Wednesday Oct.14, 2020

📱 The iPhone-palooza wrap

_When Apple goes overboard with the Augmented Reality_
_When Apple goes overboard with the Augmented Reality_

Hey Snackers,

First we had sold-out "flights to nowhere." Now we have sold-out pop-up restaurants in grounded airplanes. The takeaway: people really miss plane food.

Earnings Season kicked off yesterday with stocks dropping on some yikes-worthy results and a fresh corona surge. US COVID-19 hospitalizations hit the highest level in nearly six weeks.

Drop

Apple's new iPhones include 5G, AR lasers, and no charger

Life could be a screen... Apple's seeing to it. The Fruit already killed the audio jack and the home button (RIP). Now, don't expect free headphones or even a charger to come with the biggest iPhone screen ever (FYI, Apple measures screen sizes diagonally). The new iPhone 12 lineup:

  • Pro Max: Beats every iPhone with its big screen energy. At 6.7-in, it's larger than half an iPad. It's also the priciest of the 12s, starting at $1,099.
  • Pro (no Max): For normal-sized hands, there's the $999+ 6.1-in screen Pro.
  • Normie: The base model also has a 6.1-in screen and starts at $799.
  • Mini: This adorable $699 model has a 5.4-in screen for that back-pocket fit.

Throw some wheels on it... And you've got yourself a self-driving iPhone. Unlike the two-eyed Normie and Mini, the Pros have three cameras. But the Pros also have lidar sensors, which shine lasers at objects to measure their distances.

  • It's the same tech that self-driving cars use to build out 3D maps of environments (to avoid plowing into a tree).
  • Apple's using it for augmented reality (AR), so that you can move digital furniture around in your new room, or put your friends' Snap filters to shame.

This could be the biggest wave of iPhone upgrades... iPhones used to make up 70% of Apple’s revenue. Last quarter, they made up just ~44% of total sales. But now all four iPhone 12 models are 5G-enabled. That faster tech could convince millions to cave for better streaming, chatting, and browsing (which we're doing more than ever).

Fly

Delta loses big: it could be an even bigger warning for other "Reopening Stocks"

Diet Coke or OJ?... Delta CEO Ed Bastian will take a double whiskey neat with that earnings report. July to September is usually Delta's peak travel quarter, but instead of swimming in Mykonos you were streaming My Octopus Teacher. Do you want the bad news or good news first, Ed?

  • Bad (terrible): Delta lost $5.4B last quarter, compared to a $1.5B profit for the same quarter last year. It burned through $11B in the last two quarters.
  • Good (better): Delta cut its cash burn to $18M/day last quarter from $27M/day in the previous one. It retired dozens of planes to trim costs.

First to land... While Delta's passenger sales were down 83%, Bastian says there are signs that demand is picking up going into the holidays. Plus, its co-branded Amex card is doing better than competitors, helping offset flight losses. Delta was the first airline to report — and it might go downhill from here:

  • Delta was more profitable than other airlines going into the crisis, so it has avoided involuntary job cuts (so far).
  • American and United are cutting 32K jobs since federal airline aid expired on October 1st.

Reopening stocks fly together... These travel, hospitality, and movie theater stocks benefit disproportionately from murmurings of a return to normalcy. But when one falls, the others usually follow. American and United shares plopped on the Delta earnings. More anti-reopening news bruised other stocks yesterday, too: Carnival, AMC, and Marriott. Like airlines, these companies are hoping stimulus medicine and/or a vaccine will come to the rescue (ASAP).

What else we’re Snackin’

  • Musked: Tesla cuts the price of its Model S in the US from ~$75K to ~$72K — it also trimmed prices in China.
  • Recovered: President Trump's doctor says he has tested negative for COVID-19 on consecutive days.
  • Vax: Johnson & Johnson's sales jumped from last year, but the stock dropped since it paused final-stage testing for its COVID-19 vaccine.
  • Greenback: JPMorgan Chase's profit (surprisingly) rose 4% last quarter thanks to boosted trading revenue from its investment unit.
  • Pop: America's largest movie theater chain AMC says it could run out of cash in 2020 if people continue to Netflix-and-hiberate.
  • Drive: Uber and DoorDash have been rampantly campaigning for "yes" on Prop 22 (so many emails). Their futures are riding on election day.

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Wednesday

Disclosure: Authors of this Snacks own shares of Apple, Uber, Amazon, and Delta

ID: 1366989

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“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.

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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.

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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.

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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.

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