief Commercial Officer Titus de Jong (ex-Salesforce, ex-HP) and Chief Creative Officer Julian Mollema (award winning designer, Ex-Build in Amsterdam). All entrepreneurs with a solid track record in their respective fields. Crucially, there is also a lot of interest in Unveil from the art world. For example, the Head of Photography at Sotheby's EMEA has joined Unveil's Advisory Board.

Participating in Unveil

More information about the opportunity to invest in Unveil is in this two-page summary. If you would like to learn more about Unveil, I would be happy to put you in touch with the founders.

Spotlight 9: Judge finds XRP is, oh no it's not, an investment

Every week in this column, I go over the highs and lows of the most important assets in technology. Never before has the financial world been so dominated by crypto news as it was Thursday, when an early global happy hour erupted in the cryptoscene following a U.S. judge's incomprehensible ruling in the case brought by the SEC against Ripple Labs.

Imagine if XRP had won the case outright....

The judge ruled that Ripple Labs' sale of the XRP cryptocurrency to institutional investors violated securities laws. But, the judge said, there was nothing illegal about the sale of XRP by Ripple Labs to individual traders on crypto exchanges. As if professional investors need information, transparency and protection but consumers don't?

This schizophrenic statement was not understood outside the crypto world. "Securities laws are designed specifically to protect individual investors, based on the idea that they cannot stand up for themselves," James Carlson, an adjunct professor of securities regulation at New York University, told The Information. "Large institutional investors don't need the protection of securities laws. This ruling effectively turns that philosophy on its head," Carlson said.

"Securities laws are designed specifically to protect individual investors, based on the idea that they cannot advocate for themselves. Large institutional investors don't need the protection of securities laws. This ruling effectively turns that philosophy on its head."

James Carlson, New York University

Chance of 'boiler room' fraud

The implications of this part of the ruling are troubling. As Carlson said, "The potential for 'bucket shop' or 'boiler room' fraud is alarming." Think of the Wolf of Wall Street in a black crypto t-shirt. Carlson outlined a scenario in which a crypto company issues tokens to large institutional investors, who are given detailed information required by securities laws, but then resells them through crypto exchanges to individual traders, who are not given this information. The decision is likely to be appealed, so this may not be the end of the story. 

XRP rose nearly 80% within a day, gave back some of the gains over the weekend but still rose nearly 50% in the last week.

It remains a madhouse in AI

It had been coming for a while: Elon Musk has entered the AI battlefield with x.AI and has become CEO of his third company, in addition to Tesla and SpaceX, Musk's space company that was valued at a whopping $150 billion in a private sale last week. The man may have driven on a few blocks past the "eccentric" exit, but it's still mind-boggling how he combines it all. The goal of x.AI is "to understand the true nature of the universe." Musk talked more on Twitter about the goals and possible collaboration with Tesla, shared few details. To be continued, no doubt.

That doesn't head nicely, but with Code Interpreter, ChatGPT can analyze data, create graphs, solve math problems and edit files, among other things. It also supports file uploading and downloading, which previously was not possible in ChatGPT. Wharton professor Ethan Mollick, author of an excellent newsletter by the way, says Code Interpreter can do things he used to spend an unimaginable amount of time on.

I did a little test by downloading a .csv file of XRP price data on Friday and asking Code Interpreter to display the key information from it in a graph. I found the result amazing, especially since Chat GPT is text-based and until recently the output was also limited to text. So not anymore because Code Interpreter spit out three relevant graphs within seconds!

Code Interpreter from ChatGPT generated these graphs from a .csv file I had uploaded. Saves a lot of time and effort!

Anthropic, which raised just under half a billion dollars from investors in May, launched a new version of their Chat GPT competitor Claude.ai. Decrypt makes a good comparison between Claude.AI, ChatGPT and Google Bard. Officially, Claude is only available in the US and UK, but with a good VPN it works fine. I'd love to hear who experiences major differences between ChatGPT and Claude, personally I see little difference in quality.

In conclusion

My favorite guru Gary Vaynerchuk doesn't think Threads is a Twitter-killer either, but points out that it could attract a new audience. Just try it, he advises. For now, my feed on Threads is still filled with second-hand posts from Instagram.

In 2014, I got to know Taco Carlier of VanMoof when we spent a week together walking around SXSW. Apart from being an incredibly nice guy with whom I have a pleasant contact to this day, I find the news about a possible bankruptcy of VanMoof very sad because the company was the big booster of the e-bike as a replacement for the car.

In my experience, integration of all components into a hardware product is extremely complex, Taco and I talked about that several times. He mentioned Tesla as an example of almost complete vertical integration. But crucially, what do you do at the moment when a product continuously fails and you experience quality problems to such an extent that customers become dissatisfied and the service department is overwhelmed. I won't bore you with stories from the old box about the woes called ISDN that I had to contend with, in the transition era between modems and broadband, but sometimes you have to dare to kill a product to survive as a company. Hopefully Vanmoof will survive the current malaise.  

