Tech Brew Ride Home - Fri. 10/26 - AI “Art” Fetches $400,000 at Auction

Episode Date: October 26, 2018

The Tech earnings season earnings roundup, new DRM rules allow jailbreaking… for some things, China’s rival GPS system, AI “art” fetches $400,000 at auction and the weekend longreads suggestions. Links: Twitter Stock Soars after Strong Earnings Beat (CNBC) Tesla Shares Soar on Surprise Third-Quarter Profit That Beats Wall Street Expectations (CNBC) Microsoft Reports $29.1 Billion in Q1 2019 Revenue: Azure up 76%, Surface up 14%, and Windows up 3% (VentureBeat) Amazon Squeezes Out More Profit as Sales Growth Slows (New York Times) Google Stock Falls As Revenue Misses; Amazon Ad Competition To Blame? (Investor’s Business Daily) Snap Hits All-Time Low After Lackluster Earnings Report (CNBC) Copyright Office Ruling Issues Sweeping Right to Repair Reforms (iFixit) In Groundbreaking Decision, Feds Say Hacking DRM to Fix Your Electronics Is Legal (Motherboard) How China's GPS 'Rival' Beidou is Plotting to Go Global (BBC News) AI Art at Christie’s Sells for $432,500 (New York Times) The Betterment Weekend Longreads: Inside Rockstar Games' Culture Of Crunch (Kotaku) At Netflix, Radical Transparency and Blunt Firings Unsettle the Ranks (WSJ) Podcast on Netflix Culture (Planet Money Podcast) It Might Get Loud: Inside Silicon Valley’s Battle to Own Voice Tech (Fortune) How Dara Khosrowshahi’s Iranian heritage shapes how he leads Uber (Fast Company) AN ALTERNATIVE HISTORY OF SILICON VALLEY DISRUPTION (Wired) Bonus Link (from Wednesday): THE AI COLD WAR THAT COULD DOOM US ALL (Wired) Learn more about your ad choices. Visit megaphone.fm/adchoices

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, October 26, 2018. I'm Brian McCullough. Today, the tech earnings season, earnings roundup, new DRM rules allow jailbreaking for some things.

China's rival GPS system. AI art fetches $400,000 at auction, and the weekend Longreads suggestions. Here's what you miss today in the world of tech. Tech earnings season is upon us once again. but this quarter, instead of doling out the news day by day, since there hasn't been really any earth-shattering shocks yet, just a bunch of little surprises, I thought I'd wait and round up everything and give it to you all at once. So, first up, Tesla reported earnings this week. The company posted its first profitable quarter in two years and only its third profitable quarter ever, based on strong sales of the Model 3. It brought in $311 million in profit.

The company delivered just over 56,000 Model 3s in North America, and it hopes to expand Model 3 orders to Europe and China before the end of the year. On Twitter, Sean O'Kane highlighted some interesting details. Tesla now makes more than a 20% gross margin on the Model 3. Tesla energy revenue is up, and the company is holding $906 million in customer deposits for cars it hasn't made yet. Oh, and keep in mind this is the last. last earnings report with Elon Musk as chairman for at least three years after that recent settlement with the SEC.

Next, Twitter. Twitter has lost 9 million MOWS, monthly active users, but managed to beat expectations on both revenue and profit. Part of the dip in MOWS has to do with a purge of bots and fake accounts the company warned about last quarter. The stock opened up 14% yesterday on the earnings news. Next, Amazon. the e-commerce giant delivered its fourth consecutive quarter with profits above $1 billion.

The New York Times reports that, quote, Amazon captures 49 cents of every dollar spent online, end quote. Sales were up 29% to $56.6 billion, but investors were disappointed that sales rose just 11%. In the year ago quarter, growth was roughly twice that. Investors seem worried that Amazon is saturating its core e-commerce market and will need to diversify in order to continue growing. going. And no surprise, my ongoing interest in Amazon's advertising business showed up in the earnings, quoting the New York Times again, quote, Amazon's website has had advertising such as sponsored products for years, but ads have recently become the company's fastest growing business. In September, it became the third largest digital advertising service in the United States behind just Facebook

and Google, according to estimates from e-marketer. Ads provided a bright spot in earnings, providing about 2.5 billion in revenue in their third quarter of triple-digit growth, end quote. Next, Google. Revenue growth at Alphabet was 26% in the quarter, but overall revenue was just shy of what Wall Street expected, sending the stock down after hours. Investors Business Daily quoted e-marketer analyst Monica Pertt, quote, we're seeing a larger-than-expected slowdown in Google Properties revenue, representing its core search business. This is likely related to the ramp up in competition from Amazon as consumers increasingly turn to the e-commerce giant for their product searches, end quote. On Twitter, Tom Warren pointed out how reliant Google is on advertising for its revenue.

