As has been pointed out by people smarter than I, sometimes the AI biz does seem a bit incestuous.
From cloud mavens, SiliconAngle, May 1:
CoreWeave Inc., the operator of a cloud platform optimized for graphics card workloads, today announced that it has closed a $1.1 billion funding round.
The Series C raise reportedly values the company at $19 billion. That’s up from the $7 billion it was worth following a $642 million secondary sale in December. Fidelity Management, which led that deal, also joined in the funding round CoreWeave announced today along with Coatue, Lykos Global Management, Altimeter Capital and Magnetar.
CoreWeave operates a public cloud
that provides access to about a dozen different Nvidia Corp. graphics
processing units. It targets two main use cases: artificial intelligence
and graphics rendering. CoreWeave claims that its platform allows
customers to run such workloads more cost-efficiently than established
public clouds and with better performance.
Some of the GPUs the company offers,
such as the H100, are built from the ground up for AI workloads. Its
cloud also features other Nvidia chips such as the A40, which is mainly
geared towards computer graphics professionals.
Unlike their AI-optimized
counterparts, the A40 and the other rendering-optimized GPUs that
CoreWeave provides include RT Cores. Those are circuits optimized for
ray tracing, a rendering technique used to simulate lighting effects
such as shadows and motion blur. The method involves shining virtual
light rays on an object and studying how those rays bounce back to find
the most realistic-looking pixel settings....
The latest round of MLPerf training benchmarks includes GPT-3, the
model ChatGPT is based on, for the first time. The GPT-3 training crown
was claimed by cloud provider CoreWeave using more than 3,000 Nvidia
H100 GPUs. What’s more surprising is that there were no entries from
previous training submitters Google, Graphcore and others, or other
competitors like AMD. It was left to Intel’s Habana Labs to be the only
challenger to Nvidia on GPT-3 with its Gaudi2 accelerator.
CoreWeave used 3,584 Nvidia HGX-H100s to train a
representative portion of GPT-3 in 10.94 minutes (this is the biggest
number of GPUs the cloud provider could make available at one time, and
is not the full size of its cluster). A portion of GPT-3 is used for the
benchmark since it would be impractical to insist submitters train the
entirety of GPT-3, which could take months and cost millions of dollars.
Submitters instead train an already partially-trained GPT-3 from a
particular checkpoint until it converges to a certain accuracy. The
portion used is about 0.4% of the total training workload for GPT-3;
based on CoreWeave’s 10.94 minutes score, 3,584 GPUs would take almost
two days to train the whole thing.....
A secret question hovers over us, a sense of disappointment, a broken
promise we were given as children about what our adult world was
supposed to be like. I am referring not to the standard false promises
that children are always given (about how the world is fair, or how
those who work hard shall be rewarded), but to a particular generational
promise—given to those who were children in the fifties, sixties,
seventies, or eighties—one that was never quite articulated as a promise
but rather as a set of assumptions about what our adult world would be
like. And since it was never quite promised, now that it has failed to
come true, we’re left confused: indignant, but at the same time,
embarrassed at our own indignation, ashamed we were ever so silly to
believe our elders to begin with.
Where, in short, are the flying cars? Where are the force fields,
tractor beams, teleportation pods, antigravity sleds, tricorders,
immortality drugs, colonies on Mars, and all the other technological
wonders any child growing up in the mid-to-late twentieth century
assumed would exist by now? Even those inventions that seemed ready to
emerge—like cloning or cryogenics—ended up betraying their lofty
promises. What happened to them?...MUCH MORE
"...In the earliest formulations, which largely came out of the Marxist
tradition, a lot of this technological background was acknowledged.
Fredric Jameson’s “Postmodernism, or the Cultural Logic of Late
Capitalism” proposed the term “postmodernism” to refer to the cultural
logic appropriate to a new, technological phase of capitalism, one that
had been heralded by Marxist economist Ernest Mandel as early as 1972.
Mandel had argued that humanity stood at the verge of a “third
technological revolution,” as profound as the Agricultural or Industrial
Revolution, in which computers, robots, new energy sources, and new
information technologies would replace industrial labor—the “end of
work” as it soon came to be called—reducing us all to designers and
computer technicians coming up with crazy visions that cybernetic
factories would produce...."
HT: The Columbia Journalism Review's The Audit blog.
