Tech Brew Ride Home - Fri. 09/13 - Cloudflare IPO: Good. WeWork IPO: (???...)

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 TechMeme right home for Friday, September 13th, 2019. I'm Brian McCullough. Today, Cloudflare has a successful IPO, but will WeWorks planned IPO ever be considered a success, even if it actually has one, is another investment bubble popping in the ARVR space?

Starting point is 00:00:51 Will the streaming wars kill the back-end deal in Hollywood? And, of course, the weekend long-read suggestions. Here's what you miss today in the world of tech. Our year of first wave unicorn IPOs is winding down, and this morning, another one, got out the door. Cloudflare opened up more than 21% on its first day of trading after raising $525 million in its IPO, valuing the company at over $4 billion. Cloudflare actually priced above its range. It had expected to come out at $12 to $14 a share, but priced at $18 a share and is currently holding up at around $18.50. Quoting CNBC, in the company's initial

Starting point is 00:01:35 prospectus cloud flare reported a $36.8 million net loss on $129.2 million in revenue for the first half of 2019, with revenues up 48 percent and losses up 13 percent from the same period a year ago. It counted 74,873 paying customers as of the first half of 2019, including companies such as IBM, the chat service Discord, and Zendesk, end quote. Things are decidedly not going as swimmingly at WeWork. This morning, the company filed an amended S-1, which included sweeping corporate governance changes. For instance, changing its high-voting stock structure from 20 votes per share to 10 votes per share. Thereby, curtailing CEO Adam Newman's voting power. Indeed, a lot of these changes seem to be directed

Starting point is 00:02:27 at the power that Newman wields in the company, quoting CNBC. Prior to the move, Newman controlled the majority of voting rights through the company's Class B and Class C shares with both classes carrying 20 votes per share compared with Class A shares, which have one vote per share. The filing also states that WeWork will list its shares on the NASDAQ under the ticker We. The company also eliminated a key provision that would have allowed Newman's wife, Rebecca, to lead the search for his successor should he ever become permanently disabled or deceased. Instead, WeWork's board would pick a successor. The filing states that no members of Adam's family will sit on our board, end quote. Newman has decided to return

Starting point is 00:03:08 any profits he receives from the real estate transactions he has entered into with the company, the filing states, he had faced criticism for leasing several properties in which he has an ownership stake back to WeWork and making millions in the process. Newman will also limit himself to selling no more than 10% of his shareholdings in each of the second and third years after the WeWork IPO, end quote. So there's that. And then there's the fact that various sources are whispering that WeWork might now be seeking a public market valuation as low as $10 to $12 billion. I would remind you that in a round of funding in January, WeWork was valued at $47 billion. Now you can understand those rumors that SoftBank was maybe pressuring WeWork to call the whole thing off,

Starting point is 00:03:57 except for the fact that it basically can't. Again, WeWork needs the money, quoting the Wall Street Journal. One major motivating factor is $6 billion in loans we has arranged that are contingent on at least $3 billion being raised in the share offering, end quote. Believe me, no company, absolutely no company wants to go public at a valuation that would require some of its investors to take a 75% haircut. Again, 75% haircut on the very first day of trading, unless that company has to. Yes, more on the regulatory front and Silicon Valley House lawmakers from both sides of the aisle have formally asked Google, Amazon, Facebook, and Apple for detailed information, including internal communications around various company operations in their antitrust probe. In the case of Apple, the House Judiciary Committee asked for all internal communications from 14 top execs relating to, quote, restrictions on third-party repairs. Quote, the request sent by Democrats and Republicans on the House Judiciary Committee

Starting point is 00:05:11 asked the companies to share detailed information about their internal operations, including financial data about their products and services, private discussions about potential merger targets, and records related to, quote, any prior investigation, and quote, they have faced on competition grounds. The documents could shed light on whether the company's dominance of search, advertising, e-commerce, and other digital markets is rooted in anti-competitive practices, such as gobbling up or squashing rivals, and the expectations. and the extent to which their leaders participated in or had been personally aware of any wrongdoing. The lawmakers' letters are not official legal demands, though the panel does have key powers to compel the four tech giants to turn over records or appear at hearings if necessary, end quote.

Starting point is 00:05:51 And we recently discussed the notion of a bubble bursting in the drone space. Well, there have also been slow-moving rumblings about something similar happening in the AR-VR space. but if you know your history, it's kind of always been this way in the VR space, at least. Sources are telling TechCrunch that Dacri, which built enterprise-grade AR headsets, exactly those sorts of headsets that I have said I expect to see on every factory floor and building site soon. Dackery, which raised $275 million in funding, has closed its headquarters and laid off many employees ahead of a planned shutdown. unquote. Dackery's shutdown is only the latest among heavily funded augmented reality startups seeking to court enterprise customers. Earlier this year, Osterhout Design Group,

Starting point is 00:06:42 unloaded its AR Glasses patents after acquisition talks with Magic Leap, Facebook, and others, stalled. Meta, an AR headset startup that raised $73 million from VCs, including Tencent, also sold its assets earlier this year after the company ran out of cash. Dackery faced substantial challenges from competing headset makers, including Magic Leap and Microsoft, which were backed by more expansive war chests and institutional partnerships. While the headset company struggled to compete for enterprise customers, Dacri benefited from investor excitement surrounding the broader space, that is, until the investment climate for AR startups cooled, end quote.

