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'Minister' makes the Netherlands look utterly ridiculous in Asia

Asia Tech Summit 2023 in Singapore

'Be curious, not judgmental.' That's the message of my favorite Ted Lasso series. Mindful of that credo, I attended the Asia Tech Summit in Singapore this week, followed the launch of the Apple Vision Pro, the magic glasses of glasses, and tried to get to the bottom of the lawsuit filed by U.S. authorities against crypto exchanges Binance and Coinbase. Unfortunately, things already went wrong during the first hour of the Asia Tech Summit, in which Secretary of State Van Huffelen was overcome by an overdose of unfounded self-confidence. 

Dutch pride abroad, 'minister' of digitization Alexandra van Huffelen

The Asia Tech Summit is particularly interesting because it brings together business and government institutions, with the idea that both sides develop an understanding of the challenges facing the other. Singapore Finance Minister and incoming Prime Minister Lawrence Wong provided the kickoff, after which Kaja Kallas (Estonia's first female prime minister) and Jacinda Ardern (New Zealand's youngest ever prime minister) paved the way for the first substantive panel, on the opportunities and threats of AI. Participating in this was State Secretary Van Huffelen, along with the president of Microsoft Asia and Nvidia's board member who deals with AI.

As the only other Dutch speaker, I was above average in my interest in Ms. Van Huffelen, and Google learned that she had a typical resume for a Dutch administrator: having been an alderman (sustainability in Rotterdam), director of a semi-governmental body (GVB in Amsterdam) and as State Secretary of Finance, she had inherited the Supplement affair, from which it is difficult to judge from a distance how adequately she had handled this painful dossier.

Nothing wrong with that, I thought, in the spirit of Ted Lasso, stay positive! After all, with the Supplements affair still in the back of her mind, hopefully she had taken a ride in Singapore on the phenomenal subway (clean, fast, cheap and safe, only resembles the GVB subway from very distant places because it is also transportation on rails) and would surely show some humility and modesty? So I expected and hoped, but nothing could be further from the truth. The state, which for incomprehensible reasons is heralded abroad as Minister of Kingdom Relations and Digitalization, went in with a straight leg almost from the kickoff.

Strategic action plan

For those with a strong stomach, the entire session can be watched back here, but the gist is that Van Huffelen sees mostly threats in AI and noted disappointment at the very beginning that nothing more has been heard of the idea of stopping AI development for six months. This is especially strange because the Dutch cabinet produced a policy paper as early as 2019 under state secretary Keijzer of EZ, which mostly sang the praises of AI. Participating in that cabinet was D66, Van Huffelen's party, and she even joined it as state secretary in 2020. There is a NL AI Coalition(NL AIC), in which government, business and knowledge institutions work together, and there is an AINed foundation that may spend 204.5 million Euros of government money to stimulate AI in the Netherlands.

In 2019, a policymaker thought a baby wearing VR glasses from Lidl had something to do with AI

Van Huffelen did not say a word about this and pretended that AI is viewed exclusively with a critical eye in the Netherlands. Her substantive contribution can be summarized as a series of clichés that the citizen comes first (gosh) and should not be forgotten (boy) and that there is more to life than making a profit; the latter she must have learned from the tens of thousands of victims of the Supplements affair.

For me, the moment at the very beginning was crucial, when it became apparent that Van Huffelen is either particularly ignorant or particularly underhanded. A combination of the two I would not rule out after her performance. After 1 minute 50, Van Huffelen literally said:

" We have seen many problems with AI, I have seen that in my country, even the AI that the government used turned out to be very biased."

state secretary Alexandra van Huffelen

Excuse me, to dismiss the Supplements affair, which has ruined the lives of tens of thousands of people, in which over 2,000 children were placed out of their homes and on which the cabinet fell in which Van Huffelen, nota bene, was himself responsible for this dossier, as a result of AI, is downright disgraceful.

Therefore, this brief refresher for Ms. Van Huffelen, who seems to have no active memory of the Supplements affair:

  • until 2019, dual citizenship was a selection rule in the Tax Department. That is a policy decision made by *people*. These victims were extra checked, for years, without knowing it, and could not appeal the inclusion in this group of extra checked. This was Kafka for anyone with a foreign last name.
  • The Personal Data Authority concluded that the Tax Authority's processing was "unlawful, discriminatory and therefore improper" which constituted a serious violation of the AVG. The Dutch Tax Authority itself violated Dutch law! (It is therefore downright bizarre that as recently as January 17 of this year, this article was published on the Belastingdienst's site, reporting that everything went perfectly by the book).
  • Officials at the top of the Inland Revenue stopped benefits from people even though they knew they were entitled to them. Up to the highest level, it was decided to continue this unlawful approach for years .
  • Inland Revenue officials demanded punishment for executives, but none were punished.

In short, the Surcharge Affair is an accumulation of wrong and evil policy instructions. It has nothing, but nothing, to do with AI. Because AI is precisely about machine learning, computer programs that get smarter as more data is added to them. Whether the Surcharge Affair was in part due to institutional racism or racial profiling I leave to sociologists and activists, but in any case it was "just" the work of incompetent and scummy people.

Ms. Van Huffelen apparently wanted to score with party colleagues tens of thousands of miles away. Perhaps the next D66 newsletter will contain a glowing passage about how their state lectured the big bad Microsoft. In any case, it will be bonus points in certain circles if Van Huffelen aspires to a job in Brussels and wants to further profile herself as a fighter for civil rights against tech capitalism. After all, she certainly wanted to profile herself.

Ready steward at the Evening Walk

Each speaker received in advance an explanation of the dress code, "business casual (for gentlemen: suit, no tie). I don't know what her letter said, but I'm sure it wasn't "ready steward at the Evening Four. Van Huffelen's yellow dress and particularly ungainly appearance by Asian standards stood out more than her substantive contribution.

