The Art of the Raw Deal–Futurum Tech Podcast Episode 047
On this edition of the Futurum Tech Podcast, we’re going to take a look at the increasingly chaotic trade situation between the US and China. What does it mean for Huawei and what does it mean for the rest of the world? We’re also going to take a look at the latest in facial recognition in schools. We’ll take a look at voice recognition, identifying what a person looks like based on what they sound like. Plus, we’ll take a look at Apple limiting third party tracking apps targeting kids. We’ll also take a look at the latest in Sprint and Britain’s 5G roll out. Plus, tech bites with Amazon, because that’s what we’re all about. All this and more on this edition of FTP, the Futurum Tech Podcast.
Our Main Dive
The current trade situation between the US and China can only be explained as chaotic with the risk of disrupting the global tech supply chain. But is there hope? Can the two economic giants survive unreliable foreigners, impeachment porn, and a shortage of (not-so-rare) rare earth metals? No. Here’s why.
Our Fast Five
We dig into this week’s interesting and noteworthy news:
- Why using facial recognition to safeguard schools might not be the best idea after all
- If autonomous vehicles still aren’t here, how did Lyft just deliver 50,000 autonomous rides?
- Apple’s war against 3rd party apps that track kids (yes, this is good news)
- 5G Update: Sprint just announced an impressive 2,180 sq miles of 5G coverage in the US
- Can AI really guess what you look like based on the sound of your voice?
Amazon! In its rush to eliminate friction and optimize revenue, the tech and retail giant is looking to offload supplier negotiations to autonomous smart systems and shift aside smaller “mom & pop” suppliers in favor of mega-providers who can offer lower costs and more predictable business. How predictable…
Crystal Ball: Future-um Predictions and Guesses
Will China and the US negotiate a truce and provide global supply-chain clarity within the next 12 months? Or are we destined to get a raw deal that solves nothing but political momentum for the 2020 US elections?
Olivier Blanchard: Welcome to this edition of FTP, the Futurum Tech Podcast. I’m Olivier Blanchard, Senior Analyst with Futurum Research. Joining me today is Fred McClimans. Dan is out and about on a travel mission somewhere in the world. I think he’s coming back from Australia actually.
Fred McClimans: Where in the World is Carmen San Diego, comes to mind.
Olivier Blanchard: Right? We need to put a little tracking chip on him.
Fred McClimans: Yeah, well, hey. I’m doing well, Olivier, and I got to tell you, that I have a couple of favorite apps on the iPhone that allow me to actually track in real time where Dan is, and actually see a representative of his plane flying over wherever it happens to be flying, along with all the other planes around it. It’s some impressive tech.
Yeah, he is back in the states now, I believe, making his way home after that flight home from Brisbane. So we’ll miss him, and we’ll see him next week.
Olivier Blanchard: Yeah, we’ll go on. Yeah, I just want to point out that anybody who has ever complained about jet lag doesn’t understand what real jet lag is until they’ve flown from the US to Asia or Australia and then flown back inside of a week. That’s kind of like the gold standard of horrible, horrible jet lag.
Okay, so back to the show so we can get started. We’re going to start today’s show with a discussion about China and Huawei. Try to keep it short because it’s more of an update than a deep dive. Then we’ll share some of our favorite news story of the week in our fast five segments, followed by tech bites, which we highlight as usual one of the latest tech related fails of the week. Then we will end the show as always with a crystal ball.
As always, before we begin, it goes without saying that this show is intended for informational purposes only, and no advice or insights provided here today should be taken as investment advice.
Okay. So our main topic, Huawei, China. As you all know, the United States is currently entangled in a bit of a trade war with China and specifically on the issues of trade and also with regard to issues of national security and especially with the focus on technology and 5G, the US has been specifically unhappy with Huawei, which as you know, is a pretty major Chinese tech company that does a lot of things but is in particular a phone maker, a rival of iPhone, and also a major provider of 5G technologies and 5G standards in fact.
So about two weeks ago, I think. Two, is it three weeks? It’s hard to tell anymore. Time flies. The US issued an executive order prohibiting the United States and the United States companies from working with certain Chinese, well, foreign entities.
Fred McClimans: Yes, that would be considered security threats.