Starting point is 00:07:19 I'll admit that it is weird that I'm covering Hollywood news like it's tech news, but as the streaming wars rage over the next year, this is where we're at, basically. AT&T's Warner Media has signed an exclusive five-year deal with J.J. Abrams and his bad robot production company to produce TV, film, and streaming projects. Sources are reporting that the deal is worth somewhere in the neighborhood of $250 million, quoting the Hollywood Reporter. The new pact, which runs through 2024 and is described as exclusive, also for the first time, includes video games and digital content. Abrams is expected to create original feature films for

Starting point is 00:08:03 WarnerMedia. Still to be determined is whether Abrams will have the opportunity to pursue feature film directing jobs for studios other than Warner Brothers, though sources stress Abrams will honor pre-existing commitments to his former feature home Paramount and previously announced deals covering Star Wars. Also unclear is whether WarnerMedia landed an investment stake in Bad Robot, though multiple sources say that's a distinct possibility, end quote. So, as with the deal where Netflix locked in the talents of Benny Off and Weiss, this is all about onboarding big-name talents to hopefully produce marquee content that people will be willing to pay monthly for. But there is one other angle here.

Starting point is 00:08:42 The Los Angeles Times is reporting that Disney is taking a page out of the Netflix playbook. It is buying up the full content rights for its new TV streaming shows to be shown on its Disney Plus service. This is how Netflix has always done. things. Netflix has always just paid people up front and retained all the rights because it wants to build that back catalog. But this is a huge break in tradition for a major Hollywood studio. Hollywood is built off of profit participation on the back end, as it's known. Quote, as of the summer, Disney is pressing TV producers and other profit participants in its shows to accept a new formula offering profits sooner in exchange for complete control of any future

Starting point is 00:09:21 licensing revenue. The Los Angeles Times has learned from conversations with Hollywood agents, attorneys and union representatives. Such deals would limit the financial windfall, a major hit like The Simpsons or Gray's Anatomy could generate, end quote. Why would Disney want to do this? Because if you own the content, lock, stock, and barrel, you never have to renegotiate. It gives you greater flexibility and freedom going forward as the landscape changes. Look, for example, at the convoluted way things like the streaming rights to friends and Seinfeld have to be renegotiated. Jerry Seinfeld and Larry David need their back-end cut. If you have to go back to the market every five years or so to make sure your back-end partners are happy, that makes

Starting point is 00:10:03 things expensive. That opens up the possibility also that the talent might test the waters when their deals are up on the open market. For example, when Shonda Rimes' deal with Netflix is over, she might be tempted to field other offers. There's a bunch of streaming players now that might want her services. Locking down all of the rights prevents that if you can make it happen. J.J. Abrams's deal probably has some sort of profit participation on the back end because he has that sort of clout. But the question is becoming, for how much longer will that be the state of play in Hollywood? Time for the weekend. Long read suggestions. First up, there's an op-ed. I want you to read because we're going to talk to the author on one of the bonus episodes this

Starting point is 00:10:51 weekend. The piece asks how we can build artificial intelligence we can trust. Gary Marcus and Ernest Davis say computer systems need to make a fundamental shift in focus to truly enable the next breakthroughs in AI. Quote, the problem is not that today's AI needs to get better at what it does. The problem is that today's AI needs to try to do something completely different. In particular, we need to stop building computer systems that merely get better and better at detecting statistical patterns in datasets, often using an approach known as deep learning, and start building computer systems that from the moment of their assembly innately grasp three basic concepts, time, space, and causality, end quote. It's a super thought-provoking piece that's made me fundamentally rethink

Starting point is 00:11:38 AI as it's currently constituted, and so again, this weekend, we're going to talk a lot more about this concept. Next, this is definitely a weird one. Sex toys are increasingly becoming digital, increasingly getting connected, which means they can be hacked. And that means, perhaps, the definition of sexual assault might need to be updated. Quote, what can be said about hacking sex toys and consent laws? Because these are quite uncharted territories.

Starting point is 00:12:10 We don't know just yet what to do when someone hacks a sex toy, or its data. In some countries, such as the U.S. laws that define what constitutes sexual harassment or assault vary from state to state. In many countries, the law is still vague about the definition of assault and sexual harassment. The lack of precision surrounding sexual harassment and assault laws prevents us from taking concrete action in the event of a sex toy hack. Worse yet, we don't even know whether our data can be hacked into and stolen in the first place. Check out the piece from screenshot for a lot more. And WIRE checks. in with Urban Dictionary on the occasion of that site's 20th anniversary, saying,

Starting point is 00:12:49 The crowdsourced dictionary once felt like a pioneering tool of the early internet era. Lately, it's become something much more inhospitable. You can probably guess where this is going. In time, however, the site began to espouse the worst of the internet. Urban Dictionary became something much uglier than perhaps what Peckham set out to create. It transformed into a harbor for hate speech. By allowing anyone to post definitions, users can up or downvote favorite ones, Peckham opened the door for the most insidious among us. Racism, homophobia, xenophobia, and sexism currently serve as the basis for some of the most popular definitions on the site, end quote.

