28: Stripe Deep-Dive, My Favorite Chart, TikTok's NatSec Farce, Microsoft Buys Games & Fishes Out a Datacenter
28: Stripe Deep-Dive, My Favorite Chart, TikTok's NatSec Farce, Microsoft Buys Games & Fishes Out a Datacenter
"In fact, not caring is one of the things it does best."
The Milky-Way galaxy is mind-bogglingly big.
Eh," you say, "100,000 light years in diameter, give or take a few."
Listen, pal: just because you can measure something in light years doesn't mean you truly understand how big it really is.
By the time you carve our galaxy up into units you have actual, personal experience with, you'll have to start using numbers that you won't live long enough to count to.
That's okay. The galaxy doesn't care. In fact, not caring is one of the things it does best.
That, and being really, really, really big.
—Howard Taylor, “The Blackness Between, Part I: Needle in a Haystack”, 2003
I started this newsletter project on July 20, two months and one day ago.
Looking at edition #1, it’s obvious that some things have changed, and some have stayed the same.
I think that most of the changes have been improvements (hopefully), but I’m curious what you think. If you want to DM me on Twitter or reply to this email with feedback on what you like and dislike so far, I’d appreciate it.
Sometimes writing feels like spending hours carving a little figurine out of a piece of wood, and then throwing it over a tall wall where you hope there are people on the other side, and that if there are, that they’ll like it. So feedback, positive or negative-constructive is always gratifying.
Investing & Business
“An early photograph of Stripe.”
Paul Graham posted this “early” photo that he took of the Stripe office, back when they were a young startup.
Today the company has 2,500+ employees and is challenging all kinds of large incumbents in payment processing and other financial services, so it’s easy to forget that just 10 short years ago this is what it looked like (and the same goes for many companies that we now take for granted, but that recently were just a bunch of people crammed in an apartment somewhere). Successful startups are kind of magical.
Of course, Patrick had a good reply to PG: “Current photographs of Stripe are also early photographs.”
Stripe Deep-Dive
Speaking of Stripe, Packy McCormick wrote a nice piece analyzing the company on his Not Boring substack: “Stripe: The Internet's Most Undervalued Company”
People love the company’s co-founders, the charming, intellectual Irish brothers Patrick and John Collison. Its mission is audacious: to increase the GDP of the internet. Engineers rave about its simple-to-use product that makes something as complex as payments just work.
And yet... Stripe is underrated.
Because everyone loves Stripe, the company is under analyzed. Ben Thompson hasn’t written a Stripe-centered piece since 2017.
Microsoft to Acquire ZeniMax Media and Its Game Publisher Bethesda
It’s a $7.5bn deal for a bunch of pretty valuable gaming franchises:
The planned acquisition includes publishing offices and development studios spanning the globe with over 2,300 employees, including Bethesda Softworks, Bethesda Game Studios, id Software, ZeniMax Online Studios, Arkane, MachineGames, Tango Gameworks, Alpha Dog, and Roundhouse Studios. Bethesda's critically acclaimed and best-selling franchises include The Elder Scrolls, Fallout, DOOM, Quake, Wolfenstein, and Dishonored, among others.
It looks like my childhood’s main love has found a new home…
It’ll be interesting how many Microsoft makes exclusive to the Xbox and how many it keeps multi-platform (there’s an obvious trade-off there, as developing a game is mostly a fixed cost, so if you restrict your market size by half or more, it has to really move the needle for your own ecosystem…)
(As an aside, I was a map-maker for Doom, Doom 2, Heretic, a little Hexen, and Quake as an early teen. Looking back, some of my most fruitful and dense learning experiences came from doing that.
If you grew up with these games, know they’re now open-source and there’s an active community still making maps and updating the engine (high resolution, GPUs shaders, etc). Zandronum is a good one, and DoomWorld has tons of great maps.)
TikTok Deal: National Security? Just Kidding!
I’m tired of writing about TikTok, and you’re probably tired of reading about it. Joke’s on me for partly believing that this may have been a national security thing, despite all the weirdness surrounding the deal (key money? favoring certain buyers from the start?), because the NatSec implications are real.
They’re just misunderstood by a lot of people.