Olivier Blanchard: Right. That may have too strong of ties with certain governments that may be hostile to the United States. Huawei wasn’t specifically listed in the executive order, but it’s understood that Huawei has been blacklisted by the US government. Very quickly after this executive order came out and was interpreted as a “Huawei ban,” a number of technology companies in the US immediately tapped the brakes on their relationship with Huawei specifically.
I think the first one was Google, right, which is a big deal because Huawei depends on the android ecosystem for its phones and for Google to move away from Huawei means that updates to the android OS would no longer be available, that a lot of apps would not be available. I think also that YouTube would no longer be available to Huawei phone users and other properties that are fairly common and useful to android phone users and phone users in general.
Fred McClimans: Yeah, there was also by the way, Arm, also on the chip IP side…
Olivier Blanchard: All the chip makers.
Fred McClimans: shut everything down as well. It was a fairly significant step back.
Olivier Blanchard: It was and it kept getting worse. It seemed like every day for the last week, somebody was moving away or canceling their relationship with Huawei. Most notably, after these number of US tech companies and chip makers started doing it, they also started losing their membership in a number of organizations that were vital to any phone maker.
For instance, the SD alliance, which basically the group that controls or coordinates SD card compatibility backed away from Huawei. So there was … same thing with WIFI, same thing with Bluetooth, and the fear was the Huawei would no longer have access to or no longer be allowed to use Bluetooth, which would be horrible for peripherals. WIFI, which is kind of a big problem for any kind of electronic device. Huawei would no longer be able to use SD cards in its phones. It was just kind of this daisy chain of bad news after bad news after bad news.
The latest of these was the IEEE, which is a US based body that deals with electrical engineering, banned Huawei scientists from reviewing papers. So it didn’t ban them from contributing or from submitting their work, but it did ban them from reviewing their papers.
In the last 24 hours, however it’s really hard to follow because this keeps going back and forth. The kind of the distancing from Huawei of the SD alliance, WIFI, and Bluetooth all backtracked. So Huawei is back in, at least temporarily. I don’t think that IEEE has reversed its position. I don’t think that Google has either. I know that Huawei has had a … or at least the executive order has kind of backtracked a bit and gave a 90 day grace period for Chinese and US companies with partnerships to adjust to find a way to adjust to the new reality.
So there’s a lot of confusion right now as to what’s actually happening, what Huawei could use, what US and Chinese companies can do together. It’s a mess, but I just thought that we should briefly discuss this. First of all, give you this completely jumbled update of confusion with all this to kind of highlight just how messy the situation is, and inject another element into this. Then, Fred, I promise I will ask you for your commentary.
We’re actually leading to something. So for the last week, I started hearing a number of rumors that china was planning a package of sanctions against US technology companies. Similar, kind of a tit for tat of what was happening with the US with regard to china. That seemed to kind of gone on hold and morphed into something a little bit different. Apparently, several outlets today are reporting that china is planning its own blacklist. So not actually trade sanctions through some of its regulatory agencies, but an actual blacklist of technology companies from countries that it considers hostile, presumably including the United States. So we may find out in the next few days or in the next couple of weeks whether, A, that’s true, and B, what US technology or foreign technology companies are going to be on that list.
So Fred, where do you think we go from here? What happens now? Does it keep escalating? Do we reach some kind of agreement?
Fred McClimans: I think the best way to look at this situation here is in the context of the US administration. When it comes to negotiations, the present administration has pretty much taken a wild west approach that says, “Look, we’re playing cards. Let’s put everything on the table.” So rather than having trade discussions, rather than having intellectual property theft discussions, rather than having partnership discussions, all the various things that people would do independently, we’re throwing everything onto the table. Everything is negotiable.
For example, the US has through Canada, arrested the daughter of Huawei’s founder, charging her with various crimes. Yet, as serious as the crime charges may be, the administration has also said, “Well, hey look. We’re willing to be flexible on that if we can get the right trade deal in play.”
So what you have here is this scenario where both sides are kind of randomly firing off misses back and forth at each other and they’re creating an incredibly unstable environment and that has everybody very concerned because you can no longer plan on certain things being steady state, even if they’re agreed upon and have been canon for years or decades. So in response to the US with the executive order saying, “Look, we reserve the right to choose any country or any company within any country and list them as a potential national security threat.” By the way, the US has also thrown out at Europe for their automobile imports, exports imported into the US.