In other electric transport news, it was noticed that Lee Soo Man, founder of Korean K-pop institution SM Entertainment, invested $23 million with partners in passenger transport via drones. The EH216 can carry two passengers and flies without a pilot, leading to extraordinary videos. Just too bad about that bombastic music, therefore here, from SM Entertainment's stable, Red Velvet with Future, theme song from the popular Korean series Start-Up - yes, about Internet startups.

The high-quality sports site The Athletic (acquired last year by the New York Times, which last week dissolved its entire sports editorial staff) produced a nice long read about Lionel Messi's transfer to Miami, made possible by Apple. It remains extraordinary that Messi is the only player to benefit from the growth of subscribers to Apple TV+'s MLS subscription. The question looms as to when Apple will move more seriously into sports entertainment and move to acquire more sports rights, such as the Premier League, the NFL and the Olympics. And whether there will be more athletes then who will directly share in subscriptions to streaming services, separate of their clubs or leagues.

I want to reiterate that investing in startups carries the very highest form of risk. However, I did want to share my considerations for investing in iXora and Unveil. But simply put, my advice is: always do it only with money you can afford to lose and only in companies whose mission you support, then you will enjoy it the most. Profits remain uncertain.

I can't resist playing with MidJourney. This image is a combination of a photo I had uploaded, with an image generated by MidJourney.
Result of the prompt in MidJourney to put an iXora HRM in a room like the final scene from Raiders of the Lost Ark. Looks more like a Transformer on steroids.
Categories
AI technology

Threads is the AliExpress version of Twitter

Threads, the intended Twitter-killer from Meta, the parent company of Facebook, Instagram and Whatsapp, is out and I spent all of Saturday morning trying to figure out what's special about it. The answer is: nothing. With virtually unlimited resources, Mark Zuckerberg has managed to develop an extremely limited product.

Investor Fred Wilson rightly notes the importance of Twitter getting competition, and that it is positive that Threads has announced that it will support the open source protocol ActivityPub. That would mean that if a Threads user leaves Threads, it would be fairly easy to switch to another server that also supports ActivityPub, such as Mastodon - or hopefully another, more user-friendly variant than that app, which they would have been better off calling Masochist.

So in theory, a Threads user has "account portability" and is not forever stuck in the endlessly branched rabbit holes that Zuckerberg is trying to dig from Facebook, Instagram, Whatsapp and Threads. Only ... there is no support at all for ActivityPub in Threads yet. That's like a car manufacturer proudly announcing at the introduction of a new car that safety is paramount, but brakes won't be installed until the next model.

How fun, good or useful is Threads?

To use Threads, you must have an Instagram account. Yet every Threads user gets a number under their Instagram account with a link to the Threads account. Why? You already have a name for your Instagram account, so why do you get a number on Threads? (Leaving aside the fact that for people with any sense of history, the ostentatious display of a personal registration number evokes unpleasant associations.)

Zuckerberg likes to make human products, according to user eighty million four hundred and forty-four thousand two hundred and forty-nine

Of course, there is only one reason for this and that is that Zuckerberg wants to shout from the rooftops that you are not alone on Threads, that there are over 80 million people who have already created an account. When I created an Instagram account a week after Instagram launched in October 2010, I was already happy to see a few cute pictures made by other people. It took almost three months for Instagram to grow to one million users. For that time, that was tremendously fast.

Threads, through the roughly two billion Instagrammers, is going to get hundreds of millions of users very quickly who, like me, are going to take a look at what it is and how it works. But the question is how often and how intensively Threads will be used. The reason I am hardly active on Twitter anymore is the bickering of predictable people. Under the reign of Elon Musk, that trend only seems to be encouraged, and that leaves room for Meta to launch Threads successfully.

So, what is the experience of spending a morning on Threads?

  • Although I have already accepted my followers on Instagram, I have to do this again on Threads and then one by one. My Instagram account has been on 'open' for a while now and anyone who would like can follow me. But on Threads I have to scroll and tap my way through a blood blister because the application is only available as an app on your phone, and I even have to confirm that my own brother is allowed to follow me. Although we have confirmed each other as brothers on Facebook.
  • So what is the point of the Instagram link and the fact that Threads is part of the Meta Empire? As a user, I get little benefit from it. The integration of all data within Meta is solely to feed Meta's ad engine with additional data about users, not for better usability for average brothers.
  • There is no chronological timeline so I can get a "live" sense of what people are talking about, which is precisely Twitter's strength. On all of these crucial aspects of a good user experience, Instagram boss Adam Mosseri, also responsible for Threads, says it is being worked on. By the way, he says that on Twitter, not on Threads.
  • I haven't noticed it myself, but it's been widely complained that Threads posts in your timeline from accounts you don't follow at all. It could be that these misery 'feature' will first be tested in the U.S. before being unleashed on the world. Of course, Meta is trying to use this to keep the user hooked for longer in a way copied from TikTok.
  • Most of the posts in my timeline on Threads consist of photos. Often the same photos that the account owner has previously posted on Instagram, and since I have added everyone I follow on Instagram on Threads as well, I feel like I am watching a repeat. Not a pleasant experience.
  • Threads is currently a muddled product in which text and images are mixed in an unnatural way. This is to be expected since the vast majority of users come via Instagram, which is not a conversation or discussion platform like Twitter was in its best days.
  • Unlike Instagram, where filters can be laid over photos that smooth out wrinkles so well that even miss Piggy can look like Jessica Rabbit, there are no filters that make text messages on Twitter or Threads smarter or more fun. So it quickly becomes chatter or complaining.

