Tech Brew Ride Home - Tuesday, 7/17 - A Major Autonomous Car Startup You've Never Heard Of

Episode Date: July 17, 2018

Netflix’s subscriber miss, Amazon’s troubled Prime Day, Walmart and Microsoft team up against Amazon, some big problems with voting machines and the big autonomous vehicle startup you’ve probably never heard of. Links:What Netflix's big miss means for the new tech economy (Axios)STRIKES, BOYCOTTS, AND OUTAGES MAR AMAZON PRIME DAY (Wired)Amazon warehouse workers are striking across Europe on Prime Day (The Verge)Andreessen Horowitz Names Connie Chan A General Partner, Ending VC Firm's No-Promotion Policy (Forbes)Top Voting Machine Vendor Admits It Installed Remote-Access Software on Systems Sold to States (Motherboard)VC Firm Social Capital Set Out to Fix Capitalism. Now It’s In Turmoil (Bloomberg)Amazon Foes Walmart and Microsoft Deepen Tech Partnership (WSJ)$800 Million Says a Self-Driving Car Looks Like This (Bloomberg Businessweek) 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 ride home for Tuesday, July 17th, 2018. I'm Brian McCullough. Today, Netflix's subscriber miss, Amazon's troubled prime day, Walmart and Microsoft team up against Amazon,

some big problems with voting machines and the big autonomous vehicle startup you've probably never heard of. Here's what you miss today in the world of tech. Well, Netflix has hit a bit of a speed bump on its role. road to world domination. After the closing bell yesterday, Netflix reported earnings, which were fine, a profit of $384 million, up from $65 million in the same quarter last year. Revenue was up 40 percent to $3.91 billion. But those weren't the numbers Wall Street was focused on. Netflix said it saw membership growth of 5.2 million subscribers in the quarter, and the problem is that was one million less than the company had forecast.

Netflix blamed the miss on faulty internal forecasting and admitted that this seems to be something the company has a problem with. Netflix has missed membership forecast targets three times in the past 10 quarters. On the conference call, CEO Reid Hastings said that there is, quote, lumpiness in the business, and they can't quite figure out why they seem to miss forecasts every now and again. nonetheless, Hastings said, quote, fundamentals have never been stronger. Our viewing is setting year-over-year records.

We're feeling very strong, end quote. Well, Wall Street wasn't exactly very chill about these results. Netflix stock was down as much as 14% overnight, and it opened down around 12% this morning, before recovering slightly. Some analysts cut their price targets on the stock, but Netflix bulls also came out of the woodwork to point out strength in other numbers reported.

For example, 4.5 million of Netflix's 5.2 million new subscribers came from overseas. Some people think that Netflix has plenty of room to grow internationally, but the company's forecast for global net subscription editions of 5 million next quarter is actually less than the 5.3 million added in the same quarter last year. So in essence, people are wondering, is the low-hanging fruit already harvested? and might Netflix have trouble continuing to grow its subscriber base, especially as streaming competitors,

begin coming online in a major way. It's also worth noting that Netflix only added 670,000 subscribers in the U.S., which was only half of the 1.19 million that analysts had been anticipating. CEO Hastings acknowledged the new competitive landscape, though, saying, quote, there's a lot of new and strengthening competition with Disney entering the market, HBO getting additional funding, the different French broadcasters coming together. So that's all normal and expected. So it is what it is.

We're not going to be able to change it. And then our focus is on doing the best content we've ever done, having the best user interface, the best recommendations, the best marketing, all of the things that we've been doing for many years in the past and we'll keep doing for many years in the future, end quote. On CNBC, Ross Gerber of Gerber Kawasaki Wealth and Investment Management was one of the Bulls defending Netflix saying, quote, As an investor, we're looking over next five, ten years, and Netflix is the number one service that every single person uses in general and probably across the world in the next couple of years.

We're not concerned about the business. We love the way the numbers are trending. The only issue anyone has with the stock is the valuation, end quote. Even after today's pullback, Netflix stock is still up 96% for just this calendar year. at around a $150 billion market valuation. By the time you hear this, Amazon's Prime Day will have come and gone, but it wasn't exactly smooth sailing. Amazon suffered glitches in both its mobile app and desktop site yesterday

that had customers complaining of shopping cart errors and endless loops when trying to score Prime Day deals. That's pretty much the last thing you'd want to happen on the one day most people want to use your service. It's almost like YouTube TV going down during the final game of the World Cup. Oh, but that happened also. Anyway, at the time of this recording, the Amazon glitches were mostly fixed, but that wasn't the only headache the company was encountering. Amazon warehouse employees and multiple European companies,

especially Germany, Poland, and Spain, walked off the job yesterday and today to protest poor working conditions. Stephanie Nutsenberger, a top official responsible for retail workers at German trade union Verdi told NBC, quote, The message is clear. While the online giant gets rich, it is saving money on the health of its workers, end quote. In a press release on its website, Verdi wrote that Amazon employees have been struggling with health problems and severe mental and physical stress due to working conditions that the company has not addressed. As Wired reports, there has been a steady drumbeat of complaints about working

