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Tech Book of the Month
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December 2022 - We Are Legion (We Are Bob) by Dennis E. Taylor

This month we take a view into the future to see what a futuristic society full of AI, 5G, and easy space travel.

Tech Themes

  1. Artificial General Intelligence. One of the most significant technological themes in the book is the development of AGI. Exhibiting artificial general intelligence would mean a computer could perform any task that humans could perform. While this is the ultimate vision of the AI hypetrain, there remains a big gap even between current iterations of GPT-4 and AGI. While Bob is able to seamlessly create VR experiences, recognize missles in flight, and upgrade himself, the world of computing today lacks the technology to fit all of these things into a sentient program. A 2019 article hypothesized by 2060 that we’d have full AGI. Other predictions suggest its 200 years away. It is still early days in the world of AGI, and there needs to be a lot more innovation before we get full AGI.

  2. Programs Programming Programs. In the book, Taylor explores the concept of self-programmability when Bob discovers he can rewrite portions of his own code. Bob begins to set up virtual reality simulations for himself, complete with a cat, virtual baseball, and a butler. These VR “home” simulations offer a sense of normalcy that Bob dearly misses after reawakening as an AI. Later, Bob realizes that he is able to replicate his code. Code replication is similar to a type of AI called, Genetic Computing. In Genetic Computing, a program models the reproduction of a population based on a fitness measure and a mutation rate. When Bob replicates himself, he notices that each new Bob has a slightly different personality that all stem from his original personality. These personality changes make some replicants better suited for exploration vs. war vs. maintenance, which could be seen as their individual fitness functions. Genetic algorithms can be used to solve a whole host of machine learning and computing programs.

  3. Technology and Emotion. Before he was killed in a car crash, Bob had sold his successful software company, netting him millions. With the extra money he paid the cryogenic service that would preserve his mind in the event something bad happened to him. After his death, Bob is awoken as an artificial intelligence. Similar to Ender’s Game, he finds himself being trained for an unknown objective, although he quickly understands its military related. Over time he becomes aware that other AI’s are going crazy and discovers that when left alone to process their fate as a war-faring AI, many become immensely depressed. Bob recognizes the immensity of time as a computer, with a clock that can work at the nano-second level. This theme raises important ethical questions about the implications of creating self-aware machines, notably the mental health consequences of inventing self-aware machines that experience the world differently than humans do.Therefore time feels extended beyond comprehension. After a while, Bob discovers an endocrine switch that overrides emotion. He’s curious about its function and switches it on, and immediately becomes overwhelmed with emotions: “You know that sinking feeling you get when you suddenly realize you’ve forgotten something important. Like a combination of fast elevator and urge to hurl. It hit me without any warning or buildup. Maybe it was the sudden release, maybe it was an accumulation of all the suppressed emotions, whatever, I wasn’t ready for the intensity. My thoughts swirled with all the thing that had been bugging me since I woke up…I mourned my lost life. I was still human in the ways that mattered.” Emotion and technology are often thought of as opposite ends of the spectrum, but they are more intertwined then people imagine.

Business Themes

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  1. Government and AI Future. Another business theme explored in the book is the power and influence of corporations. In the story, Bob's actions and the emergence of AI have a significant impact on the economy, politics, and society. This theme raises questions about the ethics of corporate power and the need for regulation to ensure that technology is used in ways that benefit society as a whole. For example, Bob is controlled by a religious government entity called FAITH, the Free American Independent Theocratic Hegemony, which is led by Christian Fundamentalists. While Taylor’s expression of a future whereby Christian Fundamentalists control the government is a commentary on an increasingly co-mingled church and state environment in the US, it also begs the question about control over AI. In China, the government has a front row seat and access to all potential AI innovations. In the US, a lot of these innovations are controlled by corporations, who will obviously work with the government but who do not necessarily need to sell to the government. At the same time, it would be difficult to envision how the American government would repossess or control all AI developments of underlying corporations. There is still a lot to be figured out between industries and government’s when it comes to AI innovation.