Vice already concluded that Threads combines the worst of Twitter and Instagram into a hopeless product. Meta' s only selling point for Threads is that it should be a text platform not called Twitter.

The upside for Meta is that Instagram has a huge installed base and hundreds of millions of people will try Threads. The downside is that turning image-sensitive Instagram users into text-producing Threads people will be about as natural as making a shot putter run.

For now, Threads will not be a threat to Twitter in terms of usage, audience and form of communication. The number of accounts will be huge, but usage relatively infrequent. It simply adds too little.

The social media hierarchy in which there is no room for Threads

Threads chief Mosseri, by the way, claims that Threads' goal is not to replace Twitter, either. No, the noble goal, according to Mosseri, is to "create a public square for communities on Instagram that have never embraced Twitter and for communities on Twitter and other platforms that are interested in a less angry place for conversations but not all of Twitter.

Apologies, there I am again, I was away for a while; I was sitting barefoot with self-picked buttercups in my hair, connecting with the earth, while already tree-hugging, reciting a sonnet to the universe. That is how much I liked this description of "a public square" on Threads.

Zuckerberg's real goal with Threads

Let's ook at the larger problem facing Zuckerberg. The press release announcing the 2022 annual results says, among other things, this:

  • Meta has over $40 billion in the bank
  • revenue for 2022 was $116 billion
  • but... 'the average price per ad decreased by 16% year-over-year'

And there we are at the core. Because the total number of users of Facebook, Whatsapp and Instagram is still growing only a few percent per year, and revenue per ad is falling many times more sharply.

With Threads, Zuckerberg has two goals: first, to create a new platform through which to sell more ad space, even though the estimated revenue of, say, Twitter this year at $3 billion is a decimal rounding for Meta. No doubt Zuckerberg thinks he can get a much higher revenue per user on Threads, than Musk does on Twitter. Advertisers are not eager to advertise next to a discussions about politics. It just doesn't sell well.

But with the wealth of new data that large scale use of Threads could provide about its users, Zuckerberg hopes to make his real move and charge higher ad rates; because with the heightened privacy requirements that Meta is facing, especially in Europe, unscrupulous selling of user privacy as in Meta's current business model is becoming increasingly difficult.

This is also the same reason why Zuckerberg is trying to pressure the EU to adjust the regulations for Meta. And one way he is doing that is by not yet releasing Threads in EU countries, referring to the "unclear regulations on the use of data across multiple platforms.' Because that's what Zuckerberg is all about; he wants to fill each user's social and interest graph as richly as possible for his advertisers. But Europeans can rest assured: you really aren't missing anything from Threads.

Threads doesn't want discussions about news, because advertisers don't like that, so here is our puppy Nala.

$40 billion in the bank and Zuck makes the AliExpress version of Twitter

It's intensely sad. Zuckerberg still has nearly 80,000 employees after all the rounds of layoffs, including an army of talented programmers. Combine that talent with that $40 billion in the bank and there are every opportunity to develop a new, beautiful product. But what is the result of its first self-developed product in nearly two decades?

No more than a slapdash version of Twitter, which in itself is a waste of Elon Musk's talents. I still hope for once that man gets angry about Alzheimer's, cancer and mental health of humanity and uses his talents to solve those problems, for example with a biotech company. Musk has mastered development of software, hardware and mechanical innovations, how difficult would biotech be for him? That would be really fascinating to follow.

Zuckerberg stable borrowed the idea for Facebook from his friends co-founders, bought Instagram for $1 billion, Oculus for $2 billion and Whatsapp for $19 billion. Nice detail: Ukrainian Jan Koum, founder of Whatsapp, who emigrated to the U.S. at the age of 16, signed that sales deal from which he himself made just under $7 billion, for the office where he once got his food stamps received.

Zuckerberg has grown from a creative programmer to an experienced CEO. Only not from a technology company that develops its own valuable solutions, but from a private equity fund that copies or buys other people's ideas. Then all the talent from the acquired companies leaves, though that voluntary departure cost Whatsapp's Brian Acton no less than $850 million. Surely Zuckerberg must ask himself at times why such talent is so eager to leave Meta?

Instagram Stories was a total imitation of Snapchat but at least it worked fine. Threads, on the other hand, looks like a loveless, hastily made product. I hold out hope that one day Zuckerberg will rediscover himself as the leader of a team of talented developers and develop a beautiful, meaningful, original product. Threads is certainly not that; it is currently the AliExpress version of Twitter.

Talented YouTubers push boundaries

Speaking of meaningful, original products, two of my favorite YouTubers, Cleo Abram and Marques Brownlee, visited ZeroSpace in New York, a cross between a laboratory and a studio where the most extraordinary special effects are created where real and fake cannot be distinguished. What I found most extraordinary was the technique where up to six scenes can be shot simultaneously with different camera images(at 6 minute 11).

