Tuesday Oct.15, 2019

Apple's $399 iPhone for the other 80%

_The revenge of the braces_
_The revenge of the braces_

Hey Snackers,

Fuzzbucket. Million Dollar Duck. A creepy-ish one about a high-level lawyer transformed into a sheepdog. Disney tweeted out every show and movie hitting Disney+ on November 12th and we're impressed/confused by some of the throwbacks.

Stocks dipped Monday on word Trump's mini-deal with China isn't even a sure thing. And 3rd quarter earnings season kicks off today with big banks reporting how they did the last 3 months.

Lobbied

SmileDirectClub plummets (another) 13% on California's new ortho-regulation

Everyone gets a trophy... including SmileDirectClub. The worst new stock of 2019 is now down 53% from its IPO day. SmileDirectClub embraces "telemedicine" to straighten your teeth, using clear aligners and online video chats to replace painful in-person ortho appointments. But the stroke of a governor's pen just made its life a bit harder.

AB-1519 will see you now... That's the California bill just signed into law. It adds additional regulation for SmileDirect to deal with while providing additional protection to aspiring grinners. Now the state Dental Board will oversee all things teeth-fixing — this doesn't ban SmileDirect's business, but investors are still unhappy.

  • Your neighborhood orthodontist: She's getting disrupted by SmileDirect's straighten-from-home biz model. She also thinks braces deserve in-person, un-rushed attention.
  • The dental lobbyists: They represent that community of concerned orthodontists, so they encouraged California's government to make the move.
  • Your canines: They're not affected. Yet. SmileDirect said it will keep operating in California, but the bill “will create unnecessary hurdles and costs."

SmileDirectClub predicted this... A company's IPO filing paperwork (aka its "S-1") is released before its stock first begins trading, highlighting the business' risks and opportunities. SmileDirectClub's S-1 mentioned this exact concern: “Adverse changes in, or interpretations of, laws and regulations governing remote healthcare and the practice of dentistry."

The dental pros resisting SmileDirect are better-funded and organized than the taxis that resisted Uber...

Discount

Apple is reportedly going down-market with a $399 iPhone in Q1 2020

You overpaid for your iPhone by like $400... On the same day Apple inched past Microsoft to return to the #1 most valuable US company (iPhone 11 is apparently selling well), we get this shocker from a research analyst with a very particular set of skills:

  • The legendary Ming-Chi Kou studies Apple's supply chain for clues about the number of iPhones produced and the next model coming.
  • He just reported that an "iPhone SE 2" will be unveiled in Q1 2020.
  • The new creation boasts an iPhone 8 body with an iPhone 11 brain — for $399.

Going down-market, Apple?... This could finally compel frugal Apple buyers to upgrade. It may even convert some of the Android flock to Apple's ecosystem.

  • Upgrades: An estimated 200M humans stubbornly still use the iPhone 6 or 6s (can't believe that model is 5 years old).
  • New converts: Over 80% of the world's smartphone users and 51% in the US are on Android, Alphabet's operating system. And most Android phones are much cheaper than iPhone.

Phone profits aren't the priority anymore... The last Apple budget phone was iPhone SE (great for her jeans pockets). It annoyingly stole sales from higher-end iPhone 7s, hurting Apple's profits. But now Apple just wants more Earthlings with iPhones in their hands so it can make money monthly on recurring "services." More phones = more potential iEverything customers (iCloud, Apple Music, Apple TV+, Apple News+, Arcade...).

What else we’re Snackin’

  • Canceled: WeWork warns offices that 1,600 of its phone booths are tainted with formaldehyde
  • De-charged: Harley stops producing its new electric bike because of a problem with the charger
  • Arriving: DoorDash adds a new business — a shared kitchen for restaurants to deliver from
  • Capped: Lyft joins Uber to sue NYC for limiting how long their drivers can cruise around the city without passengers
  • 50%: US tariffs on Turkish steel were just jacked up to 50% because Turkey is moving military presence into Syria (the US withdrew troops from the area last week)
  • Ink: Facebook's Libra Association of 21 companies signs a charter warning it may not launch the global cryptocurrency by 2020 because of intense political resistance

Tuesday

Disclosure: Authors of this Snacks own options of SmileDirectClub stock

ID: 982118

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Power

World out of balance: It costs the US 3¢ to make 1 penny

The cost of producing the US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, that means that Uncle Sam loses more than two cents for every cent it produces. (And no, you can’t make it up on volume.)

For the record, that’s the 18th-straight year the penny’s face value has been below production costs, fueling calls for abolishing the lowest value denomination coin. Canada started to phase out the penny in 2013, joining Australia, Brazil, Finland, New Zealand, Norway, and Israel, according to Smithsonian Magazine.

3.07¢

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Business

Netflix is going to stop sharing subscriber numbers

After posting subscriber numbers that beat expectations today, Netflix says it’s no longer going to share those numbers starting in the first quarter of 2025. That’s a big deal since subscriber numbers have long been one of the main metrics that investors have looked at.

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” its shareholders letter read. “But now we’re generating very substantial profit and free cash flow.” The company said that it will focus on revenue and operating margin as its main financial metrics, while it will look at time spent on the platform to gauge customer satisfaction.

Another way to read this? They’ve hit market saturation and just aren’t going to be growing that much anymore, and they thought they’d end on a good note. Going forward they’re focusing on how to get more money out of the customers they do have.

They’re doing so by cracking down on password sharing and charging for extra members. They’re also pushing people to ad tiers, which are more profitable than non-ad tiers.