If someone in Asia makes a comment on a panel with which you disagree, you don't say, especially as a representative of a country, 'that is not true.' Then you say, for example, 'I have a different viewpoint.' Or: 'another way of looking at this, is xyz'. In the audience, people wondered aloud whether Van Huffelen was wearing a beach dress and whether she had confused her islands, because 'the yellow of Cory Aquino was in the Philippines, not Singapore.' An ill-mannered Dame Edna is not what you want to portray as the Netherlands in one of the largest global markets.

The most embarrassing moment, although I wonder if Ms. Van Huffelen caught it, was when a real minister, Josephine Teo of Singapore's Ministry of Communications and Information, announced the creation of the AI Verify Foundation. Not a policy paper without clear goals, but a foundation in which business and government jointly establish tests that companies and governments worldwide can use to test AI applications. Teo emphasized that AI is so important especially for small countries like Singapore because it can increase a country's efficiency and production without additional human labor. No question.

Quantum computing near, threatens cryptography

There were more interesting announcements at the Asian Tech Summit. First, Deputy Prime Minister Heng Swee Keat reported the creation of the National Quantum-Safe Network Plus (NQSN+). That's a mouthful and requires some explanation, this site reports:

'The National Quantum-Safe Network (NQSN+) focuses on establishing a national platform and testbed for a systematic build-out of quantum-safe communication technologies, by evaluating security and demonstrating the integration of quantum-safe applications, best practices and use cases.

The main goal is to deploy commercial quantum-secure technologies for trials with government agencies and private companies; to conduct in-depth evaluations of security systems; and to develop guidelines to support companies in adopting such technologies.'

Singapore aims to secure the crucial banking sector for the long term, hence the creation of this quantum-secure network. Indeed, the importance of quantum computing will grow rapidly in the coming years. The most engaging moment during the panel I participated in, on the future of Web 3.0, was when IBM Fellow Ray Harishankar explained (starting at 25.30) why quantum computing is crossing the path of the modern Internet and will be able to retroactively crack current cryptography.

Harishankar expects that between 2030 and 2035 quantum computers suitable for specific applications will become available. His message is as simple as it is ominous: to be ready for quantum computing in 2030, organizations must have their cryptography in order now because no password will soon be safe.

Singapore is collaborating on security and standardization with South Korea, which last month announced as much as $2.6 billion dollars to invest in quantum technology research. I already can't wait to hear what Secretary of State Van Huffelen has against quantum technology. 

Apple Vision Pro better device than expected, but for what?

What woman spends $3499 on ski goggles that mess up heur hair?

Apple finally announced the Apple Vision Pro, the first step toward a completely new form of computing. Marques Brownlee explained in this particularly good video what the Vision Pro excels at and where the challenges lie for Apple. I was surprised that the introductory price is still $500 higher than expected: $3499 is not the price buster of the month. For that, though, the Vision Pro is packed with high-quality sensors.

As an Apple fanboy, I was pleasantly surprised by the all-new interface: nothing keyboard and mouse, but delicate eye-tracking. Look at something and the glasses see it. Blinking becomes the new buying 😉 Even though it will probably take a decade for Apple headsets to generate a significant portion (more than 10%) of sales, it's great to see that Apple is finally trying something big and hard again and not spending billions on stock buybacks.

Zuckerberg responds

Mark Zuckerberg was smart enough to take extensive time (nearly 3 hours!) right after Apple's announcement to comment with Lex Fridman. He had a strong argument that the Apple Vision Pro seems to be made for solitary use and not for communication with others. For the Apple Vision Pro and its successors, that indeed seems like the next step, as users of the iPhone but even the Apple Watch use their devices primarily to communicate, in the case of the Apple Watch as a receiver.

The complete integration of the Apple ecosystem between Mac, iPhone, Apple watch and Vision Pro will be fascinating to follow. Over the next few years, it will be interesting to see what applications Apple develops to try to make the Vision Pro a mass-market product. I remain convinced that the biggest obstacle will be getting women excited about putting on a device that messes up their hair and makeup. Then the utility or fun of an Apple Vision Pro would have to be enormous.

Zuckerberg himself, meanwhile, has the greatest possible difficulty motivating and enthusing his people. The Washington Post reported that even before the latest round of layoffs in May, which brought the total number of layoffs at Meta to as many as 21,000 jobs, confidence in his leadership among staff had fallen to 26%. Even for a Dutch politician, that would be pathetically low.

Notable links

First, two reading tips for any person interested in AI and for "Minister" Van Huffelen:

  • Why AI will save the world. Netscape founder Marc Andreessen, particularly successful as an investor this century, explains in a lucid speech why AI has mostly positive aspects.

Further:

  • Interesting video in which Twitter founder Ev Williams talks about how he feels about Twitter under Elon Musk. An interview that gives the impression that the demise of his brainchild really hurts him.

Spotlight 9: The SEC goes wild on crypto exchanges

Sleepless week on stock markets, except for crypto exchanges

It was a soporific week in the stock markets, with the old school S&P 500 outperforming the tech funds. All the negativity about Bitcoin was apparently already priced in, as BTC barely dropped amid all the uproar over the announcement that the U.S. SEC has filed charges against Binance.

Last year I wrote about Binance's lack of commitment to combating money laundering. More surprising is the charge against Coinbase that the company sold shares without having the necessary licenses. In doing so, the SEC takes the position that at least some cryptocurrencies should be considered shares.

At the same time, it is not conclusively established that the SEC has the authority to pursue charges if elected representatives of the people are drafting legislation in the area the SEC is just now moving into. Former Wall Street Journal reporter Michael Casey, now the editorial boss at Coindesk, wrote a comprehensive analysis of the legal battle unfolding in the U.S. at the intersection of crypto and politics.

The shadow that the FTX debacle cast over the crypto sector has global repercussions. Also in Singapore, where unlike the Netherlands, failures do have consequences. Employees of sovereign wealth fund Temasek who invested in FTX and lost $275 million dollars (still less than one percent of invested assets) saw their salaries cut.

