Tech Brew Ride Home - Fri. 02/25 – The Ukraine Fallout Continues For Tech

Starting point is 00:00:00 On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Friday, February 25th, 2022. I'm Brian McCullough today. Ukraine is seeking to raise its own hacker army. New export controls affect tech products. Why mobile subscriptions being a growth industry is more bad news for the app store status quo.

Starting point is 00:00:51 And of course, the weekend long read suggestions. Here's what you miss today in the world of tech. So much stuff over the last 24 hours related to the Ukraine situation. Let me just summarize what I can as best I can. Sources are telling Reuters that Ukraine is asking for volunteers from its hacker community to protect critical infrastructure and conduct cyber spying missions against Russian troops. Russia-backed falsehoods and digital tricks related to its invasion of Ukraine are putting tech giants on the defensive again over the spread of online disinformation. Again, quoting Politico. Russia-backed media reports falsely claiming that the Ukrainian government is conducting genocide of civilians

Starting point is 00:01:39 ran unchecked and unchallenged on Twitter and on Facebook. Videos from the Russian government, including speeches from Vladimir Putin, on YouTube, received dollars from Western advertisers. Unverified TikTok videos of alleged real-time battles were instead historical footage, including doctored conflict zone images and sounds. These debunked posts have been racking up millions of likes, comments, and shares on Facebook and Twitter, according to CrowdTangle, a social media analytics tool owned by Meta and Politico's separate review of TikTok and Google's YouTube, end quote.

Starting point is 00:02:12 On that YouTube front, Google is under pressure to remove or cut commercial ties with some prolific pro-Russian YouTube channels. Today I learned that pro-Kremlin broadcasters are quite popular on YouTube, quoting from Bloomberg. The online video giant has a massive reach in Russia and has long been a popular platform for both government critics and state-backed media. But now officials in the U.S., the UK and Europe are discussing restrictions that could target groups and people with huge audiences on the platform, creating a dilemma for the alphabet-owned business. European Union sanctions, for instance, would target Vladimir Solov, a TV and radio journalist behind a YouTube channel with more than one million subscribers.

Starting point is 00:02:51 An EU report issued on Wednesday said that Solaliev is known for his extremely hostile attitude toward Ukraine and praise for the Russian government, end quote. A four-hour video live stream published overnight on his YouTube channel about the Russian military attacks had over 2.7 million views within its first nine hours. That video also ran advertisements, at least for U.S. viewers. Representatives for YouTube didn't immediately respond to request for comment. Google is already facing a nest of political problems in Russia. In December, a Russian court ruled that the company had to pay fines that doubled every day after YouTube blocked an account owned by a sanctioned ally of President Vladimir Putin. Earlier in the year, Google removed

Starting point is 00:03:31 videos and apps from Russia's opposition figures after facing pressure from Russia's government. Sergei Javiyadinov, a former lawyer for Google and Russia, and Eastern Europe said that Russia's telecom laws effectively force large tech platforms, including YouTube and Facebook, to comply with state requests to remove or reinstate content. We are dealing with a very robust Russian propaganda machine, he said, end quote. So in other words, the platforms are between a rock and a hard place here. The Russians are threatening any platforms that take their content down. But meanwhile, well, you can imagine the counter considerations, including with Western-based ads. advertisers. We're in a new world where the major tech platforms are actually platforms for government

Starting point is 00:04:13 propaganda. We've not really had to face that before. I want to speak more about this in the long reads. Patreon has suspended a donation page of a nonprofit that was started all the way back in 2014 to provide equipment for their Ukrainian army. They took it down for violating policies on funding military activity on the platform. Experts say Russia could use cryptocurrency tools to lessen the impact of U.S. sanctions, including a forthcoming digital rubble and spoils from previous ransomware attacks. And also this. Experts say that Russia's invasion of Ukraine could exacerbate chip shortages because Ukraine supplies more than 90 percent of U.S. semiconductor-grade neon critical for chip-making lasers. Quoting Reuters. About 35 percent of palladium, a rare metal

Starting point is 00:04:59 also used for semiconductors, is sourced from Russia. A full-scale conflict disrupting exports of these elements might hit players like Intel, which gets about 50% of its neon from Eastern Europe, according to J.P. Morgan. The pain won't fall evenly, however. ASML, which supplies machines to semiconductor makers, sources less than 20% of the gases it uses from the crisis hit countries. Companies may turn to China, the United States and Canada, to boost supplies, says J.P. Morgan, but this may be a slow path. Although the chipmaking industry was able to manage an increase in neon prices stemming from the 2014 Crimean crisis, the scale of today's conflict looks much larger, end quote. And as I was recording that, the U.S. announced the restriction of exports to

Starting point is 00:05:46 Russia on a broad set of U.S. made products as well as foreign-produced goods built with U.S. technology, quoting Reuters. The controls announced by the Commerce Department and first reported by Reuters rely on a dramatic expansion of the so-called foreign direct product rule, forcing companies making high and low-tech items overseas with U.S. tools to seek a license from the United States before shipping to Russia. Under the export curbs announced on Thursday, U.S. suppliers would also have to obtain licenses for certain Russian-bound items that do not currently require them, such as civil aircraft parts. By far, the most sweeping measure is the expansion of the foreign direct product rule or FDPR for Russian buyers. The move takes a page from