conditions, especially in Amazon's warehouses. Quote, this spring report, reports surfaced about Amazon workers in the U.S. who rely on food stamps and Amazon fulfillment center workers in the U.K. who are forced to forego bathroom breaks and pee in bottles, end quote. In a statement to Wired, an Amazon spokesperson said, quote, Amazon is a fair and responsible employer, and as such, we are committed to dialogue, which is an inseparable part of our culture. We are committed to ensuring a fair cooperation with all our employees, including positive working conditions and a caring and inclusive environment, end quote. Amazon also said it has provided, quote, a safe and positive workplace with competitive pay and benefits from day one.

Walmart has struck a major strategic partnership with Microsoft to make use of Microsoft's cloud, AI, and machine learning technology. And what's interesting is that nobody is making any bones about why they're doing this. Microsoft CEO Satcha Nadella says both Microsoft's and Walmart's shared rivalry with Amazon is, quote, absolutely core to this. How do we get more leverage as two organizations that have depth and breadth and investment to be able to outrun our respective competition? End quote. Walmart will make use of Microsoft's services to power algorithms for purchasing and sales data sharing with vendors. Quoting from the Wall Street Journal, Walmart plans to deploy Microsoft's machine learning, artificial intelligence, and other services to help employees, for example, pick products

that go on shelves and optimize the performance of freezers and other equipment. the retailer is aggressively cutting costs as it invests in growing sales online, and it is using tech to analyze its operations, an area of Amazon's expertise, end quote. As we've mentioned several times before, some retailers are more than happy to use Amazon's platforms, both its retail platform to sell things online and especially its AWS services, but other retailers prefer to keep Amazon at arm's length because they don't want to, A, help Amazon bulk up its new AWS CashCal, and B, because they sort of are nervous about providing a rival with sales and customer behavior data. But Walmart seems to be more than bullish on the

Microsoft pack. Quote, we are moving fast and we are looking for partners to help us do that, said Mark Lour, Walmart's head of U.S. e-commerce, and founder of Jet.com, which Walmart purchased in 2016. If you wanted to be confident that our election, systems can't be hacked. I've got really bad news for you. Have you ever used remote access software to access your PC when you were away from it, like accessing your work computer from home or vice versa? So various reporters, especially Kim Zetter, have been sniffing around for a while now trying to figure out if any remote access software has ever been installed on voting machines. To this end, she's been looking into the top voting machine manufacturers, a moment.

Among the largest of which is a company called Election Systems and Software. Specifically, Zetter has been trying to find out if election systems and software ever installed remote access software on their election management systems, which municipalities and election offices used to program actual voting machines. If it had done so, that would by definition make those machines more vulnerable to hackers accessing them, right? because it's opening up remote access. And specifically, specifically, did election systems software ever install PC anywhere

on its election management systems? PC anywhere, being a remote access software system made by Symantec, and which had the unfortunate distinction of having its source code stolen by hackers back in 2006, and which researchers determined in 2012 had a critical vulnerability that would allow a hacker to seize control of any computer

that had PC anywhere installed on it. A few months ago, when Zetter asked these questions for an article in the New York Times, the company told her, quote, none of the employees, including long-tenured employees, has any knowledge that our voting systems have ever been sold with remote access software, end quote. Welp. Senator Ron Wyden of Oregon has been on a crusade to make sure that hackers cannot interfere with elections. And by interfere, I mean actually going in and changing votes.

And so he's also been shaking the trees at election software vendors. And surprise, surprise. In a letter, election system software sent to the senator, it is now fest up that the company had, quote, provided PC anywhere remote connection software to a small number of customers between 2000 and 2006, end quote. Guess what? During those years, 2000 to 2006, ESNS was the top voting machine maker in the country. country, according to Zetter, now writing for motherboard, quote, at least 60% of ballots cast in the U.S.

in 2006 were tabulated on ESNS election management systems. It's not clear why ESNS would have only installed the software on the systems of a, quote, small number of customers, and not all customers, unless other customers objected or had state laws preventing this, end quote. So I'm really no security expert, but it seems to me that installing remote, Remote access software on election management systems is a pretty brain dead, obviously stupid idea. Or, as Senator Wyden said in a statement to motherboard, installing remote access software and modems on election equipment, quote, is the worst decision for security short of leaving ballot boxes on a Moscow street corner, end quote. A couple interesting stories of note out of the VC world. Andresen Horowitz has named Connie Chan as a general partner, a seven-year vet.

of the firm. Chan is the second female GP at Andresen Horowitz, but what is more notable, she is the first ever general partner to be promoted from within. A16Z has long had an unusual policy that said to become a general partner. You either had to have founded a company or have been a CEO previously. Quoting from Recode, quote, the rule change amounts to some inside baseball, but it also speaks to how venture capital firms, powerful insubes. institutions that control which types of people and ideas get funded and which don't are changing. Due to Andresen Horowitz's big profile, the rule has been frequently criticized in hushed tones in Silicon Valley by diversity advocates as an example of the types of hurdles that women and minorities face personally.

