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Tuesday, May 26, 2015

All things to all people

For an investor, the picture at the top of the tech ranks is pretty confusing. The great internet/tech gold rush is still going on, and all the behemoths are trying to stake a claim to each other's businesses.

Apple has been talking about an Apple TV for a while, though that hasn't happened yet. But now the rumor is that they're looking into manufacturing cars.

Google is now reformulating Youtube so it can compete with the streaming services. They've been working on their own (driverless) car for a while, and are also busy trying to encroach on Amazon's Etail turf.

Even Uber is now reportedly considering making cars. Evidently all of these companies looked at GM and salivated.

Amazon recently came up with their own phone, the FirePhone, which was a bust. But their attempt to muscle in on Netflix's territory with a streaming video service appears to be off to a better start.

Netflix wasn't content to just stream others' movies and TV shows, so started producing their own shows, in competition with the Hollywood studios.

EBay is starting its own version of Amazon Prime.

Even stodgy old Microsoft started its own search engine to compete with Google's.

I have absolutely no feel for how all these attempts to elbow each other aside will shake out.

Weirdly, although this is the computer age, about the only thing that the behemoths aren't plunging into are computers; none of them seem to want to compete with the iPad or Macbook at the high end, or Acer on the low end.

It can't be long before some of these companies start making form-fitting clothes whose temperature can be regulated, or airplanes which don't require pilots, or modular houses with built-in electronic equipment.

I'm not much of a techie, but I think I'd like living in one of those houses.


Anonymous said...

Slightly off topic - I recently learned about a company based in Mexico that creates bullet proof clothing. Since our world seems to becoming more violent and unpredictable, investing in protective clothing might become something that we'll have to do. I imagine the company that designs and makes the clothing is a profitable one.

- Susan

John Craig said...

Susan --
I wouldn't be surprised. Only problem is, in Mexico, if you want protection from the drug cartels, you'd also have to get a turtleneck tat prevents your head from being chopped off.

Bulletproof vests are actually illegal in this country if you're not a member of law enforcement.

Anonymous said...

Miguel Caballero creates a fashion line of bullet proof clothing. His business is in Columbia, not Mexico. Apparently, our President is a customer.

- Susan

John Craig said...

Susan --
That's interesting; I hope he wears those clothes a lot. Personally, I dread the idea of Obama becoming a martyr. I want him to live to a ripe old age, so people can get a better idea of what he's all about.

Anonymous said...

Your comment made me laugh. I learned about bullet proof clothing by way of Amren. Hopefully, we'll never have to wear bullet proof duds. The company has a clothing line for men, women, and children.

- Susan

John Craig said...

Susan --
I hope you're right.

Runner Katy said...

This is not bulletproof, but Saucony has a recovery clothing line that does regulate temperature. I have the full body suit that I sleep in before big races (and coincidentally, I feel quite refreshed even after just a few hours of sleep when wearing it).

John Craig said...

Runner Katy --
Interesting. Did you find that it actually regulated your temperature to what you wanted? What are the temperature ranges it works in, and what did you want your temperature kept at?

Taylor Leland Smith said...

Libertarians should love the tech revolution. I know I do. Sharing Economies, crowd-funding, crowd-sourcing, and open-sourcing are all about reducing information asymmetries. Uber owns no vehicles, facebook creates no content, alibaba has no inventory, and airbnb has no real estate. These business are all just about efficient resource allocation through efficient sharing of information, all enabled by technology.

Meanwhile, information asymmetries are economists' favorite justification of government regulation. Basically, because consumers are too stupid to think for themselves, government needs to come in and regulate markets. We're too dumb to pick our own investments. We're too dumb to vet our own cabbies. We need government to regulate our utilities, telecommunications, banks, hospitals, medicine, restaurants, hotels, cab drivers, etc..

Though companies like Yelp, AirBnB, Uber and Lyft are making apparent that this just simply isn't the case. If anything, all these information asymmetries are held in place by archaic regulations.

Cabs are un-competitive because they're granted government monopoly.
Hotels are expensive because they're granted government monopoly.
Utilities are expensive because they're granted government monopoly.
Cable companies are awful because they're granted government monopoly.
I could continue ad nauseum...

You've probably read about the criticism money managers are facing. Investors are figuring out that they can diversify themselves using ETFs, and take advantage of lower fees and thus better returns. ETFs are just reducing information asymmetries.

Quantopian is an open-source hedge fund that sources algorithmic trading code from everyday quant traders. Engineers who've never stepped on wall street are building investment strategies with unheard of sharpe ratios. Quantopian doesn't produce investment strategies... they just provide programmers with data and a trading platform. They're just putting investors together with fund managers that would otherwise never be discovered. They're just reducing information asymmetries.

Crowd-funding platforms are just facilitating the discovery process. Aiding investors to find investments. Open-Source is just efficient idea generation and discovery. Sharing economies are just about bringing buyers and sellers together who otherwise wouldn't discover each other.

