The most innovative companies are the most restless 

The term “innovation” is probably the most overused corporate jargon of the 21st century, but at its core, I’ve come to believe that the most valuable businesses to own as an investor tend to exhibit at least a couple of specific traits: First, the organization must exhibit “perpetual motion” — that is, they must constantly experiment with new products and services (many of which will likely fail). And second, embedded within the DNA of the organization, there must be a sort of fundamental optimism about the future, which then manifests as a corporate imperative to solve some of the hardest technical challenges in the world. I think an apt term for this concept might be something like “organizational restlessness” — i.e. firms that can never be satisfied with the status quo. I bring all that up as a palette cleanser to discuss last evening’s Tesla AI day, which the MIT robotics professor Lex Fridman today called “the most amazing real-world AI & engineering effort I have ever seen in my life.” (I would agree.) Lex continued, “I really appreciated that the presentation didn’t dumb anything down. But maybe in all the technical details, it was easy to miss how much brilliant innovation there was here.” While the press naturally focused on the humanoid robot announcement—which is cool!—I believe Tesla presented a few key seismic advances towards a fully-scalable, real-world artificial intelligence platform that could have enormous industrial application outside of Tesla—and beyond full-self driving. It’s game-changing stuff. I highly recommend Lex’s video recap of the event, which breaks down some of the more technical elements for non-AI folks who are curious to go a bit deeper into the core technologies presented. [For a solid analysis of the D1 Dojo semiconductor chip, see here from Dylan Patel at Semi Analysis – H/T Rishi Gosalia] 

“Tesla AI day presented the most amazing real-world AI & engineering effort I have ever seen in my life. Why was it amazing to me? No, not primarily because of the Tesla Bot. It was amazing because I believe the autonomous driving task, and the general real-world robotics perception planning task, is a lot harder than people generally think. And I also believed the scale of the effort in algorithmic data, annotation, simulations, inference compute and training compute to solve these problems was something no one would be able to do in the near-term. [But] yesterday was the first time I saw in one place just the kind of scale and effort that has the chance to solve this: the autonomous driving problem and the general real-world robotics perception and planning problem.”

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No more gas stations for Petaluma, California

The Guardian this week has a great little story about the first city in America to completely ban gas stations. It will be fascinating to watch how the gas station business model does (or does not) evolve over time—I anticipate some forward-looking gas station owners will transition to pure convenience stores and electric charging stations, and others may exit the business altogether (or be forced out). 

“It’s early days but here in California the initiative is taking off and, if it spreads, it could signal one of the biggest changes in transportation since the car displaced the horse and carriage. In March, Petaluma in Sonoma county became the first city in the US to ban future gas station construction or any new pumps on existing sites… It’s the beginning of what could be a seismic shift. California now has the highest sales of electric vehicles (EVs) in the country. Close to 11% of all new car sales were electric in the first three months of this year and in 2020 the governor, Gavin Newsom, ordered all new cars and passenger trucks sales in California to be zero-emission vehicles by 2035.”

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Investing in the era of misinformation 

The Internet is sort of like the ocean—once pristine and now completely filled with all sorts of garbage. (Er, sorry for the depressing metaphor.) As investors, one of the increasingly complicated parts of our job is to seek out parts of the Internet that actually provide value—meaningful business analysis, thoughtful interpretation of news, well-balanced viewpoints, etc. Equally important is to simply avoid the trash vortexes that float around the Web, which can lead to ill-informed ideas and, in turn, bad investing decisions. This week, Harpers’ cover story Bad News examines the current state of the Internet, and how large technology firms are increasingly shaping reality for billions of people around the globe. To be sure, the article is not directly about investing, but in a sort of McLuhan-esque way, the piece offers a thought-provoking analysis of how our collective media and Internet diet shapes what we believe and who we are — and how, in turn, we make decisions that affect all aspects of our lives.

“Everyone scrounges this wasteland for tainted morsels of content, and it’s impossible to know exactly what anyone else has found, in what condition, and in what order. Nevertheless, our American is sure that what her fellow citizens are reading and watching is bad. According to a 2019 Pew survey, half of Americans think that “made-up news/info” is “a very big problem in the country today,” about on par with the “U.S. political system,” the “gap between rich and poor,” and “violent crime.” But she is most worried about disinformation, because it seems so new, and because so new, so isolable, and because so isolable, so fixable. It has something to do, she knows, with the algorithm.”

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A few more links I enjoyed:  

Steven Wood: Constructivism & the psychology of a great investor – via Value Hive [podcast]
“This week we had a conversation with Steven Wood founder of Greenwood Investors. We covered a variety of topics ranging from joining the board of 500-year-old Portuguese Institution, Steven’s latest book ‘The Builders’ and how he is writing it, the white paper he is publishing on how family businesses operate plus Steven is a huge psychology geek and he gave us an insight on how our left and right brain interact and what we can do to take full advantage of both sides.”
Q2 2021 investor letter – via Hayden Capital
“China’s issue is that the starting line / opportunity to do so isn’t equal – those who have amassed a large piece during China’s high-growth phase (either through self-determination, or as a benefit of government support), are more advantaged and now have more power (bigger piece = more resources / access / connections = more power to acquire more pieces from others). These stronger players are always looking to grow too, and because of their advantages, naturally resources accrue to the top (‘rich get richer’) rather than flowing the other way around. Hence, this leads to an even wider income gap, and requires an even stronger force (the CCP) to stop this dynamic.”
Don’t believe the cynics: Done right, stakeholder capitalism is what America needs – via Fortune magazine
“Done properly, stakeholder capitalism is not defined by political activism, opportunistic virtue-signaling, or brand sloganeering. It doesn’t necessarily need policy interventions, corporate governance reform, or amendments to company documentation to be pursued. And it certainly doesn’t work to the detriment of investors.”
Deepfakes are now making business pitches – via WIRED
“Some partners at EY, the accounting giant formerly known as Ernst & Young, are now testing a new workplace gimmick for the era of artificial intelligence. They spice up client presentations or routine emails with synthetic talking-head-style video clips starring virtual body doubles of themselves made with AI software—a corporate spin on a technology commonly known as deepfakes. The firm’s exploration of the technology, provided by UK startup Synthesia, comes as the pandemic has quashed more traditional ways to cement business relationships. Golf and long lunches are tricky or impossible, Zoom calls and PDFs all too routine.”

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