Links #2

African Finance, software disenchantment, uruk, battery optimization, and state capacity

Hi friends,

I spent this week organizing a dinner in San Francisco around the current state of African finance with over 20 fascinating people. My friend living in East Africa, Sean Pawley of Seshat Bank, shared his thoughts on the future of the continent.

I physically cringe when people refer to Africa as though it’s one country – people make the same mistake with India and China. The truth is that every region has its own idiosyncrasies and Africa has hundreds of different languages; it’s not one culture.

To summarize, here are a few things I learned:

  • Huge investments are happening within the telecommunications and mobile lending sectors. Because of the leapfrog effect, these startups can copy the best of what’s out there and even test out the overly hyped promise of 5G. They’re not held back like modern-day incumbents are. I wrote about this in my post, The Final Colony, about how SpaceX is using Starlink as cheap bandwidth for rural areas and as a pathway to later fund their Mars mission.

  • How should private individuals invest in Eastern Africa? At the moment, most American VCs don’t even glance at Africa because they have no way of evaluating the risks involved. They write off the continent completely. The only way to do it is by building a network advantage, otherwise you’ll be bogged down by all the bribery, corruption, and hassles of developing economies. Financial liquidity in countries like Rwanda is minuscule to what we imagine in the west – it was $5.4 billion in 2017.

  • Nigeria hosts a multitude of fast-growing tech companies, but should we be bullish on the country overall? There are two issues: the first being the overdetermined nature of the Nigerian economy – the economy historically doubles down on one resource like petroleum; the second mishap is that the electricity situation is abysmal. Every successful business in Nigeria needs their own generator to avoid the never-ending stream of blackouts; the government is too weak to fix this. These are the situations one deals with when the state lacks any capacity to attack societal issues.

    “Chris Oyeniyi runs a small tech startup in Lagos, Nigeria. It's a smartphone app called KariGO that he says is "like Uber but for trucks." Businesses or factories can use it to hire big semitrucks to move their products around the country. He started it in 2016 and now has 11 office staff members, and he owns a few dozen trucks.

    But unlike Uber, which operates 24/7, Oyeniyi says the app is limited to normal business hours. He wants to keep it open around the clock but faces what has so far been an insurmountable obstacle. It's not a staff shortages, government regulations or software glitches.

    "One thing will not allow us to do that," he says. "Electricity."

    Oyeniyi says he pays about $800 every month to keep the lights and computers on in his small office. The reason for the high cost? Power from the government-run electrical grid is cheap but goes out so often — multiple times a day, every day — that he is forced to rely on a loud, fume-belching, diesel-sucking generator. It's too expensive to fuel and maintain beyond the bare minimum number of hours.”

    NPR


I’m in the midst of writing two wildly different pieces on the golden ages of cities and complex coordination, so I thought I would share a set of links I found beguiling this week.

  1. Software Disenchantment

    There is a lot hidden underneath the surface of web development. As a software engineer in a previous life, I can woefully recount the number of times I was shocked that anything online *actually* worked; when you’re aware of how shoddily code is pieced together, it all feels like magic. Like my previous points regarding Africa, we expect to have billions of new users join our current platforms, but can we handle this extra load? There is good reason to be concerned. Link.

    Look around: our portable computers are thousands of times more powerful than the ones that brought man to the moon. Yet every other webpage struggles to maintain a smooth 60fps scroll on the latest top-of-the-line MacBook Pro. I can comfortably play games, watch 4K videos, but not scroll web pages? How is that ok?…The iPhone 4s was released with iOS 5, but can barely run iOS 9. And it’s not because OS 9 is that much superior—it’s basically the same. But their new hardware is faster, so they made software slower. Don’t worry—you got exciting new capabilities like…running the same apps with the same speed! I dunno”

  2. The Uruk Series

    To the Robert Caro readers out there, the Uruk series is for you. When we think of the ills caused by neoliberal society, the biggest one that comes to my mind is how robotic everything feels – we’ve traded genuine feeling for efficiency.

    Instead of empathy, we have rapidity; instead of autodidacticism, we have specialization; instead of hugs, we swipe right. I suspect this plight can be explained by the power shift that has occurred since the Cold War; the halls of power don’t exist in the hand of communities, rather they belong to the faceless organizations like the WTO and the EU commission. Link.