  2. Space business. The book also explores the intersection of technology and business, specifically in the context of space exploration and colonization. Amazon's Kuiper and SpaceX's Starlink are two examples of companies that are driving innovation in this field. These satellite constellations have the potential to revolutionize industries such as agriculture, mining, and energy, by enabling real-time data analytics and remote control of machinery. The book touches on this theme with Bob's use of satellite constellations for communication and coordination in his efforts to explore and colonize new worlds. For example, the book explores the potential consequences of corporate control over space resources, highlighting the importance of ethical guidelines to ensure the equitable distribution of resources. Bob, who is a FAITH probe, fights China, the Australian Federation, and the Brazilian Empire over control of vast new space worlds. In the real world, people are beginning to question the value of these new constellation space businesses. A recent publication at Bernstein research noted: “Project Kuiper appears even more extreme as an investment area with $10B+ already committed. Perhaps there’s a lesson here from Google shutting Loon and stagnant Fiber and Fi businesses, that capital intensive low-margin utilities aren’t worth the effort regardless of how ‘cool’ the technology may be.” The durability of a real, sustainable business model has always been a question for Space focused businesses. As we learned from Carlota Perez’s Technology Revolutions and Financial Capital, the early establishers of infrastructure can either reap windfalls (railroads, steel) or face severe competition (telecom) which drives returns negative. I am skeptical that Kuiper or Starlink have a large enough market to create substantially large businesses that cover the cost of the capital expenditure involved in launching and maintaining the satellites. That being said, I think both organizations will probably learn a lot about space in the process, so should it ever become economically feasible, they would be ready to pounce (if they still exist).

  3. 3D Printing and The Food Question. Bob uses 3D printing technology to replicate himself into new versions with longer and larger appendages. “The area was a beehive of activity. Five version two HEAVEN vessels were under construction. One of which was a trade up from me. The new designs included a bigger reactor and drive, a rail gun, storage and launch facilities for busters, replicant systems with twice the capacity of version one, more room for storing roamers and mining drones, and more cargo capacity in general. The manufacturing systems cranked out parts as fast as the roamers could feed in the raw ore.” Bob creates many many roamers, which he uses in all sorts of ways, as drones, analyzers, and crafters. The plurality of use cases has always been the pitch for 3D computing, however, the businesses involved such as Desktop Metal or 3D Systems have struggeld to really hit mass consumer adoption. Today, it is still too hard for the average non AGI person to build things with a 3D printer, and most jobs are left to seasoned professionals. As the newly created Bob replicant’s peruse the universe for new worlds, original Bob sticks behind to help determine the fate of people on earth. One of the big challenges facing Bob is finding enough food for the world’s population while it is in transit to a new world. This situation is reminiscent of Wall-E, where the entire population of earth leaves after a nuclear attack. Food insecurity, or lacking access to quality food, is a global question, with estimates of over 345 million people facing high levels of food insecurity in 2023. In the US, about 10% of the population or 13.8 million households had low or very low food security. The question is complicated by the cost of sustainable farming, the role that farming and food play in greenhouse gas emissions, and how to use land with a growing population. Bob ulitmately decides to build a farm on a spaceship, which is reminiscent of the vertical farming craze that came through Ag-Tech around 2016-17. Three vertical farming businesses: Aerofarms, Kalera, and NL have gone bankrupt this week, after failing to find a financial sustainable business model. Its still early days in the world of alternative foods and new farming techniques, but we need to figure them out before the world population hits 10B in 2050.

    Dig Deeper

  • OpenAI CEO: When will AGI arrive? | Sam Altman and Lex Fridman

  • Starlink 2 months later ... in a 2min review ✌️

  • We are Legion (We are Bob) | Dennis E. Taylor | Talks at Google

  • What Is 3D Printing and How Does It Work? | Mashable Explains

  • What is Sustainable Agriculture? Episode 1: A Whole-Farm Approach to Sustainability

tags: Bob, AGI, Cryogenics, Genetic Computing, Space, SpaceX, VR, Government, AI, Amazon, Kuiper, Starlink, Google, Farming, Aerofarms, Vertical Farming, 3D Printing, Desktop Metal, 3D Systems, Food Insecurity
categories: Fiction
 

August 2022 - Invention: A Life by James Dyson

This month we dive into an innovation classic by examining the life of of James Dyson and the creation of his world famous vacuum cleaner.

Tech Themes

  1. IP. James Dyson believes that entrepreneurs should always retain their creations. He is a staunch advocate for patent protection and rights. When we look back at the history of Dyson, we can understand why. As a young entrepreneur, Dyson created the ball-barrow, the first wheelbarrow that used a single round ball instead of two wheels on each leg. With improved design, the product performed well; however, the board forced Dyson out of his company over a disagreement on managing the company's financial situation. Even worse, the company owned the ball barrow's patent, so James walked away with nothing but hard-earned experience and frustration. He set out to make his cyclonic vacuum and famously succeeded after 5,127 prototypes. Dyson then set out to partner with distribution channels and found Amway, a Michigan-based electronics company. In 1984, the two companies agreed on a partnership, and Dyson sent over specifications, design prototypes, and core company IP. However, shortly after that, they canceled the agreement and sued Dyson for fraud. Even worse, Amway launched an exact copy of Dyson's DC01 and was trying to compete against Dyson in the US. Dyson shot back and sued Amway. Over the next seven years, Dyson would struggle through the US court system, ultimately winning his legal case against Amway. "When you've developed a new technology, or created a radically different product, have beaten the skeptics, established awareness, and battled to create a market for it, to discover a similar product from the company that canceled the licensing agreement is sickening as if you've been punched in the solar plexus. You feel outraged by the personal theft and helpless." Dyson eventually settled with Amway in 1991, recouping all of his legal costs and gaining control of his IP.