Cleo and Marques discuss a sensitive issue after Marques takes the guise of Cleo: what happens when every actor can be simulated by a computer and soon you won't know whether you are watching a real scene with fantastic acting, or a complete simulation? Will the Oscar for best actress soon go not to Meryl Streep, as it should, but to the programmer who generates the digital Meryl Streep from bits, pixels and audio clips?

Cleo's report is here and this is Marques' report. The wait is for a full movie with fake actors in a fake environment, but hopefully one with a good script because they remain difficult to write, even with AI.

Also check out this tour of Marques' $1 million studio, in which each room is set up to solve a specific video-making problem. If you have the idea that YouTubers are still making videos with a cap on backwards in their parents' attic in pajamas, be sure to check out the quarter-million-dollar robotic arm for making quick camera movements.

Midjourney update is impressive

Crunchbase summed up the bizarre first six months in terms of funding for AI companies well.Despite the billions invested in AI, the total amount invested in technology companies dropped a whopping 51% compared to 2022.

With the investment money in AI companies, extraordinary achievements are being made. Two weeks back, I wrote briefly about Photoshop's amazing "generative fill," which uses AI to add complete sections of an image in a way that is indistinguishable from the real thing.

Manu.Vision created this phenomenal combination of art and technology

As if Midjourney were not already stunning enough, that company has released an incredibly good "Zoom Out" update that enables such extraordinary images that designer Kalson Kalu has compiled a brilliant top 10 of them. This top 10 is also impressive. Here's a detailed description of how the Midjourney v5.2 update works and what else we can expect in the near future.

All Sequoia companies are working on AI

Investment firm Sequoia (Apple, Atari, Google, Instagram, Whatsapp etc) asked 33 of the portfolio companies about their developments in AI. The findings are very worth reading. As many as 65% of the companies have AI applications in production and 94% use a "foundation model API" such as Chat GPT from OpenAI to do so.

Character.ai's chatbots even lead to adventure games

Bloomberg came out Friday with this excellent article about character.ai, the maker of chatbots that was recently valued at $1 billion but whose usefulness escapes me for now. It doesn't help when the CEO then blurts out texts like "I joke that we're not going to replace Google. We're going to replace your mother".

The founders are AI experts who did very clever things at Google, so I still struck up conversations with various characters on character.ai including Einstein, a banana and Darth Vader. Copyright and other intellectual property infringement aside, one psychologist already pointed out the danger of allowing any willful leip with lots of free time to pose as a psychologist, like this chatbot.

Things got surprisingly funny after all when I struck up a conversation with SM64 Mario, the chatbot based on the Nintendo 64 Super Mario. The creator of this bot does more than chat, he asks you along on an adventure.

In my case, Super Mario said, 'help me save Princess Peach, defeat Bowser, and bring Peach back safely to her castle. We will also visit many different worlds, each with their own unique challenge.' Then the text appeared: Mario walks over to a painting, and enters the painting portal, inviting Michiel to come with him.

This implementation of a chatbot reminded me of a textual adventure, like the first MUDs thirty years ago when I was just getting into the Internet. Try it for yourself, Super Mario is waiting for you here.

Spotlight 9: Nvidia holds its own

After my longer analysis last week on the first half of what can be called a jubilant year so far for tech stocks, in crypto equally, this week was downright soporific. Everyone knows by now that Apple is worth $3 trillion and it seems like investors are banking on that exact market value.

It was a soporific week of technology trade shows

Yet the old adage "sell in May and go away, but remember to come back in September" does not hold true for the "chipmaker for the AI stars": Nvidia. Over the past month, NVDA shares rose more than 10% and its market value has increased to more than $1 trillion, to be precise, to $1,050 billion.

Right now, Amazon ($1.3 trillion) and Alphabet (Google's parent company, $1.5 trillion) are still worth a few hundred billion more than Nvidia, but if things continue like this, Nvidia could end the year as the third most valuable technology company in the world, behind Apple and Microsoft. No one could have foreseen that at the beginning of the year.

Categories
AI crypto NFTs technology

Why Mark Zuckerberg is trying to seem cool

The other famous ex of top actress Amber Heard, Elon Musk, and Meta top executive Mark Zuckerberg challenged each other to an MMA fight this week, aptly described by the Guardian as a megarich-weirdo cage fight.

Result of the prompt: 'three middle-aged white men in MMA fight, in an exploding nebula.'

That fight is obviously never going to happen, and it's downright pathetic that Airbnb chief Brian Chesky also tried to make headlines by proposing a bench-pressing competition for tech CEOs. Like a freshman wanting to tussle with two upperclassmen boys at a school dance. First, let the man reflect on how he managed to demolish the soul out of the inner cities of Barcelona and Amsterdam in a way that generalissimo Franco and that short tempered Eastern neighbor didn't even manage.

Meta-top guy Mark Zuckerberg is trying to appear cooler at the urging of his spin doctor, the English ex-Vice Prime Minister Nick Clegg (whose website, by the way, is identical to mine because we use the same template, one of us needs to do something about that). Zuckerberg previously appeared for nearly three hours on Joe Rogan's popular podcast, and recently Lex Fridman, whose podcast is always very engaging, laid out the red carpet for Zuckerberg for two hours and 42 minutes.