You have this situation here where China now responds and the commerce ministry did just today come out and say, “Look, we are creating an unreliable foreigners list.” That can be companies, individuals, executives, countries that China decides what this country is doing or this individual goes against the interest of Chinese companies. Therefore, you are now banned. It’s this kind of tit for tat back and forth. Even within the last 24 hours or so. I know that in the case of Huawei and the SD cards as an example, they’ve been kind of reinstated in, but Huawei also has their own slightly smaller variation of the SD card that I think if they needed to they could use relatively quickly into their products.
Just within the last day or so here, Beijing is now threatening to not necessarily close, but to wind down some of the large volume of production for rare earth elements that the US needs. Our technology companies in fact the technology companies around the world need these rare earth elements for all the computer technology, all the chips, the circuitry, the silicon. It’s technology that’s sorely needed. Electric vehicles run on rare earth technology in many cases.
So it’s this back and forth. It’s incredibly unpredictable and it’s destabilizing the entire industry right now because nobody can look forward and say company X, here’s there product. Here’s their projections. Here’s the investment that we’re willing to make in either purchase their technology or as a wall street investor, perhaps buying shares in that particular company because it’s so unpredictable.
I think the impact that sort of the unintended consequence in all of this is that first off, you have a situation where there is a tariff battle in place. So often, company or country A imposes a tariff on country B, but the reality is the alternatives that come into play are other countries, other corporations that step up and say, “Yeah, we know you guys no longer want to buy from this country because it’s 25% more expensive. We’ll provide the product that you need, and it’s only going to be 5% more expensive.” We’ll sign a one year, a two year, a five year, even a ten year agreement to get that product because it’s less expensive than the 25% tariff we’re paying on other products.
So even if that trade war is resolved, we still end up paying more money. Take that and now overlay all of this uncertainty on top of it and it’s a mess. I don’t see it ending any time soon, unfortunately, just given the unpredictability of the key players.
Olivier Blanchard: Well, I’m just going to read the statement from the Chinese trade or commerce ministry that I was eluding to earlier. It’s this, or at least translated: For enterprises, organizations, or individuals that do not comply with market rules, deviate from a contract spirit, or impose blockades or stop supplies to Chinese enterprises for non-commercial purposes and seriously damage the legitimate rights and interests of Chinese enterprises will be included on a list of “unreliable entities.”
What really catches my eye here obviously is the part that talks about imposes blockades or stop supplies to Chinese enterprises. That’s obviously government statements and it’s obviously targeted at the executive order and its effects.
So the Chinese are essentially signaling that they’re okay with a lot of toughness in trade negotiations, but they consider this blockade it’s called to be a red line that they’re not willing to allow the US to cross.
Fred McClimans: You know, that’s an interesting one because you put yourself in a situation of a CIO or a CEO out there. You’re going through a digital transformation initiative, or you’re simply just keeping the lights on with the technology that you need every day to keep your business running. Even if this particular issue is resolved with the all-encompassing trade and intellectual property and national security elements all tied up really nice and neat sometime later this year, you also have to step back and ask yourself the question, “Do I have faith in that agreement actually lasting for more than a few months?”
The present history right now is that even when we get ready to sign a deal in the US let’s take the NAFTA V2 movement where the US has a deal in principle in place with Mexico. Now we’re willing to throw that deal right out the window for political expediency. So the unpredictable nature here, and of course just given the whole situation about that pornographic word, impeachment, that keeps getting lobbed around. Who knows what we can really expect. This really does, it puts the enterprise and the consumer in a very difficult position here where product could be significantly more expensive or simply not available when you need that technology.
So I think the suggestion right now is if you are a large organization, if you’re buying and implementing, whether it’s components that come from china or from Mexico or wherever, or you’re simply just buying the product, you need to start thinking now about what’s the contingency plan? What do we do if that supply does dry up? What’s that equation look like where we decide that from a financial perspective we’re willing to pay X percent more, but as soon as it goes to X+1, we’re shutting it down. Not that dissimilar to what we believe happened with Apple and the Qualcomm litigation where Apple just kind of hit that moment in time where they said, “Okay, the equation is no longer in our favor. Settle.” It’s a financial decision.