Starting point is 00:06:27 restrictions placed on Chinese telecom giant Huawei under then-President Donald Trump. The measures include carve-outs for consumer items such as household electronics, humanitarian goods, and technology necessary for flight safety. Consumer communications devices, like cell phones, are also permitted as long as they are not sent to Russian government employees or certain affiliates, end quote. In non-Ukraine news, Censor Tower says that users spent $18.3 billion globally in the top 100 non-game subscription apps in 2021, which was up 41 percent year-over year. Apple's App Store generated $13.5 billion of that, and Google Play $4.8 billion. The reason why I think this is important to take note of is consider that growth of non-gaming

Starting point is 00:07:18 subscriptions is accelerating. As the lead of this TechCrunch post notes, it's no wonder why mobile publishers are battling to keep more of their subscription revenue out of the hands of platforms like Apple and Google. quote, subscriptions have become the dominant means of driving App Store revenue. In the fourth quarter, 90 of the top 100 top grossing U.S. apps included a subscription. This figure is only slightly down from the 91 in Q4 2020 or the 93 in Q4 2019. Analysis of the subscription market like this is interesting given the increased regulatory scrutiny of the app stores business models over the past year. Some markets like South Korea even passed new laws to limit Apple and Google's control,

Starting point is 00:07:59 over in app purchases. Currently, Dutch regulators are in a standoff with Apple over dating apps payments claiming Apple is in violation of antitrust orders. And while this data is only examining the non-gaming trends, the money that app stores make from gaming companies is also massive, which is why Epic Games, for instance, is appealing the court's decision in its own antitrust case, and quote. In other words, it's not just gaming. Tons of sectors might have a growing vested interest in breaking open the app stores or at least lowering their VIG because subscription seems to be where the growth is these days. Time for the weekend long read suggestions. And as I said earlier when we were talking about YouTube being caught between a rock and a hard place in terms of Russian propaganda,

Starting point is 00:08:50 since it's basically now a huge platform for an adversarial government's propaganda, I think Noah Smith's substack this morning got it something that I've talked about before on the show. Let me quote this from the substack and then make my point. Quote, the series of great power wars that began with World War I in 1914 and ended with the armistists in Korea in 1952 represented a flood of blood unprecedented in human history. But for more than half a century after that nightmare ended, American and Soviet power, and after 1991, just American power, stabilized international borders, legitimized the rights of small countries, and generally suppressed major interstate conflict.

Starting point is 00:09:30 That long piece, as some historians call it, created the space for global trade, investment, and migration to flourish, creating an economic boom that benefited first the developed nations and, after 1990 or so, the developing nations as well, end quote. So the point that I want to reiterate is this. The modern tech economy is very much based on a Fukuyama-esque end of history conceit. even when we had the Cold War in the 1980s when modern tech came of age, you had the free world and the not free one, but you could at least assume that half the world was free and thus a market for your tech. But what if that accident of history is coming to an end? What if there is a market for Chinese tech that is exclusionary to Western tech? We've already spoken about the Internet, seemingly splintering into sub-internets where there's the Western Internet, the Russian Internet, the Chinese

Starting point is 00:10:23 internet. Also, the very foundations of modern tech were based on a supply chain that assumes globalism is triumphant and you can source materials from wherever is cheapest. We've already seen with the U.S. China trade wars of the Trump era and then the COVID crisis that that cannot be assumed with any degree of certainty anymore. And even culturally, at least since the 1980s, we could assume that Hollywood movies would travel to all corners of the globe, that media platforms, social and otherwise could have a shared cultural underpinning that was broadly Western in nature, and politics could be shunted into corners or at least managed so that platforms could serve the globe with one single platform, maybe not perfectly, but broadly. So what if, as no

Starting point is 00:11:05 opposites, we are entering an era of countries and societies descending back into great power blocks of mutual animosity? What if the world and thus the tech world and tech markets get fenced off behind these power blocks. Tech platforms would be forced to pick aside eventually. In other words, it's not just the dream of the 90s is alive in tech anymore. What I'm worried about is that modern tech in so many ways still thinks it's the 90s, still thinks that it can depend on a foundation where globalization is ascendant, the West is dominant, and free trade and liberal ideas could be assumed as table stakes.