Cynics noted that these are probably not coincidental venues where Zuckerberg's rival Elon Musk is a frequent guest. Musk got into marijuana with Rogan, and I can see Zuckerberg wanting to top that by sucking the venom out of a live Amazonian frog during the broadcast in a Kambo ritual. Instead, the rivals exchanged some lame texts, Zuckerberg on Instagram and Musk on Twitter.

Herein lies precisely the crux of the problem. After all, Zuckerberg once bought Instagram but is not the founder; those were Kevin Systrom and Mike Krieger, who are currently causing a furor with their new company Artifact. Musk in turn bought Twitter for $44 billion. While the whole world is busy with AI, the gentlemen are anxiously trying to stay in the news with their products of a previous generation.

Musk visionary, Zuckerbergexecutive

Musk is a maverick to say the least, but undisputed as a visionary and entrepreneur. While he was not the founder of Tesla, he was one of its first investors. Musk is the driving force behind the development of electric cars worldwide. Without Tesla, for example, Mercedes would never have built the EQS or Hyundai the cheaper models. I have no idea whether SpaceX is useful or an unnecessary side effect of too much testosterone, but it is a phenomenal achievement for a software maker from South Africa to successfully set up a rocket builder in America that values itself at a whopping $150 billion, Bloomberg reported Friday.

Zuckerberg never gets this respect because the one company he built, partly because of the movie The Social Network, will always be remembered as invented by others. Facebook's success was in Zuckerberg's brilliantly created "timeline" product, the addictive way of organizing friends' posts in one place.

But before Facebook, there were social networks like Friendster and MySpace, or in the Netherlands, Hyves. Facebook is effectively a Habbo Hotel grown out of its strength. Zuckerberg bought Instagram ($1 billion) and Whatsapp ($19 billion), and that shows his gift as an executive, not a visionary developer.

Tip: Andreessen at Fridman

Which is why it was all the more embarrassing for Zuckerberg that Marc Andreessen was Lex Fridman's guest this week. Andreessen was the principal developer of the first graphical Web browser Mosaic, co-founder of the first major dotcom company Netscape and, with his investment firm Andreessen Horowitz, financier of over 300 companies, including not only hits like Airbnb, Coinbase and Pinterest, but also ... Instagram, Facebook and SpaceX.

Andreessen is 51 years old and has been respected as an entrepreneur, visionary and investor for 30 of those years. Anyone comparing the appearances of Andreessen and Zuckerberg at Fridman will be struck by Andreessen's much broader view of the role of technology in society than Zuckerberg, who seems to be able to view the world exclusively through very narrow Facebook glasses.

It is therefore no coincidence that Andreessen has invested heavily in OpenAI, currently the undisputed leader in AI worldwide. Neither Musk nor Zuckerberg plays any role in AI developments. I also refer again to the excellent, thoughtful piece Andreessen wrote about AI early this month, titled "Why AI Will Save the World.

What did Zuckerberg share with the world this month? Who posted an Instagram video of himself training with a world champion jiu jitsu. That's the new geek version of buying a Porsche 911 convertible in a midlife crisis.

McKinsey sharp about AI

In recent weeks I've written more than enough about AI, but so much is happening that I want to share a few more tips. First, a new McKinsey report on the economic potential of AI. I immediately confess that I have not meticulously studied all 50 pages, but the summary on page three is already highly recommended.

Cover photo exudes that signature McKinsey warmth, but the report is fascinating

The report concludes that GenAI could add "$2.6 trillion to $4.4 trillion annually" to the global economy, almost the economic equivalent of adding an entire new country the size and productivity of the United Kingdom to the earth ($3.1 trillion GDP by 2021). To prepare the report, McKinsey analysts surveyed 850 occupations and 2,100 detailed work activities in 47 countries, representing more than 80% of the global workforce.

(I repeat it almost weekly when it comes to the bizarre numbers in the AI industry: a Dutch trillion is a thousand times a billion; in English, a trillion is a "trillion" and a billion is a "billion. Those designations are as useful as the invention of the mile, inch and el).  

An example from the McKinsey report showing the meteoric development in AI:

'Claude, Anthropic's generative AI, in May 2023 was capable of processing 100,000 tokens of text, equivalent to about 75,000 words in a minute - the length of an average novel - compared to about 9,000 tokens when it was introduced in March 2023.'


So Claude's throughput increased from 9,000 words per minute to 75,000 words within two months! 

The Mistral.ai presentation of €105 million 

Last week I wrote about Mistral.ai, the French company that raised the highest funding ever from a European company in a first round, at €105 million. That made me curious about the presentation used for investors, and it is now here.

Notable is the format, a Google Doc, and the total lack of illustrations or photos. It reads more like a seven-page white paper from academia and the crypto industry. (Incidentally, Mistral.ai's seven-page memo is exactly one page shorter than the Bitcoin whitepaper, which reminded me of the famous "7-minute abdominal workout" from Something About Mary. We are waiting for the first entrepreneurs to raise over 200 million with six pages).

