Notes on the Tech Sector from Fritz Maffry
It’s always good to get Fritz’s perspective; here’s another installment. – Craig
Five years ago key elements were on positive roadmaps; now the Consumer Electronics Show (CES) will display impactful and fantastic results
Looking back in time, it was clear something remarkable was gestating between seven and five years ago. The technologies with converging possibilities were moving iteratively towards dramatic new possibilities; now those are probabilities. The Consumer Electronics Show is about to release a torrent of game changers, and in combination, those will create sea change in the economy.
The CES has changed during this short period–from a gadget show to the high ground of technology breakthroughs, with technologies like smart assistants, exoskeletons, autonomous shuttles, care robots, electric cars and bikes, artificial intelligence, markedly advanced batteries, now all coming together. The bureaucracies under-invested in the future, while the technology industry put together an iterative momentum that has led to a new and qualitatively different reality in terms of how advancement takes place. Approaches and solutions that were very recently state-of- the-art are hopelessly out of date in terms of what is at hand right now, what will to be demonstrated this year.
CES will showcase a tour de force that should make self-evident that there is a very new prioritization and deployment at hand, to be pursued and realized in a very new way. The traditional entities are unable to keep pace, and the energy is all going over to tech and fusion disruption.
Opportunity Cost
We contend that tech was going to drive solutions, much different than the progression that bureaucracies were used to. Traditional business also did not grasp what was coming at an accelerating pace. The rise of the Super Techs showed a fundamental reorienting of the economy. The practitioners that would realize the best outcomes will not work in orthodox fashion; they would instead deconstruct scenarios, and integrate and apply technology through new models to really change things profoundly. That is now clearly coming to be. In one case to give an example, we promoted solar charging canopies for long park situations. That more or less would have set up electric vehicles with an equivalence of gas stations and oil wells. There was plenty of budget to do this; more money was not the issue. This would have been a bold and barrier-broaching approach.
The status quo stakeholders (and I use that word disparagingly) chose instead to give an exclusive program to the utility and their proxy. That program overemphasized fast chargers and billing software, staying in the comfort of the utility design. The bureaucracies were either incompetent, out of their element, inclined to not support disruption, and perhaps corrupt. There was little acceptable excuse for having the wrong skill sets and not get that disruption was the great change going forward.
Back to opportunity cost, the solar canopies for long park charging would now be paid off, working well, on advanced iterations, and have fundamentally addressed hard barriers. Our politicians and bureaucrats took the easy and inconsequential way out, delivering not much in terms of results that excited the public. The (Kansas City, MO) region did not really prioritize electric bikes, distributed solar, autonomous shuttles, disruptive models, and guess what: we didn’t get to see them here either.
The ingredients for disruption are now at the right level of readiness to have impact
Now parties are recognizing disruptive forces, be it Uber on virtual taxi business, Bird on dockless scooters, or Tesla on the entire automotive sector. Regarding CES, Forbes is saying CES will be all about mobility breakthroughs, where Barrons is saying care robotics, and robotics in general will dominate the show. Other entities covering the event are highlighting the tremendous emphasis on smart assistants and where that is heading the entire industry. How this region could be so obtuse as to bottle up disruptive positive elements is hard to believe; it is not the region’s finest hour; in fact it is a short term futility that wastes a fortune on the soon to be obsolete.
The status quo can put its finger in the dike, but here comes the tsunami. To be apathetic or poorly informed is not okay; it is a clear demonstration of poorly investing for the future, and not well representing the interests of the people and your greater constituencies. The power alignments have not delivered, but worse, they are not really preparing to change.
Yet they will be changed, and the arc of advancement now favors the super techs moving solutions along with irresistible acceleration and clearly with new drivers leading the way. The ready-to-apply solutions now will simply have their way, improving things greatly, and supplanting the old comfortable approaches of the entrenched and traditional. Watch.
Apple
Apple has had two years without a “wow.” They have iterated and improved the watch, and incrementally improved the phones, but competitive differentiation to justify margin differences is not clearly in their visible future. It didn’t help that Carl Icahn has them buying their own stock. Are they an annuity, or are they a growth company innovating in technology to take things to new places, delivering great new solutions? For a company that has $130 billion in cash and sits at the convergence of the kinds of things happening at CES, you would think they would be visibly realizing so much more. In handicapping who is executing, prioritizing, targeting, realizing the right kinds of commercial building blocks to move to another level, Apple looks like it has less mojo than Tesla or Amazon.
Certainly the impact of the China situation on what was clearly a large share of their business is a real impediment. You just don’t get the sense that Apple has replaced Jobs, when you compare to Elon Musk of Tesla or Jeff Bezos of Amazon. Hopefully they have something in development near at hand, but there is no advance buzz about that; you don’t see the new market they are going to take, or the new technology combination they are going to exploit to grow to another level.
Tesla
Despite the noise of the shorts, Tesla is now doing what we expected once they stabilized the Model 3 release. They now are close to parity on battery costs with scale and costs that lead the industry. Now they are driving a cost cutting move on products. The shorts take it as weakness, but the competition better take it as a virtuous cycle advantage that will make Tesla extraordinarily hard to overcome.
