Tech Brew Ride Home - Wed. 10/27 – Is Robinhood The Company Doge Made?

Episode Date: October 27, 2021

Microsoft and Google continued to report earnings that boggle the mind. Meanwhile, Robinhood discovered that if you live by crypto trading revenues, you can be wounded by them too. Will the Facebook Files force some sort of FTC action? AWS goes after Google’s tensor processing units. And do you think I could produce this show on MS-DOS? Probably not, but Dune was written on it. Sponsors: Masterworks.io/ride Tovala.com/ride Links: Microsoft beats revenue expectations, reporting 22% growth (CNBC) Robinhood shares tank as revenue falls way short of expectations on lighter crypto trading (CNBC) FCC kicks China Telecom Americas out of US, cites Chinese government control (ArsTechnica) Federal Trade Commission Scrutinizing Facebook Disclosures (WSJ) Amazon launches AWS instances powered by Habana’s AI accelerator chip (VentureBeat) Biden appoints Jessica Rosenworcel to lead the FCC (The Verge) The ‘Dune’ Screenplay Was Written in MS-DOS (Motherboard/Vice) 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 Tech meme right home for Wednesday, October 27th, 2021. I'm Brian McCullough. Today, Microsoft and Google continue to report earnings that boggle the mind. Meanwhile, Robin Hood discovered that if you live by crypto trading revenues, you can be wounded by them too. Will the Facebook files force some sort of FTC action? AWS goes after Google's tensor processing units. And do you think I could produce this show on MSDOS? Probably not. But Dune was written on it. Here's what you missed today in the world of tech. I want to lead off with a quick earnings roundup today, not because there have been any sort of narrative violations like we talked about earlier in the week, but because I think we can touch

base on a couple things real quickly. Microsoft earnings first, of course, they killed it again, beat revenue expectations reporting 22% year-over-year growth, their fastest growth since 2019. You know when we talk about how amazing it is that companies this big, or even in Microsoft's case this old can still be growing, that they've not run into that law of large numbers wall that a lot of people expect eventually. Well, get this. Joe Wisenthal tipped me off to the fact that Microsoft has had 17 straight quarters now of double-digit revenue growth. This is a 46-year-old company, y'all. This is a company so big that it's now closing in on Apple's market cap crown as the biggest company of all time. And frankly, that's just insane. That's most

due to their cloud stuff, of course, though Azure revenue growth was sort of flat this quarter, but also note this. Overall gaming revenue for Microsoft was $3.6 billion in Q1, up 16% year over year, with hardware revenue up 166% on continued demand for the Xbox series X and S consoles, of course. So remember, if gaming is a monster industry that is still on the up and has plenty of green fields left to grow into, remember that Microsoft is maybe the best positioned of any of the big tech companies to go hog on gaming. Meanwhile, Alphabet continued to do great. Their revenue was up 41% year over year, which again, at their scale is insane. Google Cloud revenue was up to $5 billion from $3.4 billion year over year. And in the background, remember, YouTube,

as we've been saying, killing it as well. Another record revenue quarter for YouTube, $7.2 billion in ad revenue up from $5 billion a year ago. Things weren't quite so rosy for recently public company Robin Hood. Q3 revenue for Robin Hood came in at $365 million, which was up 35% year over year, but missed estimates of $431.5 million. So that's a big miss of close to $100 million. Why? Well, why did their earnings look so good in their first report as a public company?

Last quarter, crypto trading. There was less crypto trading this quarter. I guess you folks stopped buying Dogecoin. You think I'm joking, but I'm not really joking. That could be it entirely. This gave Robin Hood a net loss of $1.32 billion, up from an $11 million loss year over year. The stock is down around 10% this morning, quoting CNBC. Robin Hood said that, barring any change in the market environment, the headwinds that dragged down last quarter like lower retail trading activity, will persist into year end. Third quarter transaction-based revenue totaled $267 million, with only $51 million coming from cryptocurrency trading. Revenue from crypto trading totaled $233 million in the second quarter helped by interest in meme-inspired Doge coin.

Q2 was kind of one of those idiosyncratic market events where there's this massive interest specifically in Doge. Robin Hood's CEO Jason Warnock told CNBC, we love it when those moments happen. It's a great way to bring a lot of new customers onto the platform, but we're really thinking about investing in crypto over the long term. And so it's, you know, frankly, it's going to be impossible for us to accurately predict revenue on a quarter to quarter basis, end quote. So, you know, there's this thing where a company can time going public perfectly so that their earnings peak right as they're going public. I'm not saying there's anything wrong with that, but lots of folks on Twitter are saying Robin Hood was the best

timed IPO they've seen in a long time. So what if Doge was the thing that gave Robin Hood, its window of opportunity to go public. What a world we live in. You thought the trade war and tech wars with China were over? Think again. The U.S. Federal Communications Commission has ordered China Telecom Americas to stop providing services in the U.S. within 60 days, saying the U.S. unit of China Telecom is subject to Chinese government control and influence, quoting Ars Technica. The vote was four to zero, with both Democrats and both Republicans approving the order to revoke. and terminate China Telecom's Section 214 authority to operate in the U.S. The FCC said its order, quote, directs China Telecom Americas to discontinue any domestic

or international services that it provides pursuant to its Section 214 authority within 60 days following the release of the order, end quote. The FCC pointed to a, quote, changed national security environment with respect to China since the Commission authorized China Telecom Americas to provide telecommunications services in the United States almost two decades ago, end quote. The companies, quote, ownership and control by the Chinese government raised significant national security and law enforcement risks, by providing opportunities for China Telecom Americas, its parent entities, and the Chinese government to access, store, disrupt, and or misrout U.S.

communications, which in turn allow them to engage in espionage and other harmful activities against the United States, the FCC said. The FCC began its review of China Telecom after the Department of Justice recommended terminating the company's authorization in April of 2020. The DOJ at the time said that China Telecom. Telecom failed to comply with a 2007 agreement with the DOJ and that it made, quote, inaccurate statements to U.S. authorities about where China Telecom stored its U.S. records, raising questions about who has access to those records, and inaccurate public representations concerning its cybersecurity practices,

which raise questions about China Telecom's compliance with federal and state cybersecurity and privacy laws, end quote. The FCC today said that, quote, China Telecom, America's conduct and representations to the commission and other U.S. government agencies demonstrate a lack of candor, trustworthiness, and reliability that erodes the baseline level of trust that the commission and other U.S. government agencies require of telecommunications carriers given the critical nature of the provision of telecommunications service in the United States, end quote. There have been whispers that the recent spate of Facebook files stories might lead to some tangible consequences sooner rather than later, and indeed sources are apparently telling the

Wall Street Journal that the FTC staff is investigating whether Francis Hogan's documents show Facebook violated a 2019 privacy settlement, which had resulted in a $5 billion fine, which I believe was Facebook's biggest ever slap on the wrist by a government agency, quoting the journal. The internal research found evidence that the company's algorithms foster discord and that its Instagram app is harmful for a sizable percentage of its users, notably teenage girls, among other findings. The documents provided the foundation for the Wall Street Journal's Facebook files series. In a statement, Facebook said that it is, quote, always ready to answer regulators' questions and will continue to cooperate with government inquiries,

end quote. The company has previously said that many of the research documents released by former Facebook product manager Francis Hogan have been misinterpreted and that the company has, quote, invested heavily in people and technology to keep our platform safe, end quote. The FTC also has been in communication with Ms. Hogan's team, according to another of the people familiar with the matter. Unlike the SEC, the FTC doesn't have a formal program to protect whistleblowers like Ms. Halgan. The FTC is nonetheless a key government regulator of business conduct on the internet in its role policing the marketplace for unfair and deceptive trade practices. One issue likely being explored by FTC staffers is whether Facebook had a legal obligation to

warn users about the risks revealed by internal research findings, said former FTC chairman William Kovitch, now a law professor at George Washington University. If Facebook failed to do so, that could constitute a deceptive trade practice, he said. David Vladak, a former head of the FTC's Consumer Protection Bureau, said the agency also could consider whether the company was acting appropriately given the findings of the company research. However, he added any case might not be easy to prove. Quote, you have to take into account Facebook's denial that its research really shows harm and its position that the whistleblower has misstated or misrepresented the research, he said, end quote. AWS has launched new EC2 instances powered by AI accelerators from Intel's Hibana,

claiming 40% better price performance to train machine learning models over the latest GPU instances. Quoting Venture Beat. Amazon Web Services, Amazon's Cloud Services Division, today announced the general availability of Elastic Compute Cloud, EC2DL1 instances. While new instance types generally aren't particularly novel, DL1 is the first type in AWS designed for training machine learning models, Amazon says, powered by Gowdy accelerators from Intel-owned Hibona Labs. Developers, including Seagate, fractal, Indel, risk fuel, and Lidos were given early access to Gowdy running on AWS prior to today's launch. This is the first AI training instances by AWS that is not based on GPUs, Hibana wrote in a blog post.

The primary motivation to create this new training instance class was presented by Andy Jesse in 2020 at ReInvent, quote, to provide our end customers with up to 40% better price performance than the current generation of GPU-based instances, end quote. Machine learning is becoming mainstream, as enterprises realize the business impact of deploying AI models in their organizations. Using machine learning generally starts with training a model to recognize patterns by learning from datasets, then applying the model to new data to make predictions, maintaining the prediction accuracy, of a model requires retraining the model frequently, which takes a considerable amount of resources, resulting in increased expenses. Google's subsidiary DeepMind is estimated to have spent $35 million training a system to learn the Chinese board game Go. With DL1, AWS's first answer to Google's

tensor processing units or TPUs, a set of custom accelerator chips running in Google Cloud platform, Amazon and Hibana claims that AWS customers can now train models faster with up to 40% better price performance when compared to the latest GPU-powered EC2 instances. The DL1 instances leveraged up to eight Gowdy accelerators built specifically to speed up training, paired with 256 gigabytes of high bandwidth memory, 768 gigabytes of system memory, second generation Amazon Intel, Zeon Scalable Cascade Lake processors, 400 GbPS of networking throughput, and up to 4 terabytes of local NVME storage. Gowdy features one of the industry's first on-dye implementations of remote direct memory access over Ethernet on an AI chip. This provides 10, 100 GbPS, or 20, 50 GbPS communication

links, enabling it to scale up to as many as thousands of discrete accelerator cards. When coming from a GPU or CPU-based instance, customers have to use Hibana's Synapse AI SDK to migrate existing algorithms due to architectural differences. Hibana alternatively provides pre-trained models for image classification, object detection, natural language processing, recommendation systems in its GitHub repository, end quote. One thing that's been sort of flying under the radar is that almost fully a year into his presidency, until now, President Biden had not filled out his Federal Communications Commission. Well, that ended today as Biden named Jessica Rosenworsal to officially lead the FCC,

also nominating Gigi Sone as the third Democratic commissioner on the five-person panel. But it's unclear if the Senate will confirm either of these folks anytime soon, so maybe the FCC will remain in a sort of limbo for a while longer, quoting the verge. The decision comes late into Biden's term, beating out both former presidents Jimmy Carter and Richard Nixon, who nominated their FCC chairs well into September of their first years. If confirmed by the Senate before December, the FCC's two-to-two deadlock would end and provide Democrats with a majority to push forward Biden's telecom agenda. But it's unclear if senators plan to move on Rosen-Worsel and Sons' confirmations before the end of the year.

Without a majority, current Democratic commissioners, Rosenworsel and Jeffrey Starks, have their hands tied when it comes to implementing Biden's agenda. In July, Biden signed an executive order urging the FCC to restore Obama-era net neutrality rules and take up other measures to promote broadband competition, including requiring companies to provide transparency into pricing. Both Rosenworsel and Son broadly support the reinstitution of net neutrality. Sohn, who founded the left-leaning tech nonprofit public knowledge, previously advised former chair, Tomparence, Tom Wheeler during the initial net neutrality fight. At a May verge event, Sohn suggested that the FCC regulate broadband even further under new net neutrality rules urging the agency to enforce new pricing principles and make it easier for states and localities to build their own broadband networks to compete with larger providers. Rosenworsel and Son have butted heads before on certain broadband and cable policy measures. In one instance, Rosenorsal cast a tie-breaking vote to shut down an Obama-era attempt to make the cable set-top box marketplace more competitive.

Sone was one of the primary backers of this policy initiative. As Rosen-Worsel and Sons's nominations progress, Republicans will likely use future confirmation hearings to cast doubt on the administration's plans to re-implement net neutrality. Since the Trump FCC under Chairman Ajit Pai's leadership rolled back the rules in 2017, conservatives have argued that rulemaking never led to any nightmare scenarios previously predicted by Democrats and progressives. These include ISPs like, AT&T and Verizon blocking certain lanes of traffic for consumers, end quote. Finally today, you know I can't resist a story like this one. Have you heard the story about how

the Dune screenplay was written on an MS-DOS program, quoting from motherboard? In the brutal future of Frank Herbert's Dune, computers are outlawed and high-level computations are done by specially trained and bred humans called Mentats. In Herbert's world, there's something elegant about old solutions to new problems. Good then that Oscar-winning Dune screenwriter Eric Roth banged out the screenplay using the MS-DOS program Movie Master. Roth writes everything using the 30-year-old software. Quote, I work on an old computer program that's not in existence anymore, Roth said in an interview in 2014. It's half superstition and half fear of change. Roth wrote the screenplay for Dune in 2018 and explained he was still using Movie Master on a

barstool sports podcast in 2020. That means Dune was written in an MS DOS program. In the video, he pulled up a DOS window in Windows XP and booted up Movie Master 3.09 on an ancient beige mechanical keyboard. So now I'm in DOS. Nobody can get on the internet and get this. Rath said, I have to give them a hard copy. They have to scan it and then put it in their computers, and then I have to work through their computer because you can't even email mine or anything. You can't get to it except where it is. It has 40 pages and it runs out of memory, end quote. Writing is fundamentally about putting your ass in the chair and typing the words, eliminating distractions. I've checked Twitter at least five times while writing this short blog is a key to success.

Nothing eliminates distractions like a stripped down simple program with no internet access. Roth also said the 40-page limit helps him structure his screenplays. I like it because it makes acts, he said. I realize if I hadn't said it in 40 pages, I'm starting to get in trouble, end quote. You know, I have been meaning to talk about Dune. I watched it, of course. I loved it. I feel like it got the book mostly right.

But I was going to come here and be like, Jesus Christ, guys, if they don't greenlight a sequel, I say we take to the streets and throw up barricades. But, of course, the sequel, I mean, Part 2 was announced yesterday, so I don't have to go start burning cars on Prospect Park West or anything like that. By the way, no Twitter space tonight, just for scheduling reasons. Talk to you tomorrow.