AirBnB, Uber, Lyft, Yelp, Netflix, Amazon and Google are pretty much all the same thing. Google isn't about search. It's about advertising. They're just extremely efficient at putting advertisers in front of their ideal customers. They do so by reducing information asymmetries. Facebook does the same thing. Netflix efficiently allocates entertainment from producer to viewer.

All these developments total undermine the legitimacy of these redundant and destructive regulations.

The best part is government can't seem to get its grubby hands in to mess it up. A lot of these income streams go totally unreported. Buyers and sellers aren't always easy to identify. Bitcoin, for example, provides a medium of exchange that can't be inflated, seized, traced or easily taxed.

In short, technology is making government obsolete, and it's awesome.

John Craig said...

Taylor --
You sound like a grad student in economics.

I agree with you in principle, but a couple quibbles. first, are hotels granted government monopoly? It's my impression that new ones spring up all the time in areas where there are other hotels, hence the clustering of Ramadas, Comfort Inns, Red Roof Inns, Motel 6's, etc, at every major highway intersection.

Second, I agree that tech is wonderful in terms of its efficiency, and that theoretically it should reduce the hand of government. But in fact, the government is growing every day, and we're saddled with far more bureaucracy than we were at the beginning of Obama's term. And each time a new department or bureau is created, it becomes its own self-sustaining fiefdom whose main purpose becomes to get more government funds and keep itself growing.

Taylor Leland Smith said...

It's only fun learning all this economics if I can share what I've learned on occasion.

Hotels are definitely granted monopoly. It's not always evident, but industries often lobby *for* regulations that increase entry barriers. Hotels aren't as bad as some industries, but they're just as guilty of this. The success of AirBnB is evidence that consumers are perfectly happy with unregulated hotels, and that people are willing to provide temporary housing at below market rates. In other words, the regulations don't protect the consumer, they protect established hotels.

I wouldn't even try to deny that government is growing every day. The most persistent trend throughout the developing world is that of growing government, and, consequently, economic stagnation. I recently me a guy who served directly under Bush 43 as deputy secretary of one of the biggest departments. I asked him what the most ridiculous example of opportunistic gov't growth. Apparently, the FDA and D. of Agriculture fight over the regulation of different food groups. Depending on the classification, certain foods fall under the DOA while others fall under the FDA. The infighting over classification intensified to the point where they were fighting over the classification of different types of PIZZA. Pepperoni pizza is DOA, for example. Regular pizza is FDA.

But, with that said, these trends are irrefutably unsustainable. Something has to give. I think these technological advancements, and their consequences, are the first manifestation of a trend reversal.

John Craig said...

Taylor --
Well I appreciate you sharing it.

I was unaware of hotel monopolies; all businesses have some barriers to entry. BTW, I agree about all the other industries you mentioned in that regard.

That's an amazing story about the pizza war, but telling, and not completely unexpected.

I've just gotten educated about the FDA recently. Here's an interesting little factoid about them. Obama's appointee as the commissioner of the FDA, Margaret Hamburg, who just recently resigned, is married to a guy who was one of the top managers at Renaissance Technologies, James Simons' huge hedge fund. Renaissance evidently owned something like $350MM worth of Glaxo Smith Kline stock, and under Hamburg's leadership, GSK had a higher rate of approvals than any other major pharma. Coincidence? It's amazing that that conflict of interest never saw the light of day, no one ever called her (or Obama) on it.

What I'm afraid is going to give is this country.

Taylor Leland Smith said...

I didn't know that story about the FDA. That's really interesting and unfortunately so typical. Though I must say, I think it is a good thing they were granting GSK more approvals. The problem is that they don't approve anyone else's drugs. One of the other research assistants I work with does research on health economics. His big bone to pick, so to speak, is with the FDA. Every year literally millions of people suffer and/or die because they won't approve drugs. For an FDA bureaucrat there's no incentive to make type one errors and get in trouble because some drug they approved ended up killing some people. Rather, they frequently commit type two errors by denying an outrageously high ratio of the drugs that are submitted.

Remember when everyone was talking about government death panels? They're very real and they're called the FDA.

As for the country, I'm certainly not an optimist... you're probably right.

John Craig said...

Taylor --
You're exactly right about the FDA. They drag their feet, and their number one job is to cover their own asses. And yes, thousands of people get sicker or die each year because the FDA does not have to answer for type two errors. It's disgusting, and infuriating.

enjoy the collapse said...

@Bulletproof vests are actually illegal in this country if you're not a member of law enforcement.

if by "this country" you mean the ussa, then you are incorrect. they're legal. some local jurisdictions may regulate them, but federal law is clear, they're legal. you can buy and sell them just fine.

John Craig said...

Enjoy the collapse --
Thank you, I stand corrected. Just looked it up, you're right.

They're only illegal if one has been convicted of a violent felony n the past or in the commission of a crime. I had read in the past that they were illegal, but must have missed the context or possibly misread.