Still, this is yet another call for diversification at Alphabet. Warren wrote, quote, Google's financial report is out and 86% of its revenue is from ads. Apple's iPhone is 54% of its. its earnings by comparison. Windows, Xbox, and Surface combined is 36% of Microsoft's earnings, end quote. As that tweet noted, Microsoft continues the transition to cloud computing as a robust part of its increasingly diversified business. While revenue from its Windows business was only up 3%, and revenue from Surface devices was up a respectable 14%. The revenue from its cloud platform, Azure, was up a staggering 76%.

This comes in addition to gaming revenue, which was up 44% on strong sales of Xbox, hardware, software, and services. But lastly, there's Snap. Poor Snap reported Q3 revenues of $298 million versus $283 million, expected. So a beat on expectations, and that revenue number is up 43% year over year. However, the dreaded Mao and Dow strike again. Snap reported daily active users of 186 million, which was up 5% year over year, but was down 1% quarter over quarter. At the time of this recording,

Snap's stock had opened down more than 12% and was below $6 today, the lowest the stock has ever been. You know what would be a good costume for a Silicon Valley Halloween party? a Mao or Dow monster. You're welcome. News from the ongoing fight

for what activists call the right to repair. Let's start with some background. The Digital Millennium Copyright Act, or DMCA, has a clause that makes it illegal to circumvent DRM Digital Rights Management protections on copyrighted works. But this clause has been used by manufacturers to limit consumers' ability

to do seemingly normal things like repair their own game console or home appliance, unlock their cell phone, or even repair a tractor. Manufacturers do this by applying DRM to their devices, or their tractors, then claiming copyright protection on the DRM system. To repair a hardware device, you now have to get through that DRM software system, and that has traditionally been illegal, assuming you can crack it at all. Representatives from the Electronic Frontier Foundation, I Fix It, Repair.org,

Stanford's IP Law Clinic and Sidia, the iPhone jailbreaking group, appeared six months ago in Los Angeles court to argue their case. It took three days of hearings. They wanted the right to repair their gadgets and their tractors and their cars and their appliances when they're broken, even if that meant cracking DRM. The pro-fixing advocates talked it over with the Copyright Office, often getting way into the technical weeds. On the opposing side, representatives from the Motion Picture Association of America,

the Recording Industry Association of America, and the Auto Alliance, among others, argued to maintain the status quo. Yesterday, the Copyright Office released its final ruling, including this quote in the introduction. It's my own damn car. I paid for it. I should be able to repair it

or have the person of my choice do it for me, end quote. That should give you a hint as to which side they came down on. Starting Sunday, October 28th, a bunch of activities will become legal. Quoting, I fix it. One, you can now jailbreak Alexa-powered hardware and other similar gadgets. They call these voice assistant devices.

Two, you can unlock new phones, not just used ones. This is important for recyclers that get unopened consumer returns. Three, we got a general exemption for repair of smartphones, home appliances, or home systems. This means it's finally legal to root and fix the revolve smart home hubs that Google bricked when they shut down the servers or pretty much any other home device. 4. Repair of motorized land vehicles, they mean tractors here, by modifying the software is now legal. Five, it is now legal for third parties to perform repair on behalf of the owner. This is hugely important for the American economy where repair jobs represent 3% of overall employment, end quote.

On the downside, the petition to open up repair of game consoles was denied, so if your Xbox breaks, you're still going to need to take it to an authorized repair center. Also, boat and airplane owners are cut out of these new rules. Only motorized land vehicles were included. And a request to bypass the HDCP copy protection system that runs over HDI cables was denied, meaning modern TV systems remain locked down. It's important to note that just because some new activities have become legal doesn't make them easy.