Also:
"Politics is the art of looking for trouble, finding it everywhere,
diagnosing it incorrectly, and applying the wrong remedies." -Groucho (source)
"Marx at 193" ...Groucho versus Karl: the great Marx debate
Religion is the sigh of the oppressed creature, the heart of a heartless
world, just as it is the spirit of a spiritless situation. It is the
opium of the people. Karl Marx
It isn’t necessary to have relatives in Kansas City in order to be unhappy. Groucho Marx
The last capitalist we hang shall be the one who sold us the rope. Karl Marx
Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy. Groucho Marx
The oppressed are allowed once every few years to decide which
particular representatives of the oppressing class are to represent and
repress them. Karl Marx
In America you can go on the air and kid the politicians, and the politicians can go on the air and kid the people. Groucho Marx
Is the color scheme a little too, as they say in Hollywood, On the Nose?
The author of this essay, Michael Hudson, is a Marxist economist.
But not just any Marxist economist. Leon Trotsky was his godfather.
And in addition to his professorship at the University of Missouri - Kansas City he teaches at Beijing's School of Marxist Studies, Peking University.
Yves Smith at naked capitalism seems to like him.
And
he almost has me convinced that the only way to clear the sclerotic
arteries of American capitalism is to declare Jubilee on all debts. He
may have gotten attracted to this ancient idea during his time on Harvard's archaeology faculty at the Peabody Museum as a research fellow in Babylonian economics. (Wiki) Not to be confused with The Babylon Bee's 2019 piece "Modernized Year Of Jubilee Will Forgive Everyone For Their Old Tweets". [rather ironic in light of the Bee's being kicked off Twitter, inciting Elon Musk and setting that whole train in motion]
Anyhoo, from Professor Hudson's website, February 8, 2022 i.e. sixteen days before Russia invaded:
The U.S. aim is to keep them from trading with China and Russia
And the headline essay, from Professor Hudson's personal website, March 29, 2024:
The dismantling of German industry since 2022 is collateral damage in
America’s geopolitical war to isolate China, Russia and allied
countries whose rising prosperity and self-sufficiency is viewed as an
unacceptable challenge to U.S. hegemony. To prepare for what promises to
be a long and costly fight, U.S. strategists made a pre-emptive move in
2022 to turn Europe away from its trade and investment relations with
Russia. In effect, they asked Germany to commit industrial suicide and
become a U.S. dependency. That made Germany the first and most immediate
target in America’s New Cold War.
Upon taking office in January 2021, Joe Biden and his national-security
staff declared China to be America’s number one enemy, viewing its
economic success as an existential threat to U.S. hegemony. To prevent
its market opportunities from attracting European participation as it
built up its own military defense, the Biden team sought to lock Europe
into the U.S. economic orbit as part of its drive to isolate China and
its supporters, hoping that this would disrupt their economies, creating
popular pressure to surrender their hopes for a new multiipolar
economic order.
This strategy required European trade sanctions against Russia, and
similar moves to block trade with China in order to prevent Europe from
being swept into the emerging China-centered mutual prosperity sphere.
To prepare for its U.S.-China war, U.S. strategists sought to block
China’s ability to receive Russian military support. The plan was to
drain Russia’s military power by arming Ukraine to draw Russia into a
bloody fight that might bring about a regime change. The unrealistic
hope was that voters would resent war, just as they had resented the war
in Afghanistan that had helped end the Soviet Union. In this case they
might replace Putin with oligarchic leaders willing to pursue neoliberal
pro-U.S. policies akin to those of the Yeltsin regime. The effect has
been just the opposite. Russian voters have done what any population
under attack would do: They have rallied around Putin. And the Western
sanctions have obliged Russia and China to become more self-sufficient.
This U.S. plan for an extended global New Cold War had a problem. The
German economy was enjoying prosperity by exporting industrial products
to Russia and investing in post-Soviet markets, while importing Russian
gas and other raw materials at relatively low international prices. It
is axiomatic that under normal conditions international diplomacy
follows national self-interest. The problem for U.S. Cold Warriors was
how to persuade Germany’s leaders to make an uneconomic choice to
abandon its profitable commerce with Russia. The solution was to foment
the war with Russia in Ukraine and Russia and incite Russophobia to
justify imposing a vast array of sanctions blocking European commerce
with Russia.....
Don't encroach on wilderness/semi-wilderness by building housing in forests.
From the cat bon/reinsurance mavens at Artemis, April 26:
US insurer Allstate has said that it will resume underwriting policies
in California once new regulation has been enacted that allows it to
price using forward-looking catastrophe risk models and include the
costs of reinsurance within its rates, Bloomberg has reported.
New regulations are set to be enacted in California in response to
what has been seen as an insurance crisis with carriers exiting the
state after taking heavy wildfire and weather losses in recent years.
Both of these issues, the inability to leverage modern catastrophe
models for pricing and to price sufficiently to afford the cost of
reinsurance, have been cited by a number of major carriers that have
pulled-back on writing business in California in recent years.