Motivate yourself with yourself, went wrong

Speaking of gut training; I stumbled upon this tweet explaining how to use MyShell to create a chatbot using your own voice. The point of talking to yourself is completely unclear to me, but of course I immediately recorded a minute of my own ramblings in accordance with instructions using the Voice Memo app on the iPhone, uploaded it to MyShell and gave some character descriptions to my robot twins like "eternally positive, motivating and not cynical.

In short, my chatbot was especially not supposed to look like me but nevertheless, after the very first question, I disliked my own AI chatbot.

My AI chatbot twins are particularly irritating, and you haven't heard the voice yet

Unfortunately, or fortunately, I cannot include the voice of my chatbot in this newsletter, but let me summarize it this way: the AI-generated robot-Michiel combined the blood-irritating gym-positivism of Arie Boomsma, but without the delightful body, with my weak sandpaper voice, but without my signature modesty.

Short AI news

  • Don't call us an AI startup: this AI startup foresees a glut of AI startups and therefore does not want to be called an AI startup. And of course, anno 2023 you may identify yourself as a startup however you like.
  • The state of legislation on AI in Europe and the U.S.: Europe is ahead in terms of speed on legislation on AI. The only question is: Is it helpful to be ahead with restrictive legislation?
  • Prince Constantine at Humberto Tan: If we start banning instead of tolerating, won't Europe become an outlet for American companies instead of a player and producer? That, in summary, is the question raised by Constantijn van Oranje on Radio 1, partly in response to State Secretary Van Huffelen's ongoing waffling about more legislation. Constantijn also rightly noted that the mistake should not be made of confusing AI, self-learning systems, with old-fashioned Hollandsche automation, or "double-check anyone of color not named Van Huffelen or Van Puffelen. (Examples here, here and here.)

Why true NFTs are the future

In all the news about AI, other fascinating developments risk being underexposed. Therefore kudos to Het Parool, which had an excellent piece on NFTs as a new revenue model for artists with the headline "With the push of a button you can send a work to a buyer on the other side of the world.

With the tidal wave of AI applications, real photos are no longer distinguishable from fakes, look for example at Photoshop's amazing new "generative fill. I wrote earlier about Unveil, the Dutch platform that provides a counterweight to all the AI-generated photography-bagger and is also mentioned in the Parool article as an example in the NFT world.

Unveil, which will open to the public in the coming weeks, collaborates with top photographers and precisely guarantees the authenticity of each work, with both the photographer and the collector benefiting from the transparency offered by capture of each work in the blockchain.

Blockchain transparency also shows that the prices of the famous Bored Ape NFTs collapsed this week and this article explains why.

Other interesting links

Spotlight 9: The beginning of a crypto summer?

Bitcoin and Ethereum continue to benefit from BlackRock

The crypto currencies BTC and ETH are the winners of the week. The recovery set in last week after the unexpected news that the world's largest asset manager, BlackRock, filed an application with the SEC for a Bitcoin spot Exchange-Traded Fund (ETF). I wrote about that last week but did not expect then that Bitcoin would go over $30,000 and stay above that. Once again, it appears that I have few predictive gifts when it comes to investing.

What has also become clear is that the crypto market, led by Bitcoin, is currently moving independently of the mainstream markets that closed Friday in minuscule territory. By contrast, of the 149 crypto assets included in the CoinDesk Markets Indices (CMI), 144 rose last week. If this trend continues into the summer, or just stabilizes around these prices with Bitcoin staying above $30,000 and ETH around $2,000, autumn seems like the time for another crypto rally with the markets also reopening to new crypto projects. And even the biggest crypto-optimist would not have dared to dream that at the beginning of this year.

See you next week!

Categories
AI crypto technology

European answer to OpenAI is 4 weeks old yet raises €105 million without product 

A historic moment for a European startup, an easy-to-use crypto wallet, Apple's revolutionary interface and more understanding of Nvidia.

It was a historic round of investment: never before has a European company raised so much money in a first round of investment. Just four weeks (not years) young Mistral AI, not to be confused with the 1980s Swiss surf brand of the same name, raised €105 million this week from a group of investors from Europe and the US. After this investment, Mistral.ai is worth as much as €260 million, although the former investor in me thinks that with over 40% of the company, the founders have actually already sold too much of their shares in this first round.

From 0 to €260 million worth in a month: Arthur Mensch's Mistral.ai

The co-founder and CEO of Mistral.ai is named Arthur Mensch, has 3 years of work experience and, always fun to check out, 0 photos and 64 followers on Instagram. The other founders are Timothée Lacroix (CTO) and Guillaume Lample (Chief Scientist). The gentlemen are all early thirty-somethings and knew each other from college. Mensch worked at Google Deepmind and Lacroix and Lample are ex-Meta employees.

Up front: people with names like that I begrudge everything. This is the level of Athos, Porthos, Aramis and D'Artagnan - the four musketeers, for the culture barbarians among us. I must confess that some sense of envy came over me when I read that these noble European knights entering the AI battlefield against the foul-mouthed Americans of Open AI, Google and Microsoft, raised over 100 million with a website with no more than 40 words. This is even more remarkable than Worldcoin, which raised $100 million with a 1-page website.

There was not yet a budget for a graphic designer at Mistral.ai

Even in the wonderful world of crypto, in the good old days of say two years ago, for that kind of money you had to publish at least an eight-sheet white paper. But how can these modern-day Asterix, Obelix and Panoramix raise that kind of money without having a working product? Because the first working model is not expected until next year.