    “Smaller units (individuals, communities, whatever) have efficient but localized forms of doing a thing. The doing of that thing is plugged into a much larger worldview which explains both how to do the thing and why you do the thing …Power is weighted heavily in favor of the larger unit, not least because community explanations appear irrational or are otherwise unintelligible. To regain some of that power, communities or groups within them tend to form mass movements. Those then replicate the ill effects of the original larger unit, whether they gain power or not. For various reasons, mass movements tend to sap power from their adherents and frustrate them more. They also tend to prescribe epistemic solutions. In other words, the origin and response tend to exacerbate and blur into one another.”

  3. Predicting Battery Performance

    When we think of Tesla’s IP, it’s basically the battery and software. The confluence of these two areas has been the focus of billions of dollars in research; specifically, combining machine learning to aid battery performance. In this study, researchers use a Bayesian Optimizer to predict a battery’s charging lifecycle. Link.

    “Fast charging is obviously useful for everything from phones to cars. But when a battery is subjected to fast charging, it doesn't store its ions quite as efficiently. The overall capacity will go down, and there's the potential for permanent damage, as some of the lithium ends up precipitating out and becoming unavailable for future use.

    There are, however, ways of altering the charging profile to avoid this issue. For example, it might be possible to start charging slowly and generate some ordered lithium storage and then switch to rapid charging that builds on these before slowing the charge rate again to pack the last bit of lithium in efficiently. Modern chargers have enough processing power to manage a charging process that's designed to optimize speed against battery performance. All batteries see performance drop over time, but the right profile will minimize it.”

  4. How state capacity drives industrialization

    A deep-dive into how national power can be the de facto force in driving industrialization, namely through the proliferation of machine tools. Why machine tools? Because of the complex coordination needed in order to build them, they’re an incredible proxy for advanced economies with a strong industrial base. With the exception of the British Industrial Revolution, it has been state capacity that has led industrialization in every major economy in the world. Link.

    “The industrial capacity of a nation can often be predicted by its ability to produce machine tools at high quality and quantity, as seen with South Korea as its industrial capacity developed. Machine tools are not only vital to industrial supply chains and an unfakeable indicator of real industrial capacity, but they also provide a lens to examine broader industrial and development policy. Machine tools, like the industrial economy as a whole, require a well-educated workforce, substantial and well-coordinated capital investment, and a robust consumer base—none of which can be produced by a single machine tool manufacturer.

    Creating the context in which machine tool production can develop and flourish requires coordination between government, business, and finance elites; much of this is captured by the term “industrial policy,” but factors ranging from the nature of the financial and legal systems to culture and positioning within global trade systems are also critical. Substantial state capacity is required to plan and execute the process of industrialization.

  5. What is the current state of the streaming wars?

    Scott Galloway hits on an interesting point: subscription videos change where consumers buy products. In this sense, Netflix is certainly trapped between a rock and a hard place because they have no other avenues to sell high-margin products; at the very least, Disney has their promised collection of plush, Baby Yoda toys as a way for fans to show their support.

    Evidently, this is hurting Hollywood darling Quibi from performing well. As a typical media company with media characteristics, they can barely compete with the likes of technological giants like Amazon. Sure, they might focus on mobile content, but I don’t believe that’s a long-term strategy. They own neither distribution nor a flywheel to integrate viewers into an ecosystem.

    “Most large entertainment media firms (Comcast, AT&T, Verizon, Netflix, Fox, Sony, etc.) will cede value to Amazon and Apple over the next decade. Similar to Walmart, Disney is the only incumbent with the assets, leadership, and shareholder base to land counterpunches on the  purveyors of paper towels & AirPods.

    My colleague Sonia Marciano teaches that to achieve success, the best strategy is to find the dimension with the greatest variance — the biggest delta between best and worst. In the streaming wars, both flywheel and distribution offer the greatest variance, and monopolies dominate those categories.

    Movies and entertainment evoke powerful emotions. The connective tissue of the flywheel is increasingly emotion. The NPS score (consumers’ emotional connection to a company) is negative to zero for ecommerce and internet companies, but it’s strong for SVOD companies. Loving Fleabag means you’ll buy your next toaster from Amazon, not Target or Williams-Sonoma.” Link.


    That’s it for this week – talk soon!

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