How much was not disclosed, but although investigations showed that all procedures had been followed, the fraud and theft by Bankman-Fried and consorts, Singapore's sovereign wealth fund managers was severely punished. I find this heavily punished, because in the end Bankman-Fried simply stole from his investors and customers, but maybe I am too Dutch and used to incompetent souls rolling from one cabinet to another.

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AI NFT's technology

The Apple Vision Pro is going to fail and that's fine

Among all the news on AI, you would almost forget that in two weeks, Apple is expected to announce its first new device since the Apple Watch in 2015. It will be mixed reality glasses that could cost as much as $3,000 (three thousand!). All the omens are that the Apple Vision Pro will be a flop - a flop by Apple standards, that is. But that's not a bad thing at all. At least Apple is trying to develop something new again, and that's better than unimaginatively buying back its own shares for hundreds of billions, as it has in recent years. Apologies in advance for this long speech below, but I felt like it.

Beautiful render of the Apple headset by Marcus Kane, creator of beautiful renders and lucid analysis. Another stunning render was created by Denis Lukianenko.

What can Apple's ski goggles do?

The glasses, likely to be called Apple Reality, are expected to feature an internal screen for virtual reality, while outward-facing cameras will allow users to view the real world inside the headset with augmented reality overlays. This combination is known as mixed reality, or blended reality.

Angry tongues claim that the first pair of glasses Apple is expected to release late this year is a poor compromise between these two visions, with external video cameras thus capturing the environment and displaying it on the screen in front of the eyes when users switch the headset from VR mode to AR mode. In technical terms, video pass-through.

What does this mean in normal Dutch? Bassie (of Adriaan) would say that the glasses allow you to see the inside of your eyes. Because the first function is that of "regular" virtual reality glasses, giving you the experience of standing on stage next to Beyonce or at the top of Mount Everest. But the second function offers the user the chance to simply look through the glasses at the real world, in which mom asks if you've taken out the trash yet. Possibly supplemented by information projected over that sad reality (augmented reality), showing, for example, that the garbage truck won't arrive until the day after tomorrow and you can continue gaming in peace.

But for how many people are the potential applications actually relevant, informative or fun? The Wall Street Journal logically headlined: Can it be more than a nerd helmet? The expected primary applications of the Apple headset are FaceTime, Apple Fitness+ and gaming. Those are applications that already work well on computers, iPhones, gaming consoles and smart watches, such as the underrated Apple Watch.  

Is the Apple headset becoming serious business?

Among all the rumors about the Apple headset, I enjoyed the garbled listing of all the materials purchased by Apple, called the Bill of Materials. If correct, Apple has already spent $1500 on component purchases. More details here.

These expensive components are one reason that the much made comparison between the Apple Headset and the Apple iPod is completely flawed. Optimists point out that when the iPod was introduced in 2003, only 3 million MP3 players had been sold worldwide, compared to over 8 million VR headsets today. In other words, Apple is now entering a much larger, more mature market than back then with the iPod.

This ignores the fact that the first iPods cost $399 and $499 respectively in 2001, which for a device you use every day was expensive, but not insurmountable. Compare that to the whispered introductory price for the Apple Headset of $3,000 for a device you just don't use every day. A market for that kind of device in that price range does not exist and is not going to exist.

Apple hopes that like the iPod and iPhone previously, people will use the Headset for hours, if not continuously. But the applications to do so are lacking. That leaves you with nerds and gamers, and that seems like a great market. But not at these prices and especially not when there is little spectacular new content available. Before MP3 players, there was music. In fact, more music than ever before. The device feasted on the huge supply of pirated music that flooded the Internet via Napster, Limewire and Kazaa.

Because what is often forgotten is that MP3 players, including the iPod, benefited from the ability to listen to music by artists whose entire CDs you would never otherwise have bought. I am man enough to confess that How Do I Live by LeAnn Rimes was high on my iPod playlist for years, but I had never bought an entire CD of hers.

Content development for the entire VR/AR/XR market, on the other hand, is complex, expensive and time-consuming. The Apple Headset will have to run on legal content (read: no porn) and that costs money. So where the iPod was relatively cheap and played free content, the Apple Headset will be an expensive device with expensive content. And that suddenly reminded me of my graduate thesis and the huge failure of the Apple Newton.

In Search of the Holy Grail

The Apple Newton did just fine. As a bookend and dumbbell. Source: Ars Technica

Exactly thirty years ago, in 1993, Apple launched with much fanfare the Apple Newton, a handheld computer whose main asset was the possibility of handwriting recognition, which would make a keyboard unnecessary. That same year, Frans Straver and I graduated together on a study of success and failure factors of interactive media in the consumer market, entitled In Search of the Holy Grail. The conclusion after a year-long analysis of more than 600 scientific articles and pieces from the international trade press, was not shocking: interactive media that want to be successful in the consumer market must be cheap, easy to operate and preferably provide a hefty amount of erotic coziness.

In 1993, university professors asked how we had gotten this photo on the cover of our thesis. Video camera set on an old, painted flower pot. Idea of the brilliant photographer Morad Bouchakour.

Philips misread our conclusion and was kind enough to let us present the results at a conference in Ahoy. After I showed the picture showing that Philips' interactive compact disc player, the cd-i, would be mercilessly crushed between the PC at the top of the market and the game console at the bottom, Frans and I were thrown out before lunch.

What we ourselves and the brains at Philips overlooked at the time was that the Apple Newton suffered from exactly the same shortcoming as the CD-i: high price, no necessary new applications and no supply of pink content, as it was so nicely called at the time.

Wired published a great article 10 years ago about the failure of the Newton. CNET seems inspired by this and recently came out with this video in which it takes 8 minutes and 30 seconds to draw the parallel between the Apple Newton and the Apple Headset.

The best analysis I've come across so far on the chances for the Apple Headset is this video from the Wall Street Journal. Within Apple, there also seems to be division over the potential of the glasses, and executives are now keeping their appropriate distance from the project. Hopefully the tech gods will be merciful to whoever presents the Apple Headset on June 5. My guess is that it won't be CEO Tim Cook.  