Olivier Blanchard: Yeah, and one of the issues I see here is that it’s already complex enough when you’re dealing with washing machines and flip flops. It’s annoying, cost can go up, you can have fluctuation in supply. With devices, especially smart phones, with all the components that go into them, all the testing that has to happen, all of the software and compatibility and customized elements of putting a device together like this, the timelines for the development and release of every next generation of smart phone are so insanely tight that any kind of uncertainty when it comes to the supply chain, you’re going to be sourcing …
You wouldn’t be able to use software licensees. It’s not even just the components. It’s even just the contracts aspect of it, the importation, everything. We could start seeing some pretty significant delays in production and availability of all sorts of electronic devices, namely smart phones, because of this. This doesn’t necessarily … I mean, it hurts Huawei, fine, but it also hurts everybody. It hurts the consumers. It hurts potentially investors. It hurts all these companies because something that would normally under the best condition still be so unbelievable complex that it takes 18 months to get from point A to point B might now take 36 months because suddenly you can’t source half of your components anymore or something that’s essential to the functioning of your device.
Fred McClimans: Right. You know, if we do end up going down the political route of seeing an increase or a continued increase in the protectionist state where if it’s not locally grown it’s no good, if we do see that continue, that just in and of itself could result in sort of a continuous delay in product development as companies within specific countries start to retool to build product with more home growing rather than imported components. Now, that’s a huge challenge in today’s supply chain because it’s not as if we go to china and say, “We want rare earth element X. Sell us this and we’re done. We call it a day.”
No. That component gets embedded and used into any number of components that then get shipped back to china, that then get shipped to some other country, shipped to another country, shipped to another country, before they finally make their way back to china for assembly, and then the product is exported to the US.
So our trade situation, our supply chain situation right now is so interdependent on all these small components in place that literally replicating the complete technology that you would need for an iPhone in the US, it’s not possible today. So that situation there as we get more protectionist, it becomes a reality that we have to start to think about how do we source locally more of these technologies and what’s the cost penalty for that?
Olivier Blanchard: Something that I should add, you mentioned rare earth elements, which is a pretty important aspect of this whole discussion, but the fact of the matter is that they’re not that rare. It’s just they’re actually kind of everywhere. We have those rare earth elements in abundance in the United States. What we don’t have is easily minable deposits of these elements, which is something that China does. They also have much more flexible, I should say, environmental laws that allows them to mine these elements in a way that would not be possible in the United States, not without major change in our environmental laws.
Fred McClimans: In many instances, a lower labor pool, which is one of the reasons why the US to begin with started sourcing product from China. It wasn’t as if we couldn’t manufacture in the US. It was that we didn’t want to. We wanted an alternative that was less expensive that didn’t have to work within the confines of our various political economic environmental workforce regulations. So it’s interesting, because if you look at this whole situation here, we’re getting a good deal. All countries are getting a good deal when you have open trade and when you can freely decide, “I want to source something from one country or the other, the best deal that works out for me and for them hopefully if it’s a competitive market.”
So maybe we do find ourselves in situation though where, as you said, rare earth elements, yeah, they’re more common than people would think, but they’re not cost effective for us. That’s the challenge there. We can replicate what we’re doing, but at what cost penalty? What does that do to the delay in new technology implementation?
Olivier Blanchard: Exactly. So in closing, since the executive order kind of has this semi 90 day grace period, which is down … it’s probably whittled down to 80 or 75 by now. I haven’t checked the calendar, but definitely by the end of July or August, I think we should be more settled and have a little bit less confusion about where this is all going hopefully, with any luck. Right now, yeah, this kind of inconsistent interpretation of what the executive order is, of what the blacklist means, of what companies can do what is sowing a lot of confusion in the markets and that’s very unfortunate. So hopefully we get the grace period.
Fred McClimans: Hopefully. I will say, though, if you look at the situation here, I believe fundamentally that in particular regards to the China and Huawei situation that we’re discussing here today, but it applies to others. In that situation, I think China has the upper hand because you don’t have the same political turnover. You don’t have the same constraints that we have in the US in terms of the frequent election cycles. We don’t have somebody that’s premier president for life, thankfully.
So I think as our political cycle moves forward and as, again, that porn word comes more into play in the US, I think the risk of the administration creating distractions out there increases, and that just serves China, ultimately, I think in the long term, I think they can hold out longer than the US can at this particular point.