Now, Bloomberg has reported that Allstate is ready to return, on the condition the new regulations are passed....
From the International Monetary Fund's Finance & Development symposium, "Rethinking Economics" March 24:
....I used to subscribe to the near consensus among economists that immigration
to the US was a good thing, with great benefits to the migrants and
little or no cost to domestic low-skilled workers. I no longer think so.
Economists’ beliefs are not unanimous on this but are shaped by
econometric designs that may be credible but often rest on short-term
outcomes. Longer-term analysis over the past century and a half tells a
different story. Inequality was high when America was open, was much
lower when the borders were closed, and rose again post Hart-Celler (the
Immigration and Nationality Act of 1965) as the fraction of
foreign-born people rose back to its levels in the Gilded Age. It has
also been plausibly argued that the Great Migration of millions of
African Americans from the rural South to the factories in the North
would not have happened if factory owners had been able to hire the
European migrants they preferred....
Inside the Brutal Business Practices of Amazon—And How It Became 'Too Toxic to Touch'
In an interview with Vanity Fair, reporter Dana Mattioli reveals how the company systematically stifles criticism, squeezes out competitors, and even pits its own employees against one another. “People tend not to last,” she says, “because it’s very aggressive and it can be bruising.”
In May of 2020, seven members of the House Judiciary Antitrust Subcommittee penned a letter to then CEO of Amazon Jeff Bezos. “On April 23,” their message began, The Wall Street Journal
“reported that Amazon employees used sensitive business information
from third-party sellers on its platform to develop competing products.”
The article contradicted previous sworn testimony from the company’s
general counsel, possibly rendering the testimony “false or perjurious,”
the seven congressional leaders wrote.
In this interview with Vanity Fair, edited
for length and clarity, Mattioli and I spoke about the challenges of
reporting on an infamously secretive and combative company, Amazon’s
forays into political-influence peddling, its new foe in the Biden
administration, and which candidate she thinks Amazon execs want to see
back in the White House come January 2025.
Vanity Fair: What first got you interested in covering Amazon?
Dana Mattioli: I was TheWall Street Journal’s
mergers-and-acquisitions reporter for six years, and in that role, my
job was to cover which companies are buying other companies across
industries globally. Something fascinating happened during my tenure in
that role. It wasn’t just retail companies that were nervous about
Amazon. I’d speak to the bankers, the lawyers, the CEOs, the board
members at different companies, and they started talking about how they
were worried about Amazon invading their industry. Over the course of
those six years, those questions got louder. It started bleeding into
other sectors where you wouldn’t even really think about Amazon at the
time. The company seemed to stretch into every vertical and its
tentacles kept spreading. It occurred to me that this was the most
interesting company, but also one of the most secretive companies in
business history. That to me seemed like such a fun challenge to dig in
and see what was going on behind the scenes....
Eight main districts in Hangzhou including downtown Gongshu and Shangcheng, as well as Tonglu county, will be open for self-driving vehicle tests from May 1 Hangzhou’s initiative shows much-needed local government support for China’s autonomous-driving system developers
The municipal government of Hangzhou, the capital of eastern Zhejiang province, is looking to help step up China’s autonomous transport ambitions by opening the city’s main urban areas to self-driving vehicles starting from this year’s May Day holiday.
Eight
main districts in the city including downtown Gongshu and Shangcheng,
as well as Tonglu county – covering an area of 3,474 square kilometres –
will be made available to pilot tests of self-driving vehicles from
Wednesday, according to a report by local outlet Qianjiang Evening News.
This
new initiative by Hangzhou forms part of a new municipal policy to
bolster the application of “intelligent connected vehicles” within the
city, helping China’s move towards a driverless future....
CIOs are more confident in both liquid and illiquid allocations and building more resilient, “all-weather” portfolios.
While higher interest rates and a new market regime are stressing
many investors, to insurance companies, today’s markets feel closer to
normalcy — and their investment performance has left them feeling
confident about how they have constructed their portfolios.
The
“last 12 years have been abnormal, today is normal,” said a chief
investment officer at an insurance company, one of almost 50 CIOs who
participated in KKR’s first insurance survey since 2021. The group
surveyed oversees a total of more than $8 trillion in assets. Half were
based in the U.S., a third were based in Europe, and the rest in Asia or
elsewhere.
A little context: The last time KKR did the survey
there were $15 trillion of negative-yielding fixed income assets in
aggregate. “Today, by comparison, that number is zero,” a report on the
survey says. Insurers tend to have more conservative portfolios than
other institutional investors to protect their bottom line, should
claims be higher than risk models expected. In a low rate environment
with less risky assets like fixed income yielded little, insurers were
unable to write as many policies as they might have in the past.