Tesla is being less coy about autonomous. Just when the traditional industry thinks it can compete, it will find Tesla driving an approach that has them chasing unprofitably, with lagging technology, slower cycles, and an unenviable price burden on the battery. Tesla is still high risk, but I think now it can be said that the traditional industry is in a higher risk position; who would have said that a year ago?
While Apple hits flat tones on innovation, Tesla and Amazon just keep on pointing to advantages, focus on new markets, new ways past barriers, and seriously tight commercialization and innovation chops to get something done. The market will go up and down; still Tesla and Amazon are forces to be reckoned with and probable drivers of great disruptive growth.
Status of the players of super tech
Despite the price corrections (what a euphemism for losing a major portion of value), tech will come roaring back, and the promise of what CES is demonstrating clearly illustrates why. Conventional machinery is broken and on the wrong path. Now tech will show brilliant examples of what the right path looks like, with different methods, results, timetables than anything your status quo is putting forward.
No longer can the country, the region, or the politicos ignore what is at hand. To lag will be to lose competitiveness, and the pace is only accelerating. The apathy of the region and the focus elsewhere will not excuse a poor showing here. The public does not demand what the public has not understood, but now that is to change quickly.
Global business models are impaired–maybe for a long while
Entities designed for globalization assumptions have been undermined: Softbank, Foxconn, Apple, Huawei, to a degree Nvidia. If a major share of business was based on things happening in the US and China in more of what has been are required for growth and success, then expect disappointments and pull-back.
Of course a trade agreement could swing that again, though there are signs that things will not be the same, even in the case of an agreement. More of the same was not an acceptable strategy. Bold and obvious alternatives point to advancement that we can innovate anew, in such a way as to not have the rug pulled out from under us in the future. To build in certain vulnerabilities is unacceptable risk, and that is getting ever more clearly illustrated. We can’t have Russia and/or China bricking our economy, and it is of little interest to have them profit and then translate that immediately into weapons pointing at us and a military that is designed only to take on ours.
Having heard quite a bit about the US negotiating team, the early impressions of the trade conflict have turned into something much different. Will Trump or Xi Jinpeng survive politically the coming challenge, were stakes are going up for both sides, as are negative consequences? Trump might calculate his politics in such a way as to declare victory, albeit without evidence. But when I heard more about the negotiating team, now I think that is less likely.
China is piling up cases of negative behavior that collectively give us little reason not address them now. There are real issues the US also needs to improve on, and Trump seemed to have in mind that the compromise would be mostly through concessions of China alone. Be it the South China Sea, trade deficits, treatment of South Korea and Taiwan, domination of Asian neighbors, profits going into postures to fight in future conflict, authoritarian hardball instead of soft influence or persuasion, China forgot that treating a customer as an adversary is not conducive to positive futures.
Needless to say the world is looking on, in many cases paralyzed until there is clarifying resolution, which is the downside of any country’s “being first” policy. The tight execution path of Tesla and Amazon compares so vividly with the discontinuity of the globalized dependency business models. Executing with confidence has to be more highly regarded at this juncture.
It’s funny: Trump and Biden came to the same conclusion
After $10 trillion spent in the oil patch and decades of war, Trump came to the conclusion that blowing things up in the desert is not the highest return on American blood and treasure. Biden, if you recall, counselled President Obama with a similar suggestion. The Generals always want more time, more money, more men. And the issue keeps ongoing with the meter running, a meter of spent lives and huge resources that could be allocated otherwise.
Hopefully there will be a nuanced action, and a skillful forward play to counter a vacuum, and it won’t be us letting down our allies. The US does not have to hold the bag on everything that goes wrong in the world, nor do we allow dark forces to operate unchecked. Sun Tzu had some crafty ideas on how to check the negatives, though it might not be Queen’s Cricket to get that accomplished. Here is another case of more of the same not being in our interests.
In closing — the accelerating rate of change
The super techs are moving at an innovation speed probably at least five times faster than bureaucracies and public sensibilities on solutions. Traditional business has had the rudder of governance; now they are not even in the ballpark of keeping up with what is coming, accelerating and at hand. To not get that “Fusion Disruption” has to be handled in a new fashion is to choke it, which will only be for a very short time. Planning cycles that don’t have the right preparatory context cannot stand in the way of 5x delivery of benefits. Pressures are building, generationally, societally, with clear overwhelming advantages to be shown by new approaches.
To answer that the status quo is the right way to manage innovation, in a context where we have great challenges, is becoming absurd. Comparisons will shake this up; the solutions of the Super Techs will transform and replace what has been. We have the wrong people, with the wrong backgrounds, going down the wrong paths, with the wrong partners. Other than that how did you like the movie? If the demonstrations of CES don’t crystallize this in your forward thinking, then you will be relegated to the dustbin of history as they say.
Surely what has happened with Tesla upending the automotive market and Amazon doing the same in retail provides you a thought template and evaluation construct for what is coming. Of course, all techs are not created equal. You can validate if what we contend is accurate through your own eyes on the proof statement that is the CES.