The firm isn't saying the change was a reaction to those concerns, though Chan did say the change was a, quote, testament to how Andresen Horowitz managed to move with the times. Last month, the firm announced it had hired Katie Juan, also not a founder or a CEO, as its first female general partner, end quote. Meanwhile, seven years ago, another high-profile venture capital firm, social capital, was founded by early Facebook employee Chimath Palihapitia to make socially meaningful investments that would change the world for the better, especially in the areas of health care, education, and financial services. But Social Capital has seen prominent staff departures of late, and quoting from Bloomberg's reporting on this, quote, At least five investors will not reinvest in the firm's next fund, people with knowledge of their plans, told Bloomberg. Those defections come at the same time the firm most needs to fortify such relationships. Social Capital has postponed fundraising at least three times during the past year, and roughly 90% of the $600 million from its last fundraise in 2015 is already committed.

according to two firm investors. Quote, I don't think there will be a next fund, a third investor told Bloomberg. Investors have complained of strategy drift at social capital, as one investor was quoted. You give him your capital to do one thing, and he does another. He's talking about Chamath. But social capital's returns have been good. The first two funds delivered annual returns of 8% and 27% respectively. according to insiders Bloomberg spoke to, and Pollyhappatia told Bloomberg, quote,

One has to have the confidence and fearlessness to try things. I try to be as well-rounded as possible in order to remain open to new ideas and ways of doing business, end quote. This also might seem like a bit of inside baseball, but it's a story. A lot of folks in Silicon Valley are watching very closely. Polyhapitia has publicly stated that his goal with social capital is to, by 2045, have the firm employ at least 10 million people through the companies the firm has invested in, as well as to, quote, positively impact a quarter of the world's population, and make $1 trillion in investment returns doing so.

So a lot of people are watching this to see if this really is a new type of venture investing, or, frankly, just hubris. The great Ashley Vance has a profile up in Bloomberg Business Week about a major player in the autonomous car space that not a lot of people have been talking about. Z-O-O-X has been building an autonomous vehicle from scratch since 2014, using methods, it says, are completely different from any other company. In fact, Zooks says everyone else is doing autonomous vehicles wrong. The company has raised $800 million to date, including $500 million just this month,

at a $3.2 billion dollar valuation. Zook's co-founder Tim Kentley-Clay says, quote, we are a startup pitted against the biggest companies on the planet, but we believe deeply that what we're building is the right thing. Creativity and technical elegance will win here, end quote. So what exactly is Zooks doing differently? Well, most autonomous projects are basically retrofitting projects, retrofitting existing vehicles into autonomous ones.

Zooks, as I said, is designing a self-driving car from the ground up. basically reimagining what a car is, period. Quoting from the piece, from those first days, Zooks and its founders had a clear picture of the vehicle they wanted. It would have an identical front and rear and would be easy to service

on the rare occasions when it wore out its built-in redundant parts. Each wheel would have its own motor, so the vehicle could make precise maneuvers in tight spaces and parked just about anywhere. And its array of sensors and cameras would be seamlessly integrated, not jammed on top.

to an existing vehicle." Zooks currently has six prototypes, or mules, as they're known in the autonomous car industry. And though the mules aren't street legal yet, Zooks is testing its sensor system in the wild. Vance actually rode along for a test drive and said that in actual city conditions, Zook's technology, quote, really shines.

Vance writes that, quote, of the many self-driving car hopefuls, Zooks, Inc. may be the most daring. The company's robot taxi could be amazing or terrible. It might change the world, not in the contemporary Silicon Valley sense, but in a meaningful sense. Or it might be an epic flop. At this point, it's hard to tell how much of the sales pitch is real, end quote. Check out the link to the story for some actual pictures of this rather unique-looking prototype,

as well as a super fascinating founding story. And that's all for today, but real quick, Remember a couple months ago, I asked you guys who were listening to the podcast on Overcast to use the Overcast share button at the top right of your podcast app and share the show, and y'all did it. I think that was when I first called you guys my mutant podcast army, right? Well, Marco must use recommendations like that to rank shows in his suggested podcast categories because for the past couple months, we've been recommended in the Overcast technology section.

But I just noticed that we've recently fallen back out. So if you don't mind, Overcast listeners, can you share the show again? Twitter preferred, but Facebook also, in case you don't use Twitter. And frankly, whatever podcast app you use, if it has a share feature on it, why not share today's episode? I know Stitcher lets you share and Apple Podcasts definitely has a share button. Again, Twitter preferred, but Facebook is a close second. Basically, let your friends know what you're listening to. Mutant Podcast Army Assemble.

Thanks in advance and talk to y'all tomorrow.