Apple Headset will be a flop - by Apple standards

Reports are that Apple hopes to sell half a million to a million Headsets in the first year. Even if that market doubles every year for the next few years, which it won't, that's still change for Apple. Because that's the downside of a company heading for $500 billion in annual sales: it's unimaginably difficult at that scale to bring something new to market that has more impact on sales than, say, a marketing campaign for a new type of Airpods.

But I'd rather see a relative failure of a fundamentally new product, than more of those hopeless share repurchases that Apple has been peddling in recent years. Is there nothing better to invent, build or buy than spending $90 billion on share repurchases? That Headset isn't going to be it, but surely there will be products in development within Apple that can match the success of the... Apple Watch!

Because notice:

  • Apple had over 30% global market share in smart watches by 2022
  • that 30% market share led to as much as 60% revenue for Apple from every penny that went into the smart watch market (30% market share vs. 60% dollar share)
  • Apple will sell over 50 million Apple Watches this year
  • the annual growth rate of the smart watches market is nearly 20%
  • Apple has higher watch sales than the entire Swiss watch industry
  • Swatch Group, LVMH and Richemont collectively achieve lower watch sales than Apple
  • Rolex's annual sales are around $10 billion
  • Apple does not publish specific figures on Apple Watches sales, but with 50 million Apple Watches sold, Apple is at least twice the size of Rolex

Combined with the success of the Airpods, which, with the Apple Watches, fall under the Wearables division, with the emergence of the Services division, this leads to a dramatic change in the structure of revenue for Apple. See these excellent charts on Apple's revenue by product line and region over the years. Sales from Wearables now exceed those of the iPad and Mac. Apple is a computer company where revenue from traditional desktop and laptop computers is still only 8%.

It would make sense for Apple to organize revenue distribution differently, for example:

  1. computer hardware (Mac, iPad, Apple TV)
  2. services (Music, Movies, TV Shows, Apps, Books)
  3. wearables (Airpods, Watches, Headset)
  4. iPhone (you know)

I conclude about the Apple headset with the same consideration as when the Google Glass came out 10 years ago: over half the people on earth are women. Do you know one who will walk around with a device on her head all day, messing up her hairstyle?

News about AI

Notable links

Dutch photography marketplace Unveil unveils Early Access Card

  • Buyers of the Early Access Card (price under $100) will get access 24 hours earlier to purchase exclusive artwork through the Unveil platform.

Worldcoin raises $100 million via sale of tokens

  • The other startup by Sam Altman of OpenAI gives free tokens to people who have their iris scanned with a new device.

One million wallets hold at least 1 Bitcoin

  • It could be one person with a million wallets, but I don't think so.

ASML has no job openings for a week due to server maintenance

  • Holland's favorite tech company apparently has servers made of papier mâché.

Spotlight 9: Google again winner of the week

Alphabet stock was again the riser of the week and I have no idea why. Google is throwing generative AI at every product right now and experts say this is a very risky strategy for the company.

I can't possibly characterize the bizarre market right now any better than this article on Crunchbase:

"Suppose you would have invested $100 in a Nasdaq Composite Index fund at the height of the boom. That would have been on Nov. 19, 2021, when interest rates were low and technology stocks were very popular.

Today, that investment would be worth about $76. It's a disappointing return that reflects how technology ratings have steadily declined in recent quarters. But it could have been even worse.

Now imagine if, instead of the index fund, you had chosen a basket of promising, venture capital-backed startups founded in the past 15 years. You know, companies like Airbnb, Coinbase, Rivian and Uber.

Let's say you had invested at the market high point in November 2021. And let's say you bought a share of the startups that launched the 19 biggest IPOs of the past 10 years. If you had held on until now, every $100 you had invested would be worth about $32. That's a much steeper drop than the drop in the technology-focused Nasdaq Composite Index and points to the public's deeper disappointment in mostly unprofitable new market entrants."

Two conclusions: profits are currently considered more important than growth. And investing in tech stocks is and remains highly risky. Because even Apple does not score on every try.

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Categories
AI crypto technology

Web Summit in Rio and senior citizens on Bitcoin, AI and ESG goals

It was a week dominated by elderly gentlemen: the god of investing Warren Buffett (92) and his apostle Charlie Munger (99), President Joe Biden (80) and the youngster Geoffrey Hinton (75, now ex-Google). They were all relevant, for better or worse, in areas I look at with interest: AI, crypto and ESG targets. And reader Maurits Stuyver was at the Web Summit in Rio de Janeiro, with a very different audience.

Created with DALL-E: four elderly men with white hair walk past burning nuclear power plants, as an oil painting

Bitcoin tax is nonsensical

This week President Biden announced that his administration is considering imposing a tax on Bitcoin miners in the amount of 30% of their energy costs. I personally do not own Bitcoin due to energy use, but this is an example of the kind of ill-conceived legislation that makes climate legislation measures generate unnecessary resistance. There needs to be a general overhaul of the tax system so that businesses and citizens pay taxes not only based on sales, profits, wealth and income, but also on pollution and resource consumption.

My former shareholder and mentor Eckart Wintzen advocated a tax on "extracted value from the planet" back in the 1990s. That would make much more sense than just a tax on Bitcoin mining, diesel cars or nitrogen emissions. The thinking is too small and isolated, but I hardly read that anywhere in the responses to this populist proposal by Biden.

When I wanted to start writing about technology and innovation again last March, as I did on my weblog 20 years ago, I ran into the problem, reason why even traditional media rarely report meaningfully on crypto, that there is not enough independent journalism on crypto worldwide. So unless you dive deep into something yourself and research sources, you can cite virtually no other media.