  2. Testing. Dyson loves testing new products. Every test (and every failure) tells you about your product and how it can be improved. He would often spend hours in his garage making minor adjustments to the cyclonic vacuum, hoping the next time would yield positive results. Over time, Dyson has adapted its testing procedures. While most companies employ some basic tests for defects, Dyson wants its products to fail the tests. Head of Testing Marco Li explains: "Everything we test will fail, in one respect, because the way we test our products we want to make sure it fails. That's the only way we can be sure we know what the limits of our technology are and make sure that what we say on the box isn't the best, but the worst-case scenario." Paradoxically, Dyson finds joy in failing: "It's a never-ending process that is enormously rewarding, and endlessly frustrating. There are countless times an inventor can give up on an idea. By the time I made my 15th prototype, my third child was born. By 2,627, my wife and I were really counting our pennies. By 3,727, my wife was giving art lessons for some extra cash. These were tough times, but each failure brought me closer to solving the problem. It wasn't the final prototype that made the struggle worth it. The process bore the fruit. I just kept at it."

  3. Failure and Entrepreneurship. As detailed above, Dyson's first company ended with heartbreak. He describes it: "I was penniless again with no job and no income. I had three adorable children, a large mortgage to pay, and nothing to show for the past five years of toil. I had also lost my inventions. This was a very low moment and deeply worrying for Deirdre and me. It was deeply upsetting, too. My confidence took a big blow, and it would take some years to regain it." Part of being an entrepreneur is holding steadfast to a goal during times like these. Interestingly, an overview of psychological research on entrepreneurship helps us understand why failure and entrepreneurship are so closely linked. It all comes down to reflection. Only upon concrete failures do entrepreneurs enter a state of deep reflection on experiences that created the failure. After some time, the entrepreneur can become more enthusiastic and open with a new perspective on a problem or issue. The secret is getting to failure quite frequently or "Fail, Fast, Forward."

Business Themes

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  1. Never Listen to Consultants or Projections. Often venture capitalists pressure entrepreneurs into following attractive markets or trends. Dyson hates market research. He correctly points out that those doing market research are often wrong, and it makes no sense to trust someone who isn't in the industry building products and talking to customers constantly. As he puts it: "I was also putting into practice ideas I'd learned directly from Jeremy Fry and indirectly from Alec Issigonis: Don't copy the opposition. Don't worry about market research. Both Jeremy and Alec Issigonis might just as well have said "Follow your own star." And this is indeed what successful entrepreneurs do." You have to think differently than the market and competition to really arrive at a unique and differentiated product.

  2. Accidental Success. One unobvious benefit of innovation, testing, trials, and not listening to consultants is "accidental" success. I think of unexpected success as the byproduct of curiosity and hard work. Every every hour you put into a tenuous venture adds a marble to the jar of unintended success. It's only after many hours that the marbles of success spill out. The Dyson Airblade is a clear example of the benefits of unintended innovation. The Dyson team was working on a small vacuum cleaner and had controversially decided to bring motor manufacturing in-house. Similar to Apple, Dyson likes to handle all of its manufacturing in-house, also known as a vertically integrated approach. After years of making motors internally with mixed success, his engineers noticed that one of their motors emitted air in a concentrated line. Although Dyson did not intend to make a hand dryer, it seemed like the perfect application for this new technology. It also was another market dominated by a few players (Excel Dryer, World Dryer) who last innovated a few decades ago. Dyson Airblades are now available all over the world.