Starting point is 00:13:26 The whole point of Urban Dictionary was to give authoritative voice to those who typically didn't have it, but is that even possible on the modern internet? Another 20th anniversary in The Verge. Tony Hawk looks back on how his titular video games changed the sport of skateboarding forever. Quoting The Verge, the thing that I'm proud of is that it represented the culture well, says Hawk. It represented the lifestyle in terms of the music and the attitude and the actual skating itself. When you do a kickflip in the game, you see what a real kickflip looks like. It taught a whole generation of kids what proper skating can be, end quote.

Starting point is 00:14:06 The games were also hard on a recent playthrough of some of the early. early levels of pro skater. I remembered how unforgiving the game could be, but also how satisfying it felt to land a string of combos. For those wondering, yes, Hawk has beaten every game that bears his name, end quote. Forbes has a cover story profile of Danny Dines, whose startup UiPath has made him, as they call it, the first bot billionaire. Quote, UiPath creates bots, blocks of code that automatically carry out repetitive tasks. You might associate bots with Russian election ruses or customer service stand-ins, but UiPath recently garnered a $7 billion valuation by selling a more humdrum kind that can pull numbers from invoice PDFs into accounting software or process

Starting point is 00:14:56 insurance claims. The mindless tasks that, like those of bank tellers or telephone operators generations ago, cry out to go the way of the do-do. This shift, which has spawned an entirely new tech category known as robotic process automation or RPA carries eye-popping potential. Japan's Sumitomo Mitsushi Bank Group, a UiPath customer since April 2017, projects that reducing employee busy work and improving accuracy will have saved it nearly $500 million by next year. Giants like Toyota and Walmart have flocked to UiPath for similar magic. Setting up virtual robots is faster and cheaper than assigning engineers to build an internal

Starting point is 00:15:34 app and it spares workers the low-tech alternative, long hours creating Excel macros and filling spreadsheets. A UiPath bot does the task endlessly without complaint for up to $15,000 a year. Some companies use thousands at a time, end quote. Finally, I've got one more bit of science to throw at you this week. Scientists think they have made an interesting discovery. Human speech might actually have a universal transmission rate. No matter how fast you talk, in whatever language. You're basically relaying information at 39 bits per second, which, interestingly, is twice the speed of Morse code. Quote, scientists started with written texts from 17 languages, including English, Italian, Japanese, and Vietnamese. They calculated the

Starting point is 00:16:22 information density of each language in bits, the same unit that describes how quickly your cell phone, laptop, or computer modem transmits information. They found that Japanese, which has only 643 syllables, had an information density. of about five bits per syllable, whereas English, with its 6,949 syllables, had a density of just over 7 bits per syllable. Vietnamese, with its complex system of six tones, each of which can further differentiate a syllable, topped the charts at 8 bits per syllable. Next, the researchers spent three years recruiting and recording 10 speakers, five men and five women from 14 of their 17 languages. They used previous recordings for the other three. Each participant read allowed

Starting point is 00:17:02 15 identical passages that had been translated into their mother tongue. After noting how long the speakers took to get through their readings, the researchers calculated an average speech rate per language measured in syllables per second. Some languages were clearly faster than others, no surprise there, but when the researchers took their final step, multiplying this rate by the bit rate to find out how much information moved per second, they were shocked by the consistency of the result. No matter how fast or slow, how simple or complex, each language gravitated towards an average rate of 39.15 bits per second. They report today in science advances. In comparison, the world's first computer modem, which came out in 1959, had a transfer rate of 110 bits per second,

Starting point is 00:17:45 and the average home internet connection today has a transfer rate of 100 megabits per second or 100 million bits. Sometimes interesting facts or rules are hidden in plain sight, says study co-founder Francois Pellegrino, an evolutionary linguist, at the CNRS-sponsored dynamic du language laboratory in the University of Leone in France. Because language science has focused so long on things like grammatical complexity, he says, this information transfer rate has been overlooked. The crystal clear conclusion, he adds, is that although languages differ widely in their encoding strategies, no one language is more efficient than another at delivering information, end quote. That's all for a very busy week, busy weekend for you too, with two

Starting point is 00:18:34 weekend bonus episodes won a full debriefing of the iPhone 11 event and won a deep dive into the state of AI, as I mentioned in the Long Read section. I'll talk to you all again on Monday.

Tech Brew Ride Home - Fri. 09/13 - Cloudflare IPO: Good. WeWork IPO: (???...)

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