Olivier Blanchard: They can. Well, their economy is going to get pretty hard, though, but yes.
Fred McClimans: It is. So is ours. So it becomes a you hit me, I hit back, but there’s not that requirement that she go into election mode. He’s not facing impeachment. He doesn’t have to run for office again and keep his ego stroked up. I mean, he has other pressures internally, but I think it’s a different situation and I think the US is at a bit of a disadvantage.
Olivier Blanchard: Yeah, they’re definitely on a different timeline than we are. Let’s just put it that way. Okay, so moving on to our fast five. We’ll obviously come back to this if there are major developments and we’ll probably revisit this once the 90 day grace period is over to just kind of see where everything has settled. So Fred, you can do the honors this week. You actually have three Fast Fives since it’s just the two of us. Your first one, I think, involves facial recognition in schools. Is that right?
Fred McClimans: Yeah. So this is an interesting situation. In New York, there is a school district that was getting all set, in fact, just today the plans were put on hold, but the idea was that this particular school district in Lockport was going to pilot the use of facial recognition within the school. The idea being that as part of a security initiative, they would like to better track who’s in the school, where they are, where they’ve been so that if somebody comes into the school that doesn’t belong, they could identify that person. They could also theoretically match up the images of people coming into the school against various do not enter or do not allow into the building lists with that.
So they’re getting set to do this, and of course that brings up all sorts of ethical questions about the tracking of kids in the school and the capturing of their images and so forth because as we know, once you capture that data, it’s not secure. Somebody will find a way to access that.
So just today, just as the school district was getting set to roll this out, the Lockport city school district, the New York State Department of Education put a temporary hold on it and said, “Wait a minute. We’re not sure about this technology being used to monitor students. It’s okay, theoretically, for adults, but we’re not sure about students.” So they’re a little concerned about the ethical issue there. The challenge of course is, if you have the system in place, it has to see everybody in the school in order for it to work.
So this is a really interesting one here. We don’t know how this is going to play out here, but it was supposed to be fully operational for the beginning of the coming school year, deployed in eight schools throughout the district. So we’ll be watching this. I think that this brings up that same level of conversation that we saw in San Francisco where the city said, “Look, we’re just simply going to ban for certain uses facial recognition technology because, A, we know there’s bias inherent in that technology today and it needs to be dealt with, but B, there’s a massive security and a privacy risk that comes with this.”
So we’ll be watching it to see what happens moving forward here, but it is interesting that the school district was getting all set to kind of turn on that pilot program with as much, as many issues that we have with facial recognition today. We’ll see how this goes. So that’s my first fast five.
Olivier Blanchard: Well, mine is actually a little bit of a variation on the same theme of privacy and children. This is just a rumor at this point so we’ll have to wait until WWDC next week as we’re recording this on Friday and WWDC is on Monday, to see if Apple is actually laying this out. There’s a pretty strong rumor that Apple is going to limit the amount of data and information that third party apps, especially the ones geared towards children, are able to collect on users.
Some of these apps, for instance, actually track the age and names of their users, and obviously that’s a little bit of an issue when you’re a child, parents having obviously expressed some concerns about what type of data is being collected on their children.
So I expect that Apple will be pushing this change in an effort to, A, do the right thing, and B, reinforce its position as one of the tech companies that’s obviously very well positioned in the general effort to protect privacy, in an age when so many other technology companies are obviously embattled because of their failure to protect user privacy. So this is, I think, a really good move on Apple’s part.
Fred McClimans: Yeah. Kudos to Apple. I think it’s the right thing to do.
Olivier Blanchard: Yeah, and let it be known, that even though I criticize Apple in a lot of points, I give them props when they deserve it.
Fred McClimans: Oh, you’re such a fan boy.
Olivier Blanchard: I know, I know.
Fred McClimans: Well, let me dive into my second, our third, Fast Five of the day. Sticking with this theme of AI, the core here, MIT has done something pretty impressive with AI. They have created the speech to face algorithm. It doesn’t work perfectly. Let me just say this upfront. What it does is it creates a visual image of what a person looks like based on the sound of their voice.