One popular crypto news site is Cointelegraph, which sold a Middle East license to PR firm Luna, which has mostly crypto projects as clients. The best source in crypto is Coindesk, but with FTX trying to recover nearly $4 billion from now-bankrupt Genesis Global, it is embarrassing that Coindesk has to continually emphasize that it is a sister company of Genesis. Imagine if the NRC were to report on the bankruptcy of Imtech and in an interjection reported, "NRC is a sister company of Imtech, both companies are owned by ZBM, Soulless Belgian Media Company.

Even Coinmarketcap, the most widely used source of cryptocurrencies, is owned by crypto exchange Binance, although it would take eight paragraphs to explain that Coinmarketcap operates independently. The list of such strange relationships is endless in crypto.

I come to this because I still want to provide an analysis on the new European crypto legislation and the upcoming crypto regulations in the US. And how lacking then is serious, professional analysis that tests the intended legislation against reality.

Crypto law can be simple

Actually, it's simple: if a party manages money from customers, crypto or not, it has to meet the same strict requirements as regular banks. So a site where you can buy crypto and then hold those tokens for you, whether it's Bitcoin or a stable token, must ensure that your funds are not being tampered with. The custodian function must be sacrosanct. The same goes for security tokens, tokens that are actually a crypto version of a type of asset (e.g. stocks, real estate, bonds etc) and should be treated like other investment products.

But all other types of tokens, from utility tokens (tokens that allow you to buy one type of service or product, similar to a digital book token) to payment tokens (such as Ripple), constitute a whole new class and cannot be lumped together with other tokens just because they are all crypto tokens. Developers of DeFi platforms, where users themselves provide the market in a pool via a smart contract protocol and buy and sell independently in it, can never keep track of who is buying and selling what; because they are merely the authors of a smart contract that enables trading, nothing more.

At the core, I fear lawmakers are making the mistake of looking at appearance and then treating all crypto equally. That would be as silly as legally treating a love letter and a fake bomb threat equally if they are both sent by e-mail.  

The first Web Summit in Rio de Janeiro attracted over fifteen thousand visitors, mostly from Sao Paolo

Web Summit in Rio big success, for Warren Buffett it's wait and see

Reader of this newsletter Maurits Stuyver was one of the few Dutchmen among the fifteen thousand participants at the first Web Summit in Rio de Janeiro last week. Stuyver, who does serious business development for interesting companies, wrote a readable account of his findings in this market, which is often overlooked in Europe. One striking conclusion I found was the new resort to crypto that Stuyver deduced, fueled by the new banking crisis in America that I wrote about last month. It was also news to me that Brazil has a big focus on fintech companies.

Maurice Stuyver also makes it through life in Rio

An estimated thirty thousand visitors descended on the antithesis of Rio de Janeiro this weekend as Warren Buffett held his Berkshire Hathaway's annual shareholder meeting again in Omaha, Nebraska. Free after Susan Sarandon in Thelma & Louise: "it may not be the middle of nowhere, but you can see it from here.

Usually shareholders are as critical of Buffett as the crowd at the Arena is of the Toppers, but this time something is brewing. Big shareholders like Blackrock want Berkshire Hathaway to start contributing more to meeting ESG goals. I doubt Buffett and his associate Charlie Munger (99) care. Together they are 193 years old, it seems to me that makes you happy to still hear the alarm clock go off in the morning. In the wings, squeaky-clean Greg Abel (60) is ready to take over from the seniors.

Nice quote from Warren Buffett yesterday about Apple, of which Berkshire Hathaway owns 6%:

"Apple has a position with consumers where they're paying 1,500 bucks or whatever it may be for a phone. And the same people pay $35,000 for having a second car, and [if] they had to give up a second car or give up their iPhone, they give up their second car. I mean, it's an extraordinary product. We don't have anything like that that we owned 100% of, but we're very, very happy to have 5.6 or whatever-it-may-be percent, and we're delighted every 10th of a percent that goes up."

Warren Buffet on May 6, 2023, at the annual meeting of Berkshire Hathaway shareholders in Omaha, Nebraska
Created with DALL-E: scary robot takes over the world, sci-fi style.

Not the week of AI

It couldn't be missed: 'the Godfather of AI,' Geoffrey Hinton, left Google because he is concerned about the dangers AI has for the world. Or as CNN cosily summed it up, "AI may figure out how to kill people. And they then pulled out 4 minutes and 11 seconds for that at the 24-hour news channel. PBS did better with this report. The annoying thing about the doomsday scenario Hinton outlines is that if it ever turns out that he is right, it will be too late for humanity to do anything about it. Who wasn't thinking about Skynet and The Terminator this week?

The US Federal Trade Commission (FTC) issued a warning this week that AI can manipulate people to the point of making bad decisions. The Republican Party did not let that be said twice and produced this anti-Biden commercial, created entirely with AI.

Notable links:

  • Nearly half of YouTube viewing time in America takes place on TV. Where YouTube once began with muddled amateur videos in a resolution of 3 by 4 pixels, audiences are now watching on 4K televisions. The advertising world is following the viewers, affecting the traditional TV world. Still, YouTube's revenue fell again. Good for advertisers, bad for media operators.
  • Globally, investment in startups is falling dramatically. What unexpectedly turns out to be the most popular sector to invest in? It's not AI or crypto, but good old health care.
  • An interesting trend in venture capital is investment funds run by active CEOs and entrepreneurs. So not by former entrepreneurs, but CEOs who apparently have time to do a lucrative side job on the side. Of course, Americans have coined another wonderful term for this: dual threat CEOs.
  • One of those CEOs with an investment fund is Auren Hoffman of Safegraph, herself the author of an excellent monthly newsletter and one of the few tech CEOs who is openly Republican.
Bitcoin and Ethereum rise again and Apple scores, despite falling sales

Spotlight 9: crypto rises sharply, Apple follows

Apple released its quarterly earnings this week and almost casually announced that revenue will decline this year. Consequence: the stock skyrocketed. A closer look at the stock price shows that Apple shares are already up 39% this year. Granted, it's not yet up to the level Bitcoin (+77%) or Ethereum (+61%) is at this year, but for the investor with a less strong stomach, Apple remains attractive. For those who hear people jubilating about crypto again at birthdays should be aware that compared to a year ago, Bitcoin is up -19% and Ethereum as much as -28%. And Apple? Ten percent in the plus.