But
higher interest rates meant CIOs could build up bigger pools of liquid
assets — namely government and other investment grade bonds — to meet
their overall return goals. This has benefited insurers at the business
level: They can now write more policies, thus driving revenue. It has
also enabled insurers to continue growing their allocations to alternative investments.
That combination has given insurers more confidence in their loss
reserves so they can write new business, which they want to do,
according to KKR....
They can invest in collateralized Beanie Baby obligations for all I care as long as they maintain their claims-paying capacity. If they don't, perhaps top insurance company officers should be subject to the old-school justice of Henry I:
"All the moneyers who were in England should be mutilated" This was the order given by King Henry I in 1125. Specifically, they should each "lose their right hand and be castrated....
Promises to train 850,000 workers and build datacenters
Microsoft CEO Satya Nadella says the company will invest $1.7 billion
in expanding its presence and building datacenters in Indonesia.
Nadella announced the investment during his grand tour of Southeast Asia, the same region Apple CEO Tim Cook visited
earlier this month. During his trip to the island country, Nadella met
Indonesian President Joko Widodo and his cabinet to discuss AI. In a blog post, Microsoft said it plans to "transform the nation into a global economic powerhouse."
"This new generation of AI is reshaping how people live and work
everywhere, including in Indonesia," Nadella said. "The investments we
are announcing today – spanning digital infrastructure, skilling, and
support for developers – will help Indonesia thrive in this new era."
To support this infrastructure, Microsoft will train 840,000
Indonesians in AI, a big chunk of the 2.5 million AI trainees envisioned
across Southeast Asia. It seems plans for the datacenters aren't set in
stone yet, but according to Reuters,
President Widodo said the small island of Bali just east of Java and
the soon-to-be new capital city of Nusantara on the island of Borneo
would both be good options....
There's a reason for today's Tesla, Tesla, Tesla theme. Something's up. As noted April 23:
It is possible that Mr. Musk knows more about electric vehicles and the
retail market for electric vehicles than I do. And it is possible that
he intuits something about the industry or the regulatory or government
policy framework toward electric vehicles that he hopes to either guard
against or take advantage of....
From the Daily Mail, April 30:
Elon Musk announced two senior executives were fired Monday night
The Tesla boss revealed he will go 'hardcore' with layoffs amid falling sales
He made a surprise visit to China Sunday promising driverless cars
Elon Musk fired two Tesla
senior executives and announced plans to go 'absolutely hardcore' with
layoffs, frustrated by falling sales and the pace of job cuts so far,
according to a new report.
The Tesla boss, who sat down with Chinese premier Li Qiang
on Sunday promising an imminent roll-out of driverless cars in the
country, sent a brutal email to senior managers Monday night, The Information reported.
Rebecca
Tinucci, senior director of the electric vehicle maker charging
infrastructure, and Daniel Ho, head of the new vehicles program, will
leave on Tuesday morning, the report said.
Musk
also plans to dismiss everyone working for Tinucci and Ho, including
the roughly 500 employees who work in the Supercharger group.
'Hopefully
these actions are making it clear that we need to be absolutely hard
core about headcount and cost reduction. While some on exec staff are
taking this seriously, most are not yet doing so,' Musk said....
Chip company gives a revenue forecast that’s in line with the consensus view at the midpoint
Advanced Micro Devices Inc. late Tuesday reported quarterly earnings
that met Wall Street’s expectations, but it wasn’t enough to boost the
stock as the company also merely matched the consensus view with the
midpoint of its outlook.
“This is an incredibly exciting time for the industry, as
widespread deployment of [artificial intelligence] is driving demand for
significantly more compute across a broad range of markets,” Chief
Executive Lisa Su said. “We are executing very well as we ramp our
data-center business and enable AI capabilities across our product
portfolio.”
The company said it expects
second-quarter revenue of $5.7 billion, plus or minus $300 million,
which is in line with analysts’ forecasts of $5.73 billion.
That would represent year-over-year growth of about 6% at its
midpoint, the company said. Non-GAAP gross margin for the quarter is
expected to be around 53%.
AMD shares
AMD
dropped more than 3% in after-hours trading Tuesday....
The Blue Oval reported an 84 percent drop in revenue in its Model e electric division.
Ford's Model e EV division reported a net revenue of around $100,000,000 in the first quarter.
Adding in expenses, though, the Blue Oval's EV arm lost $1.3 billion for the quarter.
