251: Paypal, Snowflake vs GCP, Apple's M1 Ultra, Network Effects Warfare, AWS, Google + Mandiant, SmileDirectClub, Nickel, Cloudflare & CrowdStrike
"Who knows if this part will rhyme?"
Doubt grows with knowledge.
—Johann Wolfgang von Goethe
🧠 It’s hard to know what I think, or what to think lately.
There’s simply nothing in my personal experience that helps me know how to process the situation. Having read history and seen films isn’t enough. When you read about WWII or the Cuban Missile Crisis, you know how it ends, and it’s safely in the past.
This is more like the early weeks of the pandemic, when it felt surreal and like I’m not supposed to be living through this kind of historical stuff, without knowing what’s next and if everything will be all right in the end.
I feel in a war bubble, and I want to get out of it, but it’s very hard to give my usual level of attention to some company’s gross margins going up 200bps when a nuclear-armed dictator’s thousands of tanks are rolling on large European cities.
It all feels kind of unimportant, in comparison.
I’m very aware of the whole “some things are outside your control, there’s nothing you can do about it so you shouldn’t obsess over it, there’s always been plenty of wars, etc”.
I feel like my only skill in life is absorbing a lot of information quickly. Usually, the aperture of that is open pretty wide, because I’m curious about a lot of things, but it’s been harder lately.
Fewer random shower thoughts, fewer rabbit holes.
But I’m keeping those alive, because they’re good for me. I’m forcing the aperture open. Keep calm and carry on.
I’m writing this newsletter because I want to share with you what’s going on — it’s the whole point of this project. Sharing what I think, what I feel, what interests me.
Thank you for being here for me, through good times and bad times. I’m here for you.
🇺🇦 My friend Rob Koyfman (💙 💛) has set up a page where those who want to directly help Koyfin’s 20 employees in Ukraine can contribute.
20 of our employees are based in Ukraine and are the ones that have built the product, starting with a blank page.
The Russian invasion has deeply affected our employees and their families. Many were forced to flee their homes, while others are stuck in cities like Kharkiv and Kyiv, unable to escape because it's too dangerous to travel.
As a company, we’re doing everything we can to support our employees including paid time off, help with relocation and support services. We are fully behind them and doing everything we can to help.
There’s been an outpouring of support from our users, with many reaching out to ask how they can help support our employees. This campaign to raise funds for our team in Ukraine is in response to this generosity.
The money will be donated to our employees to help them and their families navigate the current war. We greatly appreciate your support to help our team members in Ukraine get through this crisis.
📲 Substack just launched a new mobile app. I was on the beta for a few months and think it’s really well made. Check it out.
💚 🥃 If you feel like you’re getting value from this newsletter, it would mean the world to me if you became a supporter to help me to keep writing it.
If you think that you’re not making a difference by subbing, that’s incorrect. Only 5% of readers are supporters (so far — you can help change that), so each one of you makes a big difference.
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Investing & Business
Paypal stock back where it first was in 2018
Maybe it’s because I’ve been reading ‘The Founders’ about the early days of Paypal, but I’ve been keeping an eye on the company. It’s really something that the stock of one of the obvious “Covid beneficiaries” is trading where it first traded in 2018.
Makes you wonder if the stock wouldn’t be doing better if the pandemic had never happened.
I get all the explanations about inflation and rates and rotation and all that, but it’s still quite the reversal to witness (and this is only one company — there’s an endless list of others with similar stock charts… Just look at Shopify or Roku).
Hyperscalers coopetition with Snowflake ❄️
I wrote in edition #217 about hyperscalers like AWS, Azure, and GCP competing with companies like Elastic and Snowflake, and how the economics probably aren’t *that* different for the hyperscalers if a third party is running on top of their infrastructure or if they win those customers directly (though that probably has other benefits, like cross-selling and lower churn if they use multiple products).
In a recent presentation, Michael Scarpelli of Snowflake discussed this dynamic, and how AWS is choosing to deeply partner with them while GCP is being more competitive:
I would say we actually partner extremely well with AWS. That relationship has completely blossomed.
When I first joined the company, we did not have a great relationship. Now last year, we co-sold over 1.2 billion with the hyperscalers, and the vast, vast majority of that was with AWS. We actually have deals where AWS will throw dollars to us to help get the deal so that it doesn't go to GCP. GCP is the one we co-sold 0, and they're the most competitive with us. [...]
I had a call 3 weeks ago with the people at Google, and I pointed out to them there were 300 instances where you guys compete to the very end with BigQuery and we won. And all of those customers ended up in AWS or Azure when they all could have been in Google if you would had just partnered with us and you would have been able to sell some of your AI or ML technologies around it.