Apple has actually gone up $400 billion in value since my comparison with Philips two weeks ago, almost the gross national product of a country like Austria, to once again compare apples to potatoes. Analysts had expected worse numbers and the iPhone is selling better, especially in India.

It remains difficult for Apple to balance on the tenuous tightrope between multiple worlds and especially multiple continents. For example, the Financial Times published this piece arguing that Apple is now a Chinese company. Nonsense of course, easy shouting from the sidelines. Apple is the corporate version of a global citizen trying to develop himself within the norms and values of the countries where he lives and works.

Categories
AI crypto

Elon Musk and his exes. And Apple CEO Tim Cook lost AI top talent to Google, but strikes blow with savings accounts

This week, almost all tech news seemed to be about artificial intelligence. After all, major innovations in AI capture the imagination and are recognizable to all, whereas a breakthrough in biotechnology, for example, is often literally visible only through a microscope to a limited group of experts.

Why do you need $300 million when you just raised $10 billion?

When $300 million dollars is paid by top investors for just over one (1) percent of OpenAI, the company that is the creator of ChatGPT, it deserves extensive attention. Especially considering that Microsoft invested $10 billion (!) in OpenAI less than three months ago, having already put a billion into the company in 2019. That 11 billion surely hasn't run out yet, so the question arises as to why OpenAI held this additional round of investment.

The main reason OpenAI wants to have a strong relationship with some of the biggest tech investors in the world is the burgeoning battle for the AI market. The time is approaching when really big money is needed, think billions rather than millions, for a company to join the battle of giants such as Google, Apple, Microsoft and Amazon who are all competing in this market. After all, AI is too important for all players to ignore. In fact, for Google, the success of OpenAI is life-threatening. With shareholders behind it like Tiger Global, Sequoia Capital, Andreessen Horowitz, Thrive, K2 Global and Founders Fund (from Peter Thiel, the legendary investor in Facebook and Palantir, among others), OpenAI can now operate independently of partner Microsoft. With an estimated market value of $27 billion to $29 billion, OpenAI is already worth more right now than, to name a crossroad, companies like Spotify and vaccine maker BioNTech, companies that have also successfully capitalized on major developments.

This 'photo' was generated entirely with Midjourney and is eerily real

CEOs Tim Cook and Sundar Pichai fight over AI talent

Meanwhile, in the race for the best AI technology, Apple with Siri and Amazon with Alexa are far behind OpenAI. The Information reported this week that three of Apple's top programmers therefore made the move to Google, despite attempts by Apple CEO Tim Cook to retain them. The personal offer from Alphabet CEO Sundar Pichai, who is committed to catching up with OpenAI, was apparently irresistible. Would any CEO of a European publicly traded company ever have made a personal effort to attract programmers, or to retain them, as Cook and Pichai are doing? I suspect the European gentry, for they are almost all men, feel too big for that.

How difficult it is to make a good AI application proved Snapchat, which received a 1 for the "My AI" feature from users, urging them to remove it from the app. It was not Snap's week, which saw revenue drop after which the stock slumped 17%. Dropbox announced it was laying off 16% of its staff while investing heavily in attracting new AI developers. This indicates that it is difficult, if not impossible, to retrain programmers to become AI developers.

Elon Musk, his X's and his ex

The wait is on for Elon Musk to get involved in the AI war with a company, but he seems too busy trying to ruin Twitter. He does constantly criticize OpenAI and CEO Sam Altman since he sold his stake in OpenAI to Microsoft. It is remarkable, to say the least, that Musk, in an open letter, called for a sort of six-month moratorium in AI development, but in the meantime continues to work on funding his own AI startup, which he alternately calls TruthGPT (as with now unemployed chief Tucker Carlson) or X-AI. That X should normally be in there from Musk; he previously started X.com and, of course, SpaceX. It's lucky it's Tesla and not Texla. His latest son is named X Æ A-Xii (call sign: Bert). And the Æ is in the poor kid's name because it is the elven spelling of the term AI. Musk's baby mama, Canadian artist Grimes, stood out this week by giving permission to use her voice in AI-generated music: "I'll split 50% royalties on any successful AI generated song that uses my voice. Same deal as I would with any artist i collab with. Feel free to use my voice without penalty.' This is especially notable because there is concern that AI will make the entire profession of voice actors obsolete. It will be interesting to follow what the implications will be for singers.

The Apple Card with rounded corners, Steve Jobs wouldn't have wanted it any other way

Finally: Apple is going to make mincemeat of the banks and does it with ... Goldman Sachs?

It had been expected for years and last week it was here: Apple made its entrance into the banking world. Remarkable remains the choice of Goldman Sachs as a partner, because Apple hardly uses the Goldman brand but uses the prestigious bank mainly for the banking license and as a colorless and odorless handler of savings transactions, as a kind of white label. While Apple rarely, if ever, buys market share based on price, when it comes to savings accounts the high interest rate actually stands out: 4.15%, as much as 10 times higher than the US national average. 

What is typical of Apple, however, is its great ease of use. The first step is to apply for an Apple Card, a credit card, which unfortunately is only available in the US for now. All spending via that card will default to 1% to 3% of the purchase amount in the form of what Apple has called "Daily Cash," a balance that is calculated and credited daily. Those who then open a savings account from the Apple Wallet and link it to the Apple Card, an action of no more than a few clicks, will see Daily Cash credited to the savings account daily and automatically receive the high interest rate of 4.15%. The savings account is free, there is no minimum deposit and there are no penalties if balances are withdrawn from the savings account. It is also possible to transfer funds from other banks to the Apple-Goldman savings account.