The problem isn’t mostly about a Chinese company gathering data on Americans (and others). That’s not great, but what a sandboxed app can do on a modern mobile OS, especially an app that doesn’t have a huge social graph emphasis or much real ID, is limited.
If the Chinese government wants to build a database of Americans, they’re probably scraping Facebook to do it…
The real issue has always been the control of the algorithm, and how much of a black box it is. It’s the control of what people see, and don’t see, that matters.
This power is more subtle than it seems, because whoever controls the algorithm could very finely target censorship/disinformation by psychographics, demographics, geography (only in certain cities or states) in ways that would be very hard to detect for general observers. Of course, the same danger exists with Facebook/Instagram/Twitter/YouTube/Google/etc, but at least these operate from a country where there’s still some safeguards and recourses for citizens (even though many important institutions have been eroding rapidly and the oversight bodies are way behind on understanding the tech — but I’d take that over China’s CCP and its cybersecurity law).
In any case, we now learn that:
ByteDance will not transfer algorithms and technologies to Oracle as part of a deal announced over the weekend to keep social media app TikTok operating in the U.S.
Instead:
Oracle has the authority to check the source code of TikTok USA
What a farce! What are they supposed to check for, exactly, in all these ML blobs? What expertise do they have with this type of technology? What liability do they have if they fail to spot problems, and if none, aren’t they incentivized to basically look as little as possible… This sounds like something you put in the contract to make it look like it checks the “national security” concern on paper, but in reality doesn’t nothing.
This is like saying “you can have a look at my plane”, but you have no control over where and how I’m going to fly it. The danger isn’t in the engines of the plane, it’s in what I may do with it when I’m in the cockpit.
So it looks like the new TikTok Global subsidiary will be 80% owned by Bytedance and 20% by Oracle (12.5%) and Walmart (7.5%).
As Ben Thompson points out in his paid update today, the fact that US venture capitalists own about 41% of Bytedance doesn’t mean that the new subsidiary is under “US control”. A minority stake in one entity and a minority stake in a different entity don’t add up to any control. Bytedance still is under Chinese control, and the new subsidiary will still be 80% under Bytedance control.
So basically, this whole saga was about giving a cloud deal to Oracle (and it just so happens that Larry Ellison, Oracle founder and CEO, is a big fundraisers for the person who made the deal happen):
Also worth noting that this deal is pretty much the original deal that Microsoft offered in July, but was then rejected because it didn’t put the company “100% in US control”.
And if the worry about TikTok is about it being used as a propaganda tool, I think we also should be worried about this:
President Donald Trump said Saturday he wants $5 billion from companies creating a new U.S.-based TikTok venture directed toward teaching American children “the real history of our country.” [...]
he said “do me a favor, could you put up $5 billion into a fund for education, so we can educate people as to real history of our country -- the real history, not the fake history.” [...]
Trump spoke by phone with Oracle Chairman Larry Ellison and Walmart Chief Executive Officer Doug McMillon. He told them he still wanted the government to receive a payment as part of a deal, according to two people familiar with the matter. [...]
The president wants to use the $5 billion from the TikTok deal for the “patriotic education” program, according to one of the people. However, the new U.S. TikTok company will control the money and choose how it’s invested. (Source)
Retail: DTC vs Incumbents
Ecomm adoption this, DTC that.
Meanwhile, incumbents are quietly crushing it and outgrowing everyone else during COVID.
Nasdaq Moving its 28 Markets to Cloud
From the Wall Street Journal:
Several of Nasdaq’s 28 markets in North America and Europe will be hosted in the public cloud in about five years, with all of its markets expected to migrate over the next decade [...] The markets are currently run on-premise in data centers.
Scalability was a major advantage for Nasdaq when the pandemic hit earlier this year and messaging traffic surged amid increased demand for orders, quotes, trades and other market data, Mr. Peterson said. In March, Nasdaq repeatedly saw daily peaks of more than 100 billion messages being sent and received in the U.S., more than twice the volume of the previous record. The message volume was so high because of the volatility and an increase in buying and selling activity on Nasdaq’s markets.