DRM systems still need to be cracked, and that's increasingly difficult. Still a big day, not just for copyright law, but for American. who want the right to fix their own damn cars, or cell phones, or tractors. The Chinese government is building a competitor to the global positioning system, known, of course, as GPS. And if you weren't aware of it,

China's version is called Beto, like Play-Doh. And Beto is getting ready to go global. The big question here is, of course, why compete with GPS? It's actually kind of obvious. The U.S. government owns and operates GPS. So if you're, say, the Chinese military, you might not want mission-critical functions

to rely on a system controlled by a power that is potentially an adversary, or at least a power that you don't have control over. It's also smart for such a vital global service to have a robust backup system. If GPS fails for some reason, Beto will be there to offer very similar functionality as long as device manufacturers start.

building support for it. Over the past two decades, Beido has been rolling out in stages. It's currently in operation for the Greater Asia Pacific region, according to a BBC news report last month. The system is now seeing serious commercial use in that region.

Quoting the BBC, local authorities ordered 33,500, about half of all taxis in Beijing, to install Beido. And the Chinese government has set a goal of all new cars to be Beido guided by 2020.

Domestic phone brands such as Huawei, Xiaomi, and One Plus are now Beto compatible, although Apple did not add the Chinese system to its new lineup of iPhones, end quote. Beto is named after the Chinese word for the constellation Ursa Major, better known in the U.S. as the Big Dipper. It's aiming for completion in 2020

with a total of 35 satellites providing global coverage. This year alone, China has launched more than 10 satellites for the system, and more than that are planned. Compare that to 32 satellites employed currently by GPS. It's also worth noting that Beto is expected to be more accurate than GPS, though the highest accuracy service is currently restricted to military use in China and Pakistan. And let's not forget GPS and Beto aren't the only satellite location systems out there. Russia has Glanass, India has Navic, Europe has Galileo,

and the UK might have to build its own system after Brexit cuts off its access to Galileo. Prepare for a future in which devices have many options for determining your location, but the motivating factors for which systems they support may have more political than technological reasons behind them. Now some tech news from the art world. Be warned, painters, artists, AI is coming for your job too. Last Friday, a portrait produced by an AI system was sold at auction for $432,000, $5,000. hundred dollars. That's over 40 times what Christie's, the auction house, had estimated before the sale and may signal a new trend in sales of computer-generated art. The portrait titled Edmund de Balami from La Familia de Balami was created by a French art collective called Obvious. The collective is made up of three 25-year-old art students. The portrait shows a distorted view of a man part of a fictional Balami. family and is actually part of a series of portraits showing that family. The AI algorithm used to

generate it was trained with a dataset including 15,000 portraits made by humans, of course, between the 14th and 20th centuries. The code used to create the portrait was based on the work of Robbie Barat, a West Virginia programmer who was just 17 years old when he started dabbling in AI. He's 19 now and works at Stanford's AI lab. Barat uploaded his code to GitHub, making it publicly available. Obvious says they took the code and modified it slightly in order to suit their needs. Elders in the AI art community are not all pleased with the situation, quoting the Washington Post,

Mario Klingerman, a Germany-based AI artist, whom Obvious has cited as an inspiration, told the Post he was shocked that it sold for hundreds of thousands of dollars. He said he believed for a second that, maybe this is just a practical joke among oligarchs, end quote. Finally, these are the weekend long reads brought to you by Betterment, the largest independent online financial advisor. Check out Betterment. If you haven't done so, the word better is in the name. Sometimes life leaves you funny little clues like that. Better investment.

Betterment. I think you're picking up what I'm putting down here. So since I figure a good chunk of you listening out there will be spending your weekend immersed in the new Red Dead Redemption game, let's start with this. If you'll recall in last week's long reads, we featured a profile of the game's development process from New York Magazine. And a throwaway line in that piece actually ignited a fair bit of controversy in gaming circles this week.

In the piece, Dan Hoser, co-founder of the company that made the game, Rockstar, mentioned that developers have been working 100-hour weeks to get the game out. This led to a whole bunch of discussions about working conditions at Rockstar and the gaming industry in general.