He even threw some shade at Google, though I don’t know how much truth there is to that, or if it only applies to the space where Snowflake operates in, or if it’s total fabrication:
Google is not an open platform. They say they are, but the reality is they're not a great — they don't like to partner very well, especially if they feel threatened, where I would say AWS and Microsoft partner very well.
Ben Thompson: Tech & War
Ben Thompson (💚 🥃 🎩) has an epic free post about tech and war, and how the internet is fracturing and the strategic importance of things like semiconductors and information-control are reshaping the world.
Great stuff. Many of you have probably already read it, but if you missed it, it’s worth a look:
‘Asymmetric network effects warfare’
Speaking of splitting networks, here’s an interesting thread by Thomas Pueyo about a kind of reverse Metcalfe’s Law (“Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n^2)”):
Russia will suffer dramatically more from financial sanctions and Internet seclusion than the West. I tried to find this online but couldn't so I'll call this the ANEW principle: when a subnetwork splits from the main network, it suffers much more than the main network
In the graph, you can see a big network on the left (eg EU) and a smaller one on the right (eg Russia).
The connections between the small network and the big one account for a big chunk of all the connections of the small network.
That's not true for the big network [...]
To be fair, it's not just the disconnection from the network. It's also that major players in the network (big central banks, mastercard, visa, paypal...) are placed in the main network (mostly US and EU), and not the Russian subnetwork
We see the same over the Internet: many more powerful nodes outside of Russia than inside of it, which will cause outsized pain on Russia vs. ROW.
And in social media, many more ppl are supporting the West than Russia, despite the bots.
The pressure is so high that RU is planning on completely cutting the network connection on March 11th, which should further isolate it.
This will give Russia more control, at a massive cost to the value of Russian Internet for its citizens.
Asymmetric network effects warfare
I think it’s very sad that it has come to this, and the whole world is losing from this — Russians are certainly losing, but we’re all losing too when dictators put their hunger for power (keeping it and gaining more of it) above the interests of millions of people.
Google buys Mandiant ($5.4bn)
Their second biggest acquisition after the $12.5bn Motorola deal in 2012, which is kind of notable in itself — Google does tons of small bolt-on acquisitions, but larger deals are very rare.
I’m not sure if it’s cultural or strategic, or not an expertise that they feel they have (most large deals destroy value, so they shouldn’t be done lightly — companies that have expertise in picking the right targets and then integrating them well are rare).
The acquisition of Mandiant will complement Google Cloud’s existing strengths in security.
Rumors had it that Microsoft was also interested, but Google apparently offered a better deal.
It’ll be interesting to see if what Malone predicted in the media/content space happens in the security industry, with the “big bubbles” absorbing the “smaller bubbles” or “free radicals” and small players find it increasingly hard to compete against the scale and distribution muscle of the larger players.
I also think that modern cybersecurity benefits from scale in a way that it didn’t as much in the pre-cloud era, since now whoever can have the best overview of the ‘battlefield’ and gather the most data to train its AI models can have a compounding advantage over small players who only survey a smaller number of endpoints/pipes and have less data to shovel into the data furnace.
SmileDirectClub, not smiling edition ☹️
I remember when SDC first IPO’ed, I owned Align, and there was much discussion in the space about whether SDC was going to disrupt the incumbent (which itself was disrupting the old wire & brackets incumbents)…
A friend of mine made a compelling case that SDC didn’t have what it took, had some management red flags, etc. He decided to short it. It made sense to me, but I didn’t feel like I knew the company enough to be sure one way or the other how things would play out…
Looking back, seems like my friend was right:
The stock is down almost 90% since IPO, at a -57% CAGR over 2.5 years. The market cap is now under $1bn while over the same period, Align stock has almost doubled and, despite the recent fall, still has a market cap over $31bn.
‘Morgan Stanley Says Russia’s Set for Venezuela-Style Default’
The default may come as soon as April 15, which will mark the end of a 30-day grace period on coupon payments the Russian government owes on dollar bonds due in 2023 and 2043.
Indicative pricing show investors value the 2023 bonds at around 29 cents on the U.S. dollar, the lowest ever [...] In the days before Russia invaded Ukraine last month, the debt was trading above par. [...]
Five-year credit-default swaps have soared to over 2,500 basis points as investors price in a greater probability of missed payments as the war escalates. Meantime, Russia’s sovereign debt has handed investors average losses of 81% since the start of the year
AWS no longer accepting new customers from Russia/Belarus
For several weeks, we have been partnering closely with Ukrainian IT organizations to fend off attacks and working with organizations in Ukraine, and around the world, to share real-time, relevant intelligence. [...]
