Ashlee Vance, the Bloomberg journalist and biographer of Elon Musk, has an excellent piece out this week about Kernal, a startup that—in Vance’s words—is building high-tech helmets that can “peer through the human skull.” What I found so fascinating about Kernal is not just the ambition of the company, but the multidisciplinary nature of the organization itself. Bryan Johnson, the company’s founder, has recruited some of the world’s top neuroscientists, computer scientists, and electrical engineers to work on a singular problem: How can we combine the use of artificial intelligence, sensors, and machine learning to better understand the human brain? “If Johnson’s theories are correct and the Kernel devices prove to be as powerful as he hopes,” Vance writes, “he’ll be, in a sense, the first person to spark a broader sort of enlightened data awakening.”
“The promise of a leagues-more-affordable technology that anyone can wear and walk around with is, well, mind-bending. Excited researchers anticipate using the helmets to gain insight into brain aging, mental disorders, concussions, strokes, and the mechanics behind previously metaphysical experiences such as meditation and psychedelic trips. ‘To make progress on all the fronts that we need to as a society, we have to bring the brain online,’ says Bryan Johnson, who’s spent more than five years and raised about $110 million—half of it his own money—to develop the helmets.”
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Video didn’t kill the radio star — but Spotify might
This week, Spotify made two big announcements: One, it launched Greenroom, its long-awaited live audio product. Two: it acquired Podz, a podcast discovery platform. What’s interesting to me is that Spotify’s Greenroom is being framed as a competitor to Clubhouse/Twitter Spaces when, in reality, I believe Greenroom (and live audio in general) poses a much bigger long-term existential threat to traditional, linear radio networks—a much larger opportunity. (On a recent earnings call, Daniel Ek touched on this, saying, “Just look at what happened to video in 2020. Linear video fell apart as viewers flocked to on-demand… A similar shift hasn’t happened yet to linear radio, but you’ve long heard me say that it’s coming, and… no other company has the capabilities or is as well positioned as Spotify for this massive opportunity.”) Anyway, with the news this week, I thought it was worth revisiting Packy McCormack’s excellent long-form explainer on Podz—the company Spotify just acquired—which details how podcast discovery and live audio are two key ingredients for global audio disruption.
“Podcasts also severely lag radio and TV in terms of monetization, which speaks to the opportunity in front of the industry. The global radio advertising industry is a $35 billion industry. Based on the earnings of the top 10 radio stations in the US, spoken word radio stations (news/sports) account for 57% of revenues. Applying that same percentage to the overall market, spoken word audio advertising is a $20 billion market before applying any sophisticated data or targeting.”
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The rise and fall of Kodak
Back in August 2020, Kodak—which went bankrupt in 2012—saw its stock climb some 2,700% in one week in what was one of the more bizarre trading stories from last summer. (Although, to be honest, none of this is really particularly surprising anymore.) This week, Kaitlyn Tiffany, a reporter for The Atlantic, used last summer’s trading activity as a launch-point for a deep investigation into Kodak’s past, present, and future in a piece titled “The Rise and Fall of an American Tech Giant.” Kodak—which is now attempting to reinvent itself as a pharmaceutical company—is perhaps one of the best modern case studies for what happens to organizations that fail to adapt to new technologies; Tiffany’s piece captures the essence of the innovator’s dilemma and why incumbent organizations rarely succeed in a technological paradigm shift.
“Back in 1989, Steve Sasson had shown Kodak’s management a version of the digital camera he and other Kodak researchers had spent 15 years perfecting, and management had turned him down flat. ‘That’s when I kind of got frustrated,’ he told me. ‘If we could do it, other people could do it. But Kodak was reluctant. You could never project a financial business model that was superior to photographic film.’ So, by 1993, Kodak had spent $5 billion on digital-imaging research, yet that year it only reluctantly entered the digital-camera race—neck and neck with competitors like Sony, Canon, and Olympus, not miles ahead, as it could have been. And it failed to rearrange its business model to make the new cameras profitable. In 1997, Fisher was trying to push the company to succeed in digital while still placating its internal old guard and insisting that ‘electronic imaging will not cannibalize film.’ In 2001, according to a Harvard case study, Kodak was losing $60 on each digital camera it sold.”
“Yet while Flash may be dead, its legacy lives on. Thanks to improved technology and new platforms, we’re on the cusp of a resurgence in instant games, which do away with downloads and long-winded onboarding flows. A new class of instant games today melds the click-to-play ease of early Flash games with the quality and performance of app-native games. Platforms like Snapchat, Facebook, and WeChat are already embracing instant games in different forms. This frictionless, inherently social mode of play has the potential to vastly expand and democratize access to games, unfettered by the constraints of hardware. And in the near future, a decentralized network of these experiences could disrupt — and even surpass — the dominance of the App Store itself, upending how we develop, discover, and distribute games.”
“Analyzing management’s alignment and competence is widely accepted (especially in quality/compounder circles) as an important part of the research process. Something I see less often, but that I have come to believe is at least as important, is analyzing the overall culture that exists in a firm. And to be clear- I see plenty of talk about it, but I suspect that rigorous analysis and deep thinking in this area may be a source of competitive advantage for long-term investors. I think one of the reasons for this is that the culture can be somewhat abstract and difficult to uncover compared to more concrete aspects like alignment and competence. While there is nuance to each company’s situation, I usually feel like I can get a pretty good handle on management’s alignment by a review of the proxy statement, and can assess their competence with a reasonably high degree of confidence by studying what they have done in the past and what decisions led them down that path.”
“The news largely reports itself now, at least so far as new happenings go. Where journalism was once necessary for raw information flow, we have no real dependence there anymore. If every reporter in the US called in sick tomorrow, we’d still know the weather and who won the game and how Congress voted. And if anyone cared to learn about compositional shifts in the auto market, GM and Ford would make sure their self-serving PR updates were readily available. Of course, this doesn’t mean we need journalism less now. Quite the opposite! But if its job is to help us make informed decisions relative to a world without journalism, it has to do something new now — something other than what can be accomplished by bots.”
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Welcome to The Nightcrawler, a weekly collection of thought-provoking articles and analysis on technology, innovation, and long-term investing. The Nightcrawler is published every Friday evening by Eric Markowitz, Nightview Capital’s Director of Research. Subscribe below. In this evening’s email… Quote of the week: “Doubt is not a pleasant condition, but certainty is absurd.” Voltaire Embracing uncertainty as a competitive edge In …