It’s actually not that bad. There was a really good article in futurism.com this week about that and when you look at the images they have, people like Daniel Craig and so forth, the representation isn’t quite him with this, but it looks close enough that you can tell, “Yeah, I’m going to match that one up to Daniel Craig.” So it works with men, with women, they’ve got different ethnicities that they have in this sample here. It’s kind of scary impressive in a way, here. The idea of being able to identify somebody just based on the sound of their voice.
Olivier Blanchard: You know, I have to admit I’m a little bit skeptical. Not of you, but of the claim because I mean, it’s pretty simple to kind of put in Daniel Craig’s voice and have an algorithm that may be drawing from all kinds of sources, kind of figure out, “Yeah, that kind of sounds like Daniel Craig.” So you end up with Daniel Craig’s general image, but I’m skeptical about that working for the average person who does not happen to be a mega superstar.
Fred McClimans: It’s definitely not there. I think more than anything else, this is sort of a very, very early pilot program of a work in process here.
Olivier Blanchard: It’s interesting.
Fred McClimans: Yeah, they actually used U2 as the source, I believe the primary source material for training the AI system. I’m pretty sure they used again, for that competitive situation where the computer says, “Here’s what I think it is,” and then it challenges itself and says, “Nope, we’re going to play a little adversarial role here. That’s not quite right.” It’s a continuous learning process within the neural network.
So it’s definitely, I think, it’s an idea that will turn into something solid five or ten years down the road perhaps.
Olivier Blanchard: Yeah, we’ll see where it goes. It might be very helpful in differentiating between different users, for instance, or recognizing them even when they have different voices.
Fred McClimans: Absolutely. There’s a whole new area of biometric identification.
Olivier Blanchard: Okay, well, my second and overall fourth Fast Five today is a little update on 5G roll outs. So two notable ones this week. One was in the UK, which actually I think is happening today. The UK’s rolling out its first 5G service areas in six different cities this week, and Sprint in the US just announce 2180 square miles of 5G coverage with nine different launch cities across the US, mainly kind of centered along the Atlanta-Kansas City axis, but Washington DC and LA and Phoenix are part of it as well.
What I’ve seen on Twitter is a bunch of journalists and fellow analysts were invited to some of these launches and adjacent events and were given the opportunity to experience in real time what these 5G networks are capable of doing and some of the most impressive demonstrations I saw had essentially two phones side by side. You had a 4G phone. You had a 5G phone, each on their own network, and kind of one for starters showing the megabytes per second download speeds, where in normal situations, a user of 4G LTE networks would see anything from 74 megabytes per second downloads to maybe in the 300 range if they’re lucky. This was pretty consistently showing 900+ megabytes per second, which is almost a gig, which is lower than what we’ve actually been able to accomplish in controlled geo fenced laboratory testing, but in the real world is extremely rare.
So that was a huge improvement, and one of the other two demos I saw that was really interesting was somebody downloading apps from app stores that were fairly significant in size. You’re talking about 1.5, 1.8 gigabytes for these massive downloads. The 5G phone on the left, the 4G phone on the right. You could see the 5G phone going through the download and it was at 96% when the 4G phone was still at 4%.
So a pretty amazing and impressive display. So it’s really kind of interesting and it makes me very hopeful because the 5G deployment has been met with skepticism and a few hiccups here and there as there always are. Every new G has hiccups in the beginning, but seeing how quickly Sprint and the UK, and other countries by the way, are beginning to roll out fairly large 5G roll outs with pretty significant footprints definitely goes in the plus column.
Pretty cool. It’s coming.
Fred McClimans: Yeah, very cool. Very excited to see this actually turn into functional, real world, lots of bandwidth everywhere I go capability out there.
So let me wrap up our Fast Five here with my third, the fifth overall Fast Five. We’re going to take a look at Lyft. Now over the past couple of months here, Lyft and then Uber, have both gone public. Lyft and Uber have both done something very impressive for both of them. They both managed in their first quarter to lose over a billion dollars.
Olivier Blanchard: Yay.
Fred McClimans: Now, in the case of Lyft, when they announced their financials, they actually did have a better revenue rate. It was close to three-quarters of a billion dollars in revenue, but they also, again, I think it was 736 million in revenue. Again, they also lost over a billion.