Starting point is 00:11:39 Is modern tech and their business plan and their profits ready for a messier world? I fear it is not. you to read the entire piece from NOAA, not for the politics, but through the lens of tech, because it comes at the larger issues here from all sides, like energy supplies, climate change, libertarians, the far left, even crypto. And it quotes from a lot of our tech friends to make its points, including Balagy Srinivas, Antonio Garcia Martinez, and even Palmer lucky to do so. As Vitalik Buteran tweeted earlier this week, Ethereum might be neutral, but he is not. Then from Vice, a look at NFT worlds, an NFT collection of 10,000 unique Minecraft worlds,

Starting point is 00:12:19 which has amassed over 30,000 eth in trade volume or nearly $90 million thus far on the OpenC platform. So instead of building out metaverses, why not just hack your way to a metaverse right now using the existing infrastructure of Minecraft? Quote, once the NFTs are purchased, owners can call their seed from the token contract and input it into Minecraft to create an enter their very own world. If you want your world to be a Metaverse destination, you can host your own server, and the project claims to have verified builders on tap to help NFT holders build up their Metaverse experiences, which is to say Minecraft experiences. To get verified, teams of builders must purchase a world at the floor price, currently $45,000, to show their serious, according to a sign-up page. The basic mechanics of how NFT worlds works, generating a seed,

Starting point is 00:13:07 using it in the official game, and paying for your own server, have long been available to anyone who wants to play Minecraft online with or without NFTs. However, NFT worlds bolts Web3 onto this concept by turning the Minecraft worlds into resellable tokens and layering its own cryptocurrency called World on top of everything. The idea is for World to be the plug-and-play currency for all NFT worlds, which players can earn in bespoke play-to-earn games built in Minecraft and pay to world owners for various things. According to the team, Minecraft was the obvious choice to build the Metaverse on top of because it works, and because it already has to, as a thriving ecosystem of mods, user-generated game modes, cosmetic items, and maps.

Starting point is 00:13:47 We didn't want to have to reinvent the wheel by creating our own unproven game from scratch, while also having to innovate on the NFT, integration, and decentralized metaverse side of the platform we envision the project's documentation states. This would take far too long to deliver on, end quote. What I find interesting is that the article goes on to ask the question, what does Microsoft, owner of Minecraft, think of all this? From The Verge, a Q&A with law professor Tanya Evans on the relationship between legal frameworks and crypto, including copyright and NFTs, contract law, and DAWS, and much, much more. This was hugely useful to me concerning all the things we've been discussing of late.

Starting point is 00:14:26 Quote, I love the way that Wyoming has approached this. They have over 20 laws on the books in some form or fashion regulating or providing regulatory, clarity to folks who want to do business. When folks come together for the purposes of the Dow, they always want the upside. They don't want any of the downside. They would think that the original organizer of the Dow, whether they actually know their names or not, is going to take the heat if something goes badly. By default, that is not what would happen. We will start to see that play itself out. I like the way that Wyoming is at least giving a framework that makes sense. Oftentimes we see things percolate at the state level until there's a tipping point

Starting point is 00:14:59 that would require a federal response. You have to have some type of treasury that might be dedicated in case something goes wrong, some way to protect against the harms, whatever the potential harms are that we would see with any governing structure that involves more than one person, you're going to have to have some protections for them and for others who interact and do business with them. That doesn't mean that the technology is flawed, but you want to just regulate or legislate around the potential harms to investors, to consumers, rather than to the technology itself, end quote. The New York Times has a piece about how when you hear things like this crypto project got hacked or that NFT got stolen using social engineering.

Starting point is 00:15:36 Increasingly, what you're really hearing about is this, quote, romance scams. The term for online scams that involve feigning romantic interest to gain a victim's trust have increased in the pandemic. So have crypto prices. That has made crypto a useful entry point for criminals looking to part victims from their savings. About 56,000 romance scams totaling $139 million in losses were reported to the Federal Trade Commission last year, according to agency data. That is nearly twice as many reports as the agency received in the previous year. In a bulletin last fall, the Federal Bureau of Investigations Oregon Office warned that crypto-dating scams were emerging as a major category of cybercrime with more than 1,800 reported cases

Starting point is 00:16:16 in the first seven months of the year. Experts believe this particular type of scam originated in China before spreading to the United States and Europe, its Chinese name translates roughly as pig-butchering, a reference to the way victims are fattened up with flattery and romance, before being scammed, end quote. And finally, from CNBC, an interesting supposition. I think I assume that when Amazon got into groceries, it was nothing short of an inevitability, the end stage of what Amazon started 25 years ago with books. But what if, as the piece says, for Amazon, grocery has become something of an expensive hobby with little coherent path towards meaningful profitability. Quote, Amazon has introduced a dizzying array of services, Prime Now, Fresh, Go, and others in its effort to become a giant in the $750 billion

Starting point is 00:17:03 U.S. grocery market. In 2017, it spent $13.7 billion to acquire Whole Foods, a price tag more than 10 times higher than Amazon had paid in any prior deal. Nonetheless, it remains a niche player in the industry. As of mid-December, Amazon.com and Whole Foods accounted for a combined 2.4% of the grocery market over the past 12 months, while Walmart controlled 18%, according to research firm numerator. Amazon's delivery services have struggled to stand out in a crowded field, while the Go automated convenience stores have been deprioritized, according to people familiar with the company's strategy, end quote. All right, this weekend's bonus episode coming tomorrow will be the Twitter space we did on all things Tesla earlier this week. Look for that. Catch you all on Monday.

Tech Brew Ride Home - Fri. 02/25 – The Ukraine Fallout Continues For Tech

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.