Twice the previous record all of a sudden, without much warning. On-premise hosting just can’t scale that fast — or you have to over-provision it so much that it’s wasteful and you may as well be on the cloud anyway.
Nasdaq’s data warehouse for the U.S. and Canada had earlier migrated to Amazon Web Services from its own data centers, the cloud was able to handle the increase in traffic.
That sounds like a nice win for AWS Redshift.
Science & Technology
Energy in the U.S.: Perennially One of my Fave Charts
This chart by Lawrence Livermore National Labs (LLNL) showing energy consumption is the US has been fascinating me even since I stumbled on a previous edition many years ago.
Looking at all the high-level data in one place cuts through the headlines and the anecdotes and shows what is actually going on. And if you go back and look at previous years, you can see what has changed the most.
For example, here’s the 2012 edition, which isn’t that long ago when it comes to energy infrastructure — there’s a lot of inertia in the system, and even if you built what looks like a lot of new capacity and decommission what looks like a lot of old one, the installed based (stock) is so large that these changes (flows) don’t move things very quickly:
Most notable is coal going from 17.4 quads in 2012 to 11.4 last year and natural gas going from 26 quads in 2012 to 32.1 in 2019.
Solar and wind both had a ton of growth in percentage terms, but in absolute numbers they’re still pretty small. ‘Hopefully the growth rate stays high and get get to the right side of that exponential graph where everything happens all in a short period of time after it looks like not much has happened before…
Another thing to note on these charts is the light gray box on the right labelled “rejected energy”. That’s energy that isn’t actually used to do useful things (for example, when you drive a gasoline car, around 70-80% of the energy contained in the fuel is wasted as heat. Only a small fraction is actually converted to mechanical energy to move the car.
Looking at this chart makes it obvious that there’s a lot lot of ‘negawatts’ to be harvested out there; energy-efficiency improvements are often cheaper and/or cleaner than building new capacity and should be prioritized a lot more. Does your house have enough insulation? Is your furnace and A/C energy-efficient? Do you have LED lightbulbs?
Microsoft is Testing Underwater Datacenters
The one above is getting a power-wash after two years underwater:
Earlier this summer, marine specialists reeled up a shipping-container-size datacenter coated in algae, barnacles and sea anemones from the seafloor off Scotland’s Orkney Islands. [...]
Microsoft’s Project Natick team deployed the Northern Isles datacenter 117 feet deep to the seafloor in spring 2018. For the next two years, team members tested and monitored the performance and reliability of the datacenter’s servers.
More here on Microsoft’s blog.
Tim Ferriss on his Childhood Trauma
Powerful episode by Tim Ferriss, revealing publicly for the first time how he was sexually abused as a child and his lifelong process of dealing with the trauma that almost cost him his life.
And if you remember only one thing, remember this: there is light on the other side. I wouldn’t have believed this even five years ago, but I now consider myself living proof that deep, lasting change is possible. Don’t give up. You are never alone, and it is never hopeless. I’m right there alongside you, as are millions of others.
We never know what the people around us are living through.
I think it’s very useful to learn about these experiences, if we’re lucky enough to not have gone through them ourselves, to upgrade our capacity for empathy.
Here’s the link: My Healing Journey After Childhood Abuse
The Arts
John Ceprano Stone Sculptures
I was walking by the river with my family when we saw a lot of stone sculptures. Above and below are my own photos.
Every spring for more than 30 years, Ottawa artist John Ceprano has scoured the flat limestone bottom of the river for rocks of all sizes.
What started as a passion project sees him stacking stones by hand into gravity-defying sculptures treasured in town and funded by the National Capital Commission. [...]
Ceprano’s striking sculptures are built in the same spot he stumbled upon one sunny day in 1986. [...]
“I’m producing a body of work that enhances the sense of community for people who can identify with it so that they have a gathering place.”
Ceprano studied physics at school, but quickly discovered he was better at art. (Source)
I’d say his art requires a pretty keen intuitive understanding of physics…
Dune 2020 Toys?!
The Internet truly has unlocked the long tail of niches… Some company is apparently making figurines of characters from the new ‘Dune’ movie (I wrote a little about it and the trailer in edition #24). Funko Tweet about it (with link to Walmart for pre-order)
Via @FLinvestor_