Now, a large portion of that was related to their stock compensation coming out of the IPO, but since then, Lyft has been doing a couple of really impressive things. They did announce that they’re going to be getting into a partnership with Waymo, the Google alphabet autonomous vehicle product, but more importantly, just in the last day, they have announced that their existing self-driving car service in Las Vegas, which is based on the active technology, has passed 50,000 rides.
Now I got to say, that really surprised me. It caught me off guard because I didn’t realize that they were that deep into the implementation. Now their vehicles, they are autonomous. They do have a driver on standby in the car, but I think what was impressive here is when they made the announcement, they also included the star rating for the autonomous cars. It turns out that the autonomous vehicles, they averaged a 4.97 star rating. 92% of their riders gave feedback that said, “We feel safe.”
Here’s a 4.97. That’s higher than most drivers that I ride with from Lyft or Uber. So this technology, we talk about it very often in the sense that autonomous vehicles, it’s going to take longer for them to arrive, but when they do, they’re going to hit faster than we expect, and I think this is a good example of this because while we are still debating many things about the regulatory aspects, the legal aspects, all the various issues that come with an autonomous vehicle in play. While we’re still debating that across the country, there are examples where companies like Lyft are out there. 50,000 rides. That’s not an insignificant number and don’t forget general motors later this year will be rolling out the service as well. So we’re getting there, and I think it’s time for people to really start to pay attention to this. If you get a chance the next time you’re in Vegas, I’m definitely going to take a ride in a Lyft autonomous vehicle.
Olivier Blanchard: Yeah. I want to try that, too.
All right, cool. Well, that does it for our Fast Five. Those are pretty good. So we now move onto tech bites, the worst behaviors from tech companies of the week. Fred, I’m actually giving it to you because you came up with this week’s tech bite. So what is it?
Fred McClimans: Yes. Well, it wouldn’t be a Futurum Tech Podcast if we didn’t mention Amazon somewhere. This week, it is in fact Amazon. So a few months back, Amazon started pulling some of their mom and pop shop suppliers offline. Orders simply stopped coming in. They blamed it on a bit of a glitch. They said, “Oh, everything’s fine. We’re trying to sort things out here.”
That was a short-lived glitch. It’s back and in fact what it looks like right now is that Amazon is in fact going to be reworking their supply chain for product. In an effort to find larger, more reliable, more stable patterns, it looks like they are going to be pulling back on the smaller providers within Amazon, forcing those providers to no longer be able to sell through Amazon. You know, the old this is from company X but provided by Amazon. Now, they’ll be dealing directly to consumer on the Amazon platform. So that injects a little bit of unpredictability into the whole mix.
Now I think the interesting thing in this is that this is part of a larger program within Amazon called their hands off the wheel initiative. In fact, there was a good write up on this in Bloomberg this week. So the hands off the wheel is an approach that Amazon is taking to expand the number of products and the reliability and the service, but do it without spending more money or with more people.
So one key element of this is that they’re looking to actually automate a lot of the things like forecasting and negotiating prices and contracts with suppliers. So think about this. Two people on the phone, an Amazon rep and a provider of products and technology. It’s a human relationship. It’s a negotiation. Here’s what we can do. What if we do this? Well, let’s counter with that. At the end of the day, you arrive to something reasonable that both parties agree with.
When you inject AI and automation into that mix, you lose the human element. It now becomes person negotiating against a machine, and that machine, like in the chess match, can think out an infinite number of moves ahead. In fact, it turns out that AI and chat bots and so forth, one of the things they do really well is they negotiate. So I think this is … it’s an interesting move on the part of Amazon, but it’s also a move that I just have to look at and say, “Come on, guys. Really? You’re taking this step now to increase the profit margin just a little bit here and there?”
I think it just kind of highlights some of the profit motive that exists in our industry today, and for that, I think it’s worthy of the tech bites award.
Olivier Blanchard: Fair enough. Fair enough. Okay. So I guess that brings us to our crystal ball segment. As we often do, the crystal ball circles back to the original topic. Since our topic earlier was the trade war between US and china, specifically relative to Huawei and how it’s kind of spreading to the entire tech ecosystem. Where do you think we are a year from now? Okay, so before elections, are we still engaged in a crazy trade war between tech companies that we still can’t really pull ourselves out of or that we can’t really frame in any long term vision? Or a year from now, is this mostly resolved? Do we have clarity on the direction of the trade war one way or another, right? Either it’s worse than it was or it all gets solved but at least we have clarity.