One of the gamblers, excuse investors in Mistral AI seem mostly concerned with convincing themselves that this is not a blind 'all on red' guess was:

"There is a pool of 80 to 100 people worldwide who have the level of experience that they have. Right now, for better or worse, the capital requirements in compute and top talent make [launching an AI startup] a pretty capital-intensive game."

Time will tell if this small group of high potentials has sufficient business acumen and leadership qualities.

Rishi Sunak proudly on the cover of The Economist, but Barack Obama would never pose as a mannequin from Are You Being Served

British Prime Minister Sunak proved again this week that he couples a big mouth with a limited sense of reality, always a cozy combination. He referred to the United Kingdom as the Unicorn Kingdom, the land of billion-dollar tech companies. That's like the prime minister of Belgium declaring that Disney World is a far cry from Bobbejaanland.

French President Macron, of course, was already on a stage with Mistral-CEO Mensch, and the Financial Times cooed "Europe's Got Talent. I've never worried about the talent in Europe, but I do worry about the lack of corresponding doekoe. Somehow I'm glad that European countries are calling out this kind of silliness and finally daring to invest serious sums of money in key early-stage companies.

But let's compare with the US for a moment. There, $25 billion has already been invested in AI companies this year, compared to $4 billion in Europe. Earlier I wrote that it is often forgotten that OpenAI alone has $11 billion in investment money.

The Register says it well: there is panic in Europe, there is a feeling that something must be done and this kind of buck-passing is the result. But it now feels like too little and too late. Because €105 million is Keuken Kampioen Divisie level in the AI sector, and OpenAI is playing Champions League. Still, our French friends deserve all the support they can get, because Mistral AI has announced that it is embracing open source, which would make their technology many times more accessible to developers than OpenAI, which is not closed in name only.

Meanwhile in blockchain

In all the AI violence, you would almost forget that there are some very interesting developments taking place in crypto in relative silence. Co-founder of Twitter Jack Dorsey and his company Block (formerly Square) have announced BitKey, an app that allows people to manage their own Bitcoin, in partnership with Coinbase and Cash App (a kind of expanded Tikkie). BitKey users will be able to transfer Bitcoin directly to each other on all six continents this year, without the need for a bank. This could become the model for crypto use, management and payments worldwide. You can sign up for the beta test here.

Meanwhile, the Biden administration is trying to stop the spread of crypto. The key question is whether crypto, or some of its crypto variants, are actually securities. In the famous 1946 Howey case, the court ruled that "an investment of money in a common enterprise with profits derived solely from the efforts of others," is a type of security called an investment contract.

That narrow definition of securities would make a large portion of all crypto-currencies securities and thus all crypto exchanges, such as Binance, Coinbase and Kraken, would be subject to the same laws as regular exchanges. The lawsuits against Binance and Coinbase will take years, just as the SEC's case against Ripple has dragged on for years.

The renowned American investment company Andreessen Horowitz (among others, Facebook, Airbnb, Pinterest, Slack, Instacart, Robinhood and Coinbase) is not waiting and is opening its first international branch in ... London. The main argument of this top vc is that the UK government will introduce legislation allowing decentralization. Jack Dorsey's BitKey, mentioned earlier, is an example of such a decentralized product (digital assets held in-house, rather than at a bank), as well as decentralized crypto exchanges where traders transfer directly to each other rather than through an intermediary, as is currently the case on mainstream exchanges.

Apple talks about Spatial Computing

I had started writing about why Apple never uses the words AI and virtual reality, because I hadn't read anything about them. And then yesterday, Marques Brownlee came out with this excellent video in which he explains, razor thin and better than I can, why Apple never uses words over which it has no control.

Point being, the new Apple Vision Pro is interesting not so much as a product that breaks open a whole new category, like the iPhone or the Apple Watch, but that it represents a whole new form of interacting with the computer. Users of the Apple Vision Pro can select something with their eyes and snap their fingers to "click" on it.

Sensors on the front of the glasses register what your fingers are doing. This interface is revolutionary, similar to the transition from MS-Dos and those awful text commands with green letters on a black screen, to mouse scrolling and clicking like Apple Macintosh and Microsoft Windows later made commonplace.

Former journalist, now investor, Om Malik says of this handling of a computer:

'Just as the "mobile computing" initiated by the iPhone eventually turned out to be just "computing," what Apple calls "spatial computing" will turn out to be the natural evolution of computing.'

Legendary investor Fred Wilson (Twitter, Kickstarter, Etsy) sees a combination of AI, blockchain and spatial computing emerging:

"The combination of advances in computer science in machine learning (MF: AI), decentralized systems (blockchains) and new forms of interaction with computers (chat interfaces, heads-up displays, voice, etc.) represents the most powerful cocktail of innovation I have ever seen.

Not entirely coincidentally, AI, blockchain and spatial computing are the three topics in this newsletter today. I am a big fan of Wilson's irregularly published newsletter and hereby recommend it again.