And precisely the latter is a nightmare for traditional banks. Because while there are other, lesser-known banks, giving even higher savings rates, they are not trusted brands like Apple. The combination of Apple Card with Apple Pay and the Apple Wallet is so seamless and simple that it will be difficult for banks to compete. It seems plausible that European banks will launch a hefty lobby in Brussels, combined with legal action, to make it difficult for Apple to enter the European market in the same way it does in the US.

Event: Consensus 2023

Nearly fifteen thousand people attended the leading crypto event Consensus in Austin, Texas last week, and that doesn't include the types who are too stingy to buy a conference ticket because they think they already know everything and want to tell you that the best networking happens in the pub. The sounds from Austin were universally positive, especially about the quality of the projects that survived the crypto winter. I found the most notable contribution to Consensus, viewed from a distance because I wasn't there myself, to be the interview with journalist Brady Dale, whose book about Sam Bankman-Fried of FTX will soon be published. Dale emphatically points to decentralized finance, DeFi, as the main solution against fraud and mismanagement, precisely where there is no central party like a stock exchange like FTX. I also found it striking that Dale specifically mentions memecoin Dogecoin as a relevant crypto alongside Bitcoin and Ethereum:

'To me, Dogecoin is the chain that said, A story, a character, a concept can have a value, and if a community believes in that character and works together in a distributed way to make the idea bigger, the value of the concept will grow and so will its currency. Dogecoin has really made that clear. It's not just about DOGE, it's about that whole idea of collaboration around a concept, and that's why I'm betting Dogecoin will be the comeback kid of blockchains, again and again, in the near future.

- Brady Dale

Good links

  • Check out this link to some particularly practical prompts to use yourself at ChatGPT.
  • Startup funding is under severe pressure. These four charts show that, and in Miami, investment in startups actually fell more than 90%. Partly a result of the focus in that region on crypto startups, which were struggling.
  • In the Netherlands, more and more investors are asking startup founders not to pay themselves a salary. Here are five reasons why they should.
  • Unknown identifies nearly 1,000 Bitcoin wallets belonging to Russian secret services. Very clever.
  • The U.S. government is about to take over First Republic Bank. I wrote earlier this month about what kind of bank First Republic is. Or was?

Spotlight 9: Meta and Microsoft the big winners of the week

Meta and Microsoft as outliers after good quarterly results

Reader Raoul Kuiper rightly asked me why I did include Bitcoin in this portfolio when I don't own it myself because of its energy consumption and associated carbon emissions. By way of explanation, I created this fictitious Spotlight 9 portfolio to track sentiment in the tech world on a weekly basis. I think when, as happened last week, virtually all major tech companies plus the Dow Jones and S&P 500 are all in the minus, that is relevant to the entire world of technology and innovation. Bitcoin and Ethereum I included because those are the most widely held assets of the hundreds of millions of people investing in crypto worldwide. Of the Spotlight 9, I personally find Microsoft, Apple and Ethereum interesting. The projects and companies I find otherwise fascinating, such as Polygon (MATIC), are usually too small to have an impact on stock market sentiment and the economy and therefore not included in the Spotlight 9.

Amazon, Alphabet (Google), Microsoft and Meta published good quarterly earnings this week, and Microsoft and Meta in particular benefited. Microsoft is expected to benefit greatly from the integration of AI, based in part on technology from OpenAI, into various products and services. Zuckerberg explained to investors that Meta uses a lot of AI to better target their TikTok competitor Instagram Reels, and that struck a chord: Meta shares rose nearly 13% in the last 5 days.

It was, in short, in every way the week of AI.

Categories
AI technology

Amsterdam AI startup raises 50 million, Ajax wins only on Apple TV+

This is the web version of edition 3, April 23, 2023, of my weekly newsletter, subscribe here.

For a very brief moment over the past few days, Amsterdam took center stage in the online world, and it had nothing to do with Ajax. It made me think back to 2003, twenty years ago.

On Leidseplein in Amsterdam, a group of unknown American comedians stood on stage at Boom Chicago, the comedy theater that had to rely primarily on drunken tourists. In California, the first iLife suite, consisting of the cumbersome iTunes and iDVD, which allowed you to burn DVDs very slowly, was launched amid jeers by the moribund Apple. Steve Jobs was at the helm for over 5 years and on $6 billion in sales, Apple was loss-making.

Ted Lasso's unexpected star, Hannah Waddingham, gives bald men hope in the episode Sunflowers 

Anyone who would have predicted then that 20 years later a brilliant comedy show based on a cheap commercial created by these comedians would break all sorts of records on an Apple streaming service with as many as 52 Emmy Award nominations would have been instantly fooled. Ted Lasso, the brainchild of Boom Chicago alumni Jason Sudeikis, Brendan Hunt and Joe Kelly, won the Emmy Award for best comedy series two years in a row. Earlier, Apple TV+ was the first streaming service to win an Oscar for best film, with CODA, which led to strong growth in Apple TV+ subscribers.

It's comparing apples to potatoes, but it's nice to look at how another legendary company that preferred to make only hardware and no content fared during the same period: our own Philips, unlike Apple, did make a profit in 2003, even nearly €500 million on sales of €29 billion, almost five times the sales of Apple that year. Twenty years on, Philips is worth €15 billion on sales of €17 billion and Apple has a market value of €2.3 trillion. Forget all those zeros: that's 2,300 times a billion. Apple has become worth over 150 times as much as Philips in two decades and is on its way to annual sales of over $500 billion, $100 billion of which comes from its services division alone. Not bad for a company that, to the anger of Steve Jobs, was so bad at services that it couldn't yet provide a decent email service. Or does anyone still have a MobileMe address?

But I digress, because entirely in the spirit of Ted Lasso, I would like to be positive this Sunday. Last Wednesday's episode, Sunflowers, was the reason I was reminded of when the creative minds behind Ted Lasso lived in Amsterdam. Sunflowers is an hour-plus long paean from the creators to Amsterdam. Including André Hazes and even a snippet of Rob de Nijs. The only implausible moment of this episode was the beginning, Ajax's 5-0 victory in the Johan Cruijff Arena. When in reality Ajax's only scoring team was the media team, which unfurled a large banner at the pub in London where part of Ted Lasso is being shot.