Ford largely blames margin-cutting price cuts for the massive drop in revenue compared to Q1 2023.
Ford
reported a net income of $1.3 billion for the first quarter of 2024, a
figure largely bolstered by the success of the company's Ford Pro fleet
division and the $3 billion it brought in—more than three times that of
the internal-combustion-engine-focused Ford Blue arm. The Blue Oval's
battery-electric–oriented Model e division, however, remained a drain on
company funds, losing $1.3 billion for the quarter—around twice what it
lost during the same period in 2023. The company blamed "industry-wide
pricing pressure" in its first-quarter earnings presentation....
One of the current (!) and future cash flows that go into analyst models of Tesla's valuation is the charging business. In North America they basically own it, with by far the largest network of charging points and with 20 out of 22 competitors having signed on to the standard.
One figure that's been tossed around is $5 billion in annual revenue by 2030. Whether that's a good guess, I don't know but that's the order of magnitude. Plus it's easy to remember.
From IEEE Spectrum, April 18:
Wireless EV Charging Hits Key Benchmark Oak Ridge researchers move plugless electric future forward
Researchers at Oak Ridge National Laboratory in Tennessee recently announced that they have set a record for wireless EV charging.
Their system’s magnetic coils have reached a 100-kilowatt power level.
In tests in their lab, the researchers reported their system’s
transmitter supplied enough energy to a receiver mounted on the
underside of a Hyundai Kona EV to boost the state of charge in the car’s
battery by 50 percent (enough for about 150 kilometers of range) in
less than 20 minutes.
“Impressive,” says Duc Minh Nguyen, a research associate in the Communication Theory Lab at King Abdullah University of Science and Technology (KAUST)
in Saudi Arabia. Nguyen is the lead author of several of papers on
dynamic wireless charging, including some published when he was working
toward his PhD at KAUST.
The Oak Ridge announcement marks the latest milestone in work on wireless charging that stretches back more than a decade. As IEEE Spectrumreported in 2018, WiTricity,
headquartered in Watertown, Mass., had announced a partnership with an
unspecified automaker to install wireless charging receivers on its EVs. Then in 2021, the company revealed that it was working with Hyundai to outfit some of its Genesis GV60 EVs with Wireless charging. (In early 2023, Car Buzz reported that it had sniffed out paperwork pointing to Hyundai’s plans to equip its Ionic 5 EV with wireless charging capability.)....
Another development was the unveiling of a battery at the Beijing Auto Show last week.
From Reuters, another example of those advantage flywheels accruing incremental gains for the best-of breed-companies, in this case the world's largest EV battery producer. From Reuters, April 25:
"....that can add 370 miles (600 km) range in 10 minutes..."
And the flywheels? From the time CATL introduced the predecessor to the new battery, July 11, 2023:
"CATL announces new battery with 400 kilometer range on 10 minute charge" Have I ever mentioned the "Flywheel Effect?" ***** I think we're witnessing the Flywheel Effect in action at, not just China's but the world's largest battery producer. Incremental advantages lead to overwhelming business success. I don't know if there are 16,000 researchers in the entire rest of the battery biz. If that's the case, how can they catch up to CATL?
Amazing what being able to hire 16,000 researchers can lead to,
And just for grins and giggles, from Reuters, April 29:
This is such an important concept to grasp. It's the advantage flywheels, the rich
get richer, winner-take-all reality of business in 2024.
From Fortune via Yahoo Finance April 29:
Elon Musk has a message for America’s business leaders—either prepare
yourself for the AI revolution or start writing your corporate
obituary.
At a juncture in time when Tesla’s CEO is cutting back
on investments into new vehicle capacity, he is spending $10 billion
this year alone to bulk up on AI training and inference, and position Tesla at the forefront of the industry for real-life applications outside of generative AI.
“Any company not spending at this level, and doing so efficiently, cannot compete,” he posted on X Sunday.
Spending
on AI inference would primarily be targeted at his range of cars, a
possible indication that he is preparing the ground for the next
generation of his custom-designed Full Self-Driving (FSD) computer known
as HW5.
The distinction between training and inference is
important since close observers will know Musk is currently working on
another major AI project, his humanoid robot dubbed Optimus after the
1980s cartoon vehicle that transformed into a sentient robot.
This
bold and risky pivot toward AI—and by implication away from his
previous focus on a tenfold increase in car sales to 20 million EVs
annually—definitively answers the perennial question whether Tesla is an automaker or a tech company in favor of the latter.
Any
typical auto executive would have long since invested in rejuvenating
one of the oldest product ranges in the auto industry. For example,
Tesla’s EV archrival, BYD, is pumping out one new