Notable links

  • 7 Chat GPT plug ins you need to know, or not? I looked at them but I don't get excited about them. What am I missing? And which Chat GPT plug ins are better? I'd love to hear it, email your suggestions!
  • Reddit in trouble Why it can be dangerous as a business to depend too much on volunteers and the much-vaunted 'community' around your platform.
  • Bill Gates does tea with Xi Jinping It is good to keep an open line of communication with a rival, so now that the U.S.-China relationship has fallen below freezing, there is nothing wrong with Bill Gates having tea with his friend Xi Jinping. Notable point in the Reuters article: Among other things, Gates was praised by Xi Jinping for sending $5 million to China to help fight Covid, even though China did have enough money to spend 1.7% of GDP, a sloppy $230 billion, on the armed forces. It's just where your priorities lie.

Spotlight 9: BlackRock with Bitcoin ETF and Nvidia deserves better analysis

A fine week in the tech world, with Nvidia once again the standout.

It was a positive but calm week in the stock markets for tech stocks.

It was a positive but calm week in the stock markets for tech stocks. It seemed surprising that Bitcoin did not fall, despite the SEC continuing to repeat that the entire crypto sector is not playing by the rules. This is arguably nonsense, as even a deaf-blind illiterate can see the difference in policy between, say, Coinbase and Binance when it comes to fighting money laundering and unregulated trading.

The news that the world's largest asset manager BlackRock, with just under $10 trillion (10,000 times a billion) under management, is about to apply to the SEC for a license for an investment product in Bitcoin led to a slight rise in Bitcoin and great enthusiasm among Bitcoin believers. Technically, the trust BlackRock is setting up is not an ETF, but the effect is the same: investors, if approved by the SEC, which has so far rejected all ETF applications, can buy an investment product from BlackRock that shadows the price of Bitcoin, without having to go through all the hassle of a normal purchase of Bitcoin.

So you don't have to create an account on a crypto exchange, buy hardware wallet, manage 24 passwords for your seed phrase etc, unless you are brave enough/moral enough to let someone else manage your Bitcoin. If BlackRock gets approval for this investment product, investors worldwide, from small to large (think pension funds) will buy it, which will bring a sharp rise in Bitcoin. But it is still a long way off.

According to Bloomberg's ETF specialist Eric Balchunas, at least statistically, BlackRock has a very good chance of getting approval from the SEC, as it previously saw 575 applications approved and only one rejected. Coindesk studied the application in detail and saw that BlackRock included a "surveillance-sharing agreement" between exchanges, which could avoid market manipulation, a major problem in Bitcoin trading.

Meanwhile, there is already a parody account on Twitter of the BlackRock Bitcoin ETF and whoever the creator of this account is, this person is patently an insider because extremely knowledgeable about all the regulation. Frequently repeated disclaimer: I have great appreciation for the decentralized aspect of Bitcoin and think the only eight-page Bitcoin white paper is genius, but do not own Bitcoin and think it is too technically outdated because unnecessarily carbon-producing. That said, Bitcoin's impact on the global economy is similar to the oil business: you don't have to be a fan of it to realize it's important.

Nvidia is years ahead

Ever since newsletter reader Boudewijn Jansen of iXora pointed me to Nvidia a few months ago, I started following the company more closely, and as of last week, Nvidia has even secured a permanent spot in my completely arbitrary Spotlight 9, the nine investments that determine economic sentiment in the tech world, based on market value.

At the Asian Tech Summit last week in Singapore, I had the pleasure of joining the other speakers for lunch with Nvidia's Keith Strier, responsible for AI partnerships. Annabelle Droulers of Bloomberg and I were trying to better understand why Nvidia plays such a crucial role within all AI developments and how big a lead Nvidia actually has, that the company is worth a P/E ratio of over 200 (!).

Strier explained in detail what he already briefly described here. The core lies in the fact that Nvidia makes not just the chips, but the entire infrastructure required to develop AI applications. Chip companies that want to compete effectively with Nvidia must not only build a similar AI chip, but also develop a software ecosystem around the chip that speeds up the application development process for developers.

And the components for that infrastructure are finite, which is why Nvidia is already receiving orders for deliveries 5 years from now:

'This is about compute, not just chips. AI requires a highly specialized compute infrastructure, a combination of hardware and software. Most importantly, the supply is finite. [...] NVIDIA GPUs (the chips, MF) are more than gold, they are the "rare earth elements" of AI.

Therefore, the world's most advanced AI companies are raising capital to secure the delivery of accelerated computing. Whether an enterprise or even a country, it is important to plan and budget for the computing power that will be needed to achieve and sustain leadership in AI.'

Strier is referring to the fact that Nvidia has more orders than it can deliver and that companies and even countries have been placing orders years in advance to ensure longer-term deliveries.

Meanwhile, Nvidia's lead does not seem to be limited to their "stack" of hardware (especially the GPUs) and software, but the company provides complete data center solutions, making it even more difficult for competitors to catch up.

The day before yesterday, Morgan Stanley announced it was selling shares of chipmaker AMD and raising its price target for Nvidia from $450 to $500. NVDA's closing share price Friday was $427.

It seems as if, despite all European efforts, the AI world of hardware, software and applications will be dominated by the Americans for at least the next few years.