  3. James Musk and Elon Dyson. The similarities between James Dyson and Elon Musk are striking. Dyson's Dad died from cancer at an early age, which he acknowledges may have propelled his intensity and desire for control as he got older. Elon Musk had a complicated relationship with his Dad and suffered abuse for many years. Dyson was forced out of his ball-barrow company after the board ousted him as CEO. This company was his first venture, and the experience pushed him to assume complete ownership of Dyson after buying out Jeremy Fry in the 1990s. Elon was betrayed by the board of Zip2, his first company, after he took over following a dispute with former CEO Richard Sorkin. Musk was again fired from Paypal after disagreements with Peter Thiel and Max Levchin. Both founders entered markets that had lacked innovation for years, the vacuum industry and the car industry, with premium-priced products that work exceptionally well. Furthermore, these companies (Dyson, Tesla, and SpaceX) employ a unique design that is unlike other products in their respective markets and prioritize environmental benefits with their design. Although from different times and in different fields, I was surprised by how similar Elon and James are; maybe that's just a crazy person thing.

Dig Deeper

  • Chapter 1: Early Years from Invention: A Life, by James Dyson - Interview on Youtube

  • Dyson unveils its $500 million electric car that was cancelled

  • Love Is In The Air: how Dyson’s love affair with airflow technology has withstood the test of time

  • Sir James Dyson explains his bladeless fan

  • Dyson: James Dyson (2018) - How I Built This with Guy Raz

tags: James Dyson, Vacuum, Ball Barrow, IP, Amway, Marco Li, Failure, Entrepreneurship, Jeremy Fry, Alec Issigonis, Apple, Elon Musk, Tesla, SpaceX, Zip2, Excel Dryer, World Dryer
categories: Non-Fiction
 

March 2022 - Invent and Wander by Jeff Bezos

This month we go back to tech giant Amazon and review all of Jeff Bezos’s letters to shareholders. This book describes Amazon’s journey from e-commerce to cloud to everything in a quick and fascinating read!

Tech Themes

  1. The Customer Focus. These shareholder letters clearly show that Amazon fell in love with its customer and then sought to hammer out traditional operational challenges like cycle times, fulfillment times, and distribution capacity. In the 2008 letter, Bezos calls out: "We have strong conviction that customers value low prices, vast selection, and fast, convenient delivery and that these needs will remain stable over time. It is difficult for us to imagine that ten years from now, customers will want higher prices, less selection, or slower delivery." When a business is so clearly focused on delivering the best customer experience, with completely obvious drivers, its no wonder they succeeded. The entirety of the 2003 letter, entitled "What's good for customers is good for shareholders" is devoted to this idea. The customer is "divinely discontented" and will be very loyal until there is a slightly better service. If you continue to offer lower prices on items, more selection of things to buy, and faster delivery - customers will continue to be happy. Those tenants are not static - you can continually lower prices, add more items, and build more fulfillment centers (while getting faster) to keep customers happy. This learning curve continues in your favor - higher volumes mean cheaper to buy, lower prices means more customers, more items mean more new customers, higher volumes and more selection force the service operations to adjust to ship more. The flywheel continues all for the customer!

  2. Power of Invention. Throughout the shareholder letters, Bezos refers to the power of invention. From the 2018 letter: "We wanted to create a culture of builders - people who are curious, explorers. They like to invent. Even when they're experts, they are "fresh" with a beginner's mind. They see the way we do things as just the way we do things now. A builder's mentality helps us approach big, hard-to-solve opportunities with a humble conviction that success can come through iteration: invent, launch, reinvent, relaunch, start over, rinse, repeat, again and again." Bezos sees invention as the ruthless process of trying and failing repeatedly. The importance of invention was also highlighted in our January book 7 Powers, with Hamilton Helmer calling the idea critical to building more and future S curves. Invention is preceded by wandering and taking big bets - the hunch and the boldness. Bezos understands that the stakes for invention have to grow, too: "As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn't growing, you're not going to be inventing at a size that can actually move the needle." Once you make these decisions, you have to be ready to watch the business scale, which sounds easy but requires constant attention to customer demand and value. Amazon's penchant for bold bets may inform Andy Jassy's recent decision to spend $10B making a competitor to Elon Musk/SpaceX's Starlink internet service. This decision is a big, bold bet on the future - we'll see if he is right in time.