“Scaling ads to become a more meaningful contributor to our business in ‘25 and beyond,” Netflix said.

Netflix’s ads membership grew another 65% in Q1 over the previous one, after rising 70% the quarter before, and 40% of signups in ad markets continue to be for those ad plans.

Tech

Meta’s not telling where it got its AI training data

Today Meta unleashed its ChatGPT competitor, Meta AI, across its apps and as a standalone. The company boasts that it is running on its latest, greatest AI model, Llama 3, which was trained on “data of the highest quality”! A dataset seven times larger than Llama2! And includes 4 times more code!

What is that training data? There the company is less loquacious.

Meta said the 15 trillion tokens on which its trained came from “publicly available sources.” Which sources? Meta told The Verge’s Alex Heath that it didn’t include Meta user data, but didn’t give much more in the way of specifics.

It did mention that it includes AI-generated data, or synthetic data: “we used Llama 2 to generate the training data for the text-quality classifiers that are powering Llama 3.” There are plenty of known issues with synthetic or AI-created data, foremost of which is that it can exacerbate existing issues with AI, because it’s liable to spit out a more concentrated version of any garbage it is ingesting.

AI companies are turning to such data because there’s not enough good, public data on the entire internet to train their increasingly greedy AI models. (Meta had reportedly floated buying a publisher like Simon & Schuster to satisfy its insatiable data needs.)

Meta, of course, isn’t the only company that’s tight-lipped about where its AI data is coming from. In a now infamous interview with WSJ’s Johanna Stern, OpenAI’s chief technology officer Mira Murati was unable to answer questions about what Sora, OpenAI’s video generating app, was trained on. YouTube? Facebook? Instagram — she said she wasn’t sure.

What is that training data? There the company is less loquacious.

Meta said the 15 trillion tokens on which its trained came from “publicly available sources.” Which sources? Meta told The Verge’s Alex Heath that it didn’t include Meta user data, but didn’t give much more in the way of specifics.

It did mention that it includes AI-generated data, or synthetic data: “we used Llama 2 to generate the training data for the text-quality classifiers that are powering Llama 3.” There are plenty of known issues with synthetic or AI-created data, foremost of which is that it can exacerbate existing issues with AI, because it’s liable to spit out a more concentrated version of any garbage it is ingesting.

AI companies are turning to such data because there’s not enough good, public data on the entire internet to train their increasingly greedy AI models. (Meta had reportedly floated buying a publisher like Simon & Schuster to satisfy its insatiable data needs.)

Meta, of course, isn’t the only company that’s tight-lipped about where its AI data is coming from. In a now infamous interview with WSJ’s Johanna Stern, OpenAI’s chief technology officer Mira Murati was unable to answer questions about what Sora, OpenAI’s video generating app, was trained on. YouTube? Facebook? Instagram — she said she wasn’t sure.

Today’s earnings: Who’s making money edition

Here are some some notable numbers out this morning, as earnings season gathers steam. Thursday’s main event will be Netflix after the close of trading. (Keep an eye on its advertising business.) But until then...

7.13%

The 30-year fixed rate mortgage is back above 7%, according to weekly numbers from the Mortgage Bankers Association, the highest level in four months. High borrowing costs are creating havoc for would-be buyers, as affordability lingers at the low levels not seen consistently since the late 1980s.

Business

Amazon’s spy ops on rivals: shell companies, printed docs, and a fake Japanese streetwear brand

Some companies check out rivals’ websites, stores and public filings to stay abreast of the competition. Amazon made its own fake shell company and brands, transacted hundreds of thousands of dollars per year undercover on competitors’ platforms, and kept its intel operation a secret for nearly a decade even from others at Amazon, according to a fascinating investigation by the Wall Street Journal.

Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

Perhaps most strange of all, the company created a fake Japanese streetwear brand called “Not So Ape” (clearly a play on A Bathing Ape) and continues to sell products from the brand on a Shopify store, presumably as an attempt to learn the inner workings of the shopping platform. Of course, copying is old hat for Amazon.

In meetings where they’d use this clandestine information to inform Amazon’s own business practices, the group resorted to literal paper. “[T]he team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies."

Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

Perhaps most strange of all, the company created a fake Japanese streetwear brand called “Not So Ape” (clearly a play on A Bathing Ape) and continues to sell products from the brand on a Shopify store, presumably as an attempt to learn the inner workings of the shopping platform. Of course, copying is old hat for Amazon.

In meetings where they’d use this clandestine information to inform Amazon’s own business practices, the group resorted to literal paper. “[T]he team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies."

Crypto
Jack Morse
4/17/24

Worldcoin pivots to the blockchain… with a 'humans only' discount

Worldcoin, the “proof of personhood” crypto project launched by OpenAI’s Sam Altman, said it plans to launch its own ethereum layer-2 (L2) blockchain dubbed World Chain. The pitch: a blockchain where it’s both easier and cheaper for people to transact than bots.

Worldcoin has made waves for its iris-scanning metallic orb that promises a future where people can mathematically prove they’re real humans and not AI bots.

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses. 

Which is what may make World Chain attractive. Crypto exchange Coinbase launched its own L2, Base, last year. Base has since seen rapid user growth — activity that’s generated the exchange millions of dollars in weekly fees

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses. 

Which is what may make World Chain attractive. Crypto exchange Coinbase launched its own L2, Base, last year. Base has since seen rapid user growth — activity that’s generated the exchange millions of dollars in weekly fees

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.