Games are bigger than movies now. But the actual development process shares more in common with the piecework conditions of comic book companies or the garment industry. And of course, the garment industry gave us the term sweatshop. So the first long-read suggestion is a piece from Kataku, where they interviewed 34 current and 43 former rock star employees to get the real scoop on what it takes to get perhaps the biggest game ever out the door. Speaking of profiles of company cultures, the Wall Street Journal has a fascinating piece up looking at the culture of Netflix. I say fascinating because I don't think we've seen much before about the Netflix way. We hear all the time about the Apple way, the Amazon way, even the

Facebook way. But how has Netflix been so successful? Well, it's a bit of a mixed bag. Quote, The Netflix way emphasizes freedom and responsibility, trusting employees to use discretion, whether it is about taking vacation, flying business class, or expensing an Uber right home. Virtually every employee can access sensitive information from how many subscribers sign up in each country to viewership of shows to contractual terms for Netflix's production deals. Executives at the director level and above, some 500 people, can see the salaries of every employee.

Employees are encouraged to give one another blunt feedback. Managers are all told to apply a keeper test to their staff, asking themselves whether they would fight to keep a given employee, a mantra for firing people who don't fit the culture and ensuring only the strongest survive, end quote. In the show notes, there's also a link to a Planet Money episode that went into some of the same stuff about Netflix a few years ago. Next, Fortune has a piece that you know I couldn't resist.

It's a look at the entire tech industry's race to own voice technology. It's all about smart speakers, smart assistants, and why every major tech player thinks they have to be in the space all of the sudden. Quote, Gene Munster of the investment firm Loop Ventures estimates that the tech giants are spending a combined 10% of their annual research and development budgets, more than $5 billion in total on voice recognition. He calls the advent of voice technology a monumental change for computing, predicting that voice commands, not keyboards or phone screens,

are fast becoming the most common way we interact with the Internet, end quote. Next, Fast Company has a long profile up on Uber CEO Dara Koshojahi and how his Iranian heritage shapes how he leads that company. And finally, there are three books that have all come out this month that have each taken a jaundiced view of Silicon Valley in different ways. Wired reviews each of them, quote, It is only now a decade after the financial crisis that the American public seems to appreciate that what we thought was disruption, worked more like extraction of our data, our attention, our time, our creativity, our content, our DNA, our homes, our cities, our relationships. The tech visionaries' predictions did not usher us into the future, but rather a future where

they are kings. They promised the open web. We got walled gardens. They promised individual liberty, then broke democracy. And now they've appointed themselves the right men to fix it. but did the digital revolution have to end in an oligopoly? In our fog of resentment, three recent books argue that the current state of rising inequality was not a technological inevitability. Rather, the narrative of disruption duped us into thinking this was a new kind of capitalism.

The authors argue that tech companies conquered the world not with software, but via the usual route to power. Ducking regulation, squeezing workers, strangling competitors, consolidating power, raising rents and riding the wave of an economic shift already well underway, end quote. That's all for the weekend, long reads, brought to you by Betterment. Investment involves risk, but TechMeme ride home listeners can get up to one year of their investment money managed for free. Just go to betterment.com slash ride. That's betterment.com slash R-I-D-E. Betterment, outsmart average.

That's all for this Friday. Thanks again to Chris Higgins for writing. the show all week, including today. I wanted to end today a little differently, though. We did a story on Wednesday about the AI Cold War that's brewing between China and the U.S. It was a bit of a long read itself, and for whatever reason, it's kind of stuck with me

over the last few days. I feel like it's a piece that has woken me up to some of the themes and threads that will shape how I'm thinking about things for the next decade or so. it struck me so much that I want to read this passage that for reasons of time we didn't get to include on Wednesday. I'll quote the entire passage and then leave you all to enjoy your weekends. In the beginning, the communications revolution made computers affordable to the masses. It wired devices together in a giant global network and shrank them down to the size of your hand. It was a revolution that empowered the individual, the lone programmer with the power to create in her pocket.

the academic with infinite research at his fingertips, the dissident with a new and powerful way of organizing resistance. Today's stage of the digital revolution is different. That supercomputer in your pocket is also a homing device. It's tracking your every like, keeping a record of everyone you talk to, everything you buy, everything you read, and everywhere you go. Your fridge, your thermostat, your smartwatch, and your car are increasingly sending your information back to headquarters too.

In the future, security cameras will track the ways our eyes dilate, and sensors on the wall will track our body temperature. It's already hard for most people to comprehend much less control all the information collected about them, and the leverage that accrues to data aggregators will just increase as we move into the era of AI. Vladimir Putin is a technological pioneer when it comes to cyber warfare and disinformation, and he has an opinion about what happens next with AI, quote,

The one who becomes the leader in the space will be the ruler of the world, end quote.