  3. Long-Term Focus. Bezos always preached trading off the short-term gain for the long-term relationship. This mindset shows up everywhere at Amazon - selling an item below cost to drive more volumes and give consumers better prices, allowing negative reviews on sites when it means that Amazon may sell fewer products, and providing Prime with ever-faster and free delivery shipments. The list goes on and on - all aspects focused on building a long-term moat and relationship with the customer. However it's important to note that not every decision pans out, and it's critical to recognize when things are going sideways; sometimes, you get an unmistakable punch in the mouth to figure that out. Bezos's 2000 shareholder letter started with, "Ouch. It's been a brutal year for many in the capital markets and certainly for Amazon.com shareholders. As of this writing, our shares are down more than 80 percent from when I wrote you last year." It then went on to highlight something that I didn't see in any other shareholder letter, a mistake: "In retrospect, we significantly underestimated how much time would be available to enter these categories and underestimated how difficult it would be for a single category e-commerce companies to achieve the scale necessary to succeed…With a long enough financing runway, pets.com and living.com may have been able to acquire enough customers to achieve the needed scale. But when the capital markets closed the door on financing internet companies, these companies simply had no choice but to close their doors. As painful as that was, the alternative - investing more of our own capital in these companies to keep them afloat- would have been an even bigger mistake." During the mid to late 90s, Amazon was on an M&A and investment tear, and it wasn't until the bubble crashed that they looked back and realized their mistake. Still, optimizing for the long term means admitting those mistakes and changing Amazon's behavior to improve the business. When thinking long-term, the company continued to operate amazingly well.

Business Themes

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  1. Free Cash Flow per Share. Despite historical rhetoric that Bezos forewent profits in favor of growth, his annual shareholder letters continually reinforce the value of upfront cash flows to Amazon's business model. If Amazon could receive cash upfront and manage its working capital cycle (days in inventory + days AR - days AP), it could scale its operations without requiring tons of cash. He valued the free cash flow per share metric so intensely that he spent an entire shareholder letter (2004) walking through an example of how earnings can differ from cash flow in businesses that invest in infrastructure. This maniacal focus on a financial metric is an excellent reminder that Bezos was a hedge fund portfolio manager before starting Amazon. These multiple personas: the hedge fund manager, the operator, the inventor, the engineer - all make Bezos a different type of character and CEO. He clearly understood financials and modeling, something that can seem notoriously absent from public technology CEOs today.

  2. A 1,000 run home-run. Odds and sports have always captivated Warren Buffett, and he frequently liked to use Ted Williams's approach to hitting as a metaphor for investing. Bezos elaborates on this idea in his 2014 Letter (3 Big Ideas): "We all know that if you swing for the fences, you're going to strike out a lot, but you're also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score one thousand runs. This long-tailed distribution of returns is why its important to be bold. Big winners pay for so many experiments." AWS is certainly a case of a 1,000 run home-run. The company incubated the business and first wrote about it in 2006 when they had 240,000 registered developers. By 2015, AWS had 1,000,000 customers, and is now at a $74B+ run-rate. This idea also calls to mind Monish Pabrai's Spawners idea - or the idea that great companies can spawn entirely new massive drivers for their business - Google with Waymo, Amazon with AWS, Apple with the iPhone. These new businesses require a lot of care and experimentation to get right, but they are 1,000 home runs, and taking bold bets is important to realizing them.

  3. High Standards. How does Amazon achieve all that it does? While its culture has been called into question a few times, it's clear that Amazon has high expectations for its employees. The 2017 letter addresses this idea, diving into whether high standards are intrinsic/teachable and universal/domain-specific. Bezos believes that standards are teachable and driven by the environment while high standards tend to be domain-specific - high standards in one area do not mean you have high standards in another. This discussion of standards also calls back to Amazon's 2012 letter entitled "Internally Driven," where Bezos argues that he wants proactive employees. To identify and build a high standards culture, you need to recognize what high standards look like; then, you must have realistic expectations for how hard it should be or how long it will take. He illustrates this with a simple vignette on perfect handstands: "She decided to start her journey by taking a handstand workshop at her yoga studio. She then practiced for a while but wasn't getting the results she wanted. So, she hired a handstand coach. Yes, I know what you're thinking, but evidently this is an actual thing that exists. In the very first lesson, the coach gave her some wonderful advice. 'Most people,' he said, 'think that if they work hard, they should be able to master a handstand in about two weeks. The reality is that it takes about six months of daily practice. If you think you should be able to do it in two weeks, you're just going to end up quitting.' Unrealistic beliefs on scope – often hidden and undiscussed – kill high standards." Companies can develop high standards with clear scope and corresponding challenge recognition.

Dig Deeper

  • Jeff Bezo’s Regret Minimization Framework

  • Andy Jassy on Figuring Out What's Next for Amazon

  • Amazon’s Annual Reports and Shareholder Letters

  • Elements of Amazon’s Day 1 Culture

  • AWS re:Invent 2021 Keynote

tags: Jeff Bezos, Amazon, AWS, Invention, 7 Powers, Elon Musk, SpaceX, Andy Jassy, Hamilton Helmer, Prime, Working Capital, Warren Buffett, Ted Williams, Monish Pabrai, Spawners, High Standards
categories: Non-Fiction
 

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