Fred McClimans: Yeah. You know, so I think it’s a combination of both, and to be honest, I’m not sure how it’s likely to play out, you know, more than anybody else, but my gut feeling here is that as we get closer to election in the election cycle in the United States, one of two things has to happen in terms of an approach to that election cycle.
The president has to either say, “Okay, I’m not going to tell you that I created this mess, but I created this mess, and look at this mess. It’s huge. It’s ridiculous and now I’m going to solve it.” Then he solves the mess by completing the negotiation process with China and everything looks great. In the process, probably doesn’t make the best of deals. In fact, if he goes that approach, I think it’s probably going to be a pretty poor deal because he’s going to want to wrap things up and say, “Look, we have this massive issue, and I solved the issue. Keep me in office.” That’s one approach.
The other approach is if things get really nasty on that porn word again, impeachment cycle there …
Olivier Blanchard: It’s actually written in the constitution. It’s not a porn word.
Fred McClimans: I know, I know. The constitution–that dirty little magazine.
Olivier Blanchard: I know, right?
Fred McClimans: Yeah. It’s so ridiculous. Anyway, the other approach is he could do what he’s doing right now, and that is simply string it out and say, “Look, this is a horrible mess. I’m blaming everybody else for it, and I’m the only one that can solve the mess,” and he does have backers that will back him in that.
So I’m not sure which of those two approaches weighs out. My thought at this point in time is it’s really dependent on what happens with the house of representatives, and how far they’re willing to take things here. If I had to flip a coin, I would say that we probably see some resolution to the trade situation and it’s probably not the resolution that we would like to see perhaps, but clarity and focus because the stock market has to be doing well going into the election cycle.
Olivier Blanchard: Yeah. I hope so, as well. I think your political analysis is on point that it’s one or the other. Either you kind of come in with this fake deal. Say, “We solved a problem, here’s the deal that we made.” We end up in the same situation that we’re in with North Korea where we have this agreement on paper that’s being touted, but it’s not actually being reflected in the real world, and there’s a gap between those two things.
Or the other thing which is that we may be in a situation where he says, “We’re almost there. We’re making progress. We need to stay tough, and I need to get a second term in order to complete this journey that we’re on and ultimately solve it, but I need more time.” In that instance, nothing would be resolved. It would be just a to be continued, right? It’s kind of like let’s wait and see, but only I can do this.
You’re right. I don’t know which route. It’s going to be one of these two, I just don’t know which one it will be.
Fred McClimans: You know, in either case though, there’s going to be a lot of blame going to everybody else but on individual for the mess that we’re in.
Olivier Blanchard: That’s fine, but my main concern, at least with regard to this podcast is with regard to the technology companies, to consumers, the investors, the fact that whichever way it goes … I have my preference personally. I’d like for the integrated supply chain of the US and China to be fluid and agile and mutually beneficial for a variety of reasons, and I’d also like to see a lot of tech jobs come back to the United States, and I’d like to see a lot of production come back to the United States. I’m also not a big believer in World Garden.
So I think that kind of not a compromise solution, but some kind of plan to get a little bit of everything that everybody wants to everybody who wants it would not be a bad thing. I think that the Chinese would be willing to compromise with us a little bit. If there’s willingness on our side, I think they’ll meet us halfway.
Fred McClimans: Well, you know, I wouldn’t be surprised to see a resolution on paper as you mentioned, that at the end of the day really doesn’t solve all the issues.
Olivier Blanchard: It doesn’t, but I have to say, though, and from a personal perspective, I am shedding zero tears about what’s happening to Huawei. Not one. So there’s … to me, the general kind of trade dispute with China is a separate subject from Huawei in a way kind of experiencing karma a little bit for some of the behaviors it’s exhibited over the years.
So that I think does it for this week’s edition of FTP, the Futurum Tech Podcast. So thanks a lot for tuning in. There will be plenty of more tech topics and tech conversations right here on the Futurum Tech Podcast, FTP. Hit that subscribe button, join us, become part of our community. We would love to hear from you. Check us out, futurumresearch.com, or Futurum Tech Podcast, Daniel Newman, Fred McClimans, Olivier Blanchard. We’ll see you later.
Disclaimer: The Futurum Tech Podcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.