Why is an Amsterdam "vector database" worth 200 million?

Bob van Luijt and Etienne Dilocker, co-founders of Weaviate

Who wouldn't laugh?

While all of Ted Lasso's protagonists in the Amsterdam episode experienced a direction-defining breakthrough, the same was true of a startup unknown to me that announced it had raised no less than $50 million in its third round of funding. Weaviate calls itself a "vector database" but as the last generation whose math wasn't in the required curriculum, I'm not helped by that. (I'm guessing the name stands for weav-iate, do something with weaving, and not for we-aviate, we fly). Searching for more information about Weaviate, until January still called SemI which does not provide more insight, I found this excellent explanation by CEO Bob van Luijt:

'First-generation database technology is often referred to by the acronym SQL [...] which are conceptually similar to spreadsheets or tables. In the 1980s, this technology was dominated by companies such as Oracle and Microsoft. The second wave of databases is called "NoSQL." These are the domain of companies like MongoDB (and Elastic, MF). They store data in different ways [...] but what they all have in common is that they are not relational tables. [...] The third wave of database technologies focuses on data that is first processed by a machine-learning model, where the AI models help process, store and search the data, as opposed to traditional ways.'

That's an excellent explanation, and it's smart to frame Weaviate this way. Without saying it, Van Luijt implies that Weaviate is solving a huge problem in a huge market, music to the ears of investors, referring to a number of industry peers whose "little ones" are even publicly traded and have a market value of $16 billion (MongoDB) and just under $6 billion (Elastic). Except that those are of the old generation, lisp Van Luijt actually says in passing, and Weaviate is better.

A few things strike me: 

  • $50 million on a $200 million valuation is a high amount for a relatively low valuation. That sounds absurd, but consider that a few weeks ago Character.ai raised $150 million on a valuation of over a billion. Still, this funding is a wise decision by Weaviate, because the fact remains that U.S. VCs invest less money in non-U.S. companies, and at lower valuations, than in U.S. companies. To stay in Ted Lasso spheres, an English Premier League club simply pays more for a player from another Premier League club, than for Jan Maas from the Eredivisie. (That character who always speaks the truth, however painfully at times, by the way, is named after Saskia Maas, the CEO and driving force behind Boom Chicago).
  • in total, Weaviate has now raised $67.7 million within three years, allowing the company to compete in the development of fundamental technology for an international market. What Weaviate is doing is similar to playing Champions League soccer with a Dutch club. Fortunately, Van Luijt et al. now have sufficient resources to attract good players. (This is the latest soccer comparison.)
  • ING already participated in the 2022 A round because it knew Weaviate, as a spin-out from ING Labs. It is commendable that a traditional major bank like ING made such a risky investment, provided the bank actually gets to work with Weaviate's technology. Otherwise, it is a normal venture capital investment, and those do not score better on average in the Netherlands than the AEX index. By the way, it's funny that Weaviate's name change has passed the administrator of ING Ventures' portfolio page by. There, the company is still simply called SemI.
  • Alex van Leeuwen participated in the seed round of Weaviate and in doing so made perhaps one of the best investments ever in the Netherlands. Investor Peter Thiel bought a 10% stake in Facebook in 2004 for $500,000 and sold his stake for a total of over $1 billion, as far as we know the best-yielding investment in venture capital. It may not be that happy (2000x) for Van Leeuwen, but I don't rule it out. Database companies, we've learned from those first- and second-generation oldies, can scale up quickly relatively easily without huge follow-on investments.

Fine links

  • The FD published this thorough article about Lightyear with the headline "How Holland's cuddly company went down by a hair. The disinterest of foreign technology investors in Lightyear (compare it to Weaviate) should have been a telling sign.
  • Master vlogger Casey Neistat intentionally made a terrible vlog based on a script written by ChatGPT4. His conclusion: AI lacks soul, lacks depth. I think ChatGPT4 mostly lacks context at this point, because not yet fed Casey's past, perspective and tone.
  • ChatGPT's CTO Greg Brockman gave this fascinating presentation on ChatGPT's capabilities, which go so much further than some "text and pictures" questions. The interview with TED founder Chris Anderson immediately following the presentation is also enlightening. Thanks to Michiel Schoonhoven of content marketing specialist NXTLI for the tip.

Spotlight 9

(ChatGPT4 coined this rubric name, see the p.s. below this newsletter).

Stock market sentiment determines much of our economy and in fact the tech sector is dominated by it. The idea behind this portfolio was simple. Say you want to invest, but don't want to buy and sell every day because that's time consuming and complicated and you can stand to lose a little; what do you buy? I chose the 5 biggest tech stocks (Amazon, Apple, Google/Alphabet, Meta and Microsoft) two index funds (S&P 500 and Dow Jones Index) and the two biggest cryptocurrencies (Bitcoin and Ethereum). Anyone who had made these nine purchases on Jan. 1 of this year, each for an equal amount, would have earned a return of 37.6% today. But compared to a year ago, the return is -8%. That's the nice thing about tracking a portfolio like this: the duration of the investment, your investment horizon, determines the definition of success. Those who look only at this week, in which only Amazon stands proudly, yearn for the old Silver Fleet account. Incidentally, the main reason Amazon shares rose seems to be the announcement that the company wants to play a prominent role in AI alongside Microsoft and Google, with Amazon Bedrock as its first asset. The setup of Bedrock is interesting because instead of developing everything itself, Amazon offers AWS customers the ability to use AI models from various vendors, including AWS itself.

For those more interested in AI, I recommend this conversation, started by NRC journalist Wouter van Noort who himself produces some of my favorite newsletters, Future Affairs and Transcend.

Happy Sunday,

-Michiel

The archive of past newsletters is here.

p.s. below the conversation with ChatGPT4 about the rubric name for tracking a small investment portfolio