AWS has no data centers, infrastructure, or offices in Russia, and we have a long-standing policy of not doing business with the Russian government. We have also stopped allowing new sign-ups for AWS in Russia and Belarus.
Nickel 🚀🌙
The price of Nickel is going hyperbolic in a short squeeze for the ages today.
Science & Technology
🦷 What people are dreaming about around the world 🐍
I can’t vouch for the methodology (seems to be based on what people search on Google), but it’s certainly interesting to see how regional variations exist in dreams.
h/t Claudia Dawson
Apple’s New ‘Studio’ Mac & Display, M1 Ultra SoC 🔥
They threw me a curveball.
All I wanted was a big ARM-based iMac (Pro?), and instead Apple released a tall Mac Mini with just insane silicon and a standalone 27” display (which was sorely needed — Apple hasn’t made an affordable display for a while, not everybody works for Pixar and can justify the 6K XDR).
My initial observations:
The M1 Ultra is just bonkers 🤯
Truly insane. The M1 Max was already insane, but they found a way to stitch two Maxes together with direct interconnects at 2.5tb/s, and to put up to 128gb of very fast unified memory in the same SoC. This means that both the CPU and GPU cores can access *all* memory (that’s an unprecedented amount of RAM for a GPU) and don’t have to shuffle data back and forth between separate CPU RAM and GPU RAM pools.
The Ultra has 114 billion transistors! That’s just…. !!!
I’ll have to wait for Anandtech’s full review to know real-world performance, but it seems incredibly power-efficient and much faster than even the 28-core Intel Xeon in the maxed out iMac.
The GPU is also incredibly fast, beating the fastest Radeon in the Mac Pro. Not only that, but the Ultra has double the number of media-encoding modules as the Max, so anyone working with h.264, HEVC or ProRes will see *massive* improvements.
The Mac Studio seems like a nice new desktop. They didn’t over-complicate it and try to make something unexpected like the 2013 Mac Pro (aka the ‘trash can’), they just went with a kind of
souped-uppimped-out Mac Mini (my first thought was ‘Fat Mini’, which is kind of like a ‘jumbo shrimp’ 🍤) and let the performance and connectivity speak for itself. The ports in front are a nice touch, convenience over ‘purity’ of design.I’m a bit disappointed in the Studio display, to be honest. I think rumors had raised my expectations too high, but I was expecting micro-LED and variable refresh up to 120hz. Maybe that’s still too expensive for such a big display… I’m sure it looks great anyway, but the techy in me always wants the latest tech.
Cloudflare, CrowdStrike, and Ping launch ‘Critical Infrastructure Defense Project’
The Project was born out of conversations with cybersecurity and government experts concerned about potential retaliation to the sanctions that resulted from the Russian invasion of Ukraine.
In particular, there is a fear that critical United States infrastructure will be targeted with cyber attacks. While these attacks may target any industry, the experts we consulted with were particularly concerned about three areas that were often underprepared and could cause significant disruption: hospitals, energy, and water.
To help address that need, Cloudflare, CrowdStrike, and Ping Identity have committed under the Critical Infrastructure Defense Project to offer a broad suite of our products for free for at least the next four months to any United States-based hospital, or energy or water utility. [...]
this is what we think is required, because the current threat is significantly higher than what we have seen since any of our companies was founded. We all built our companies relying on the nation’s infrastructure, and we believe it is incumbent on us to provide our technology in order to protect that infrastructure when it is threatened.
The Arts & History
History doesn’t repeat, but it does rhyme…
A very telling bit from the WaPo:
Like other autocrats, Putin has had ample opportunity to choose his top officers for loyalty rather than capability. His minister of defense, Sergei Shoigu, has no military background at all: He is a civil engineer who was minister of emergency situations when Putin put him in charge of the country’s armed forces.
And now they're finding out that some general was stealing 50% of the money supposed to go to buying fuel and tires, while some other general was stealing the other 50%.
Live by the sword/corruption, die by the sword/corruption… ⚔️
Who knows if this part will rhyme?
The Russian national tradition is unforgiving of military setbacks. Virtually every major defeat has resulted in radical change. The Crimean War (1853-1856) precipitated Emperor Alexander II’s liberal revolution from above. The Russo-Japanese War (1904-1905) brought about the First Russian Revolution. The catastrophe of World War I resulted in Emperor Nicholas II’s abdication and the Bolshevik Revolution. And the war in Afghanistan became a key factor in Soviet leader Mikhail Gorbachev’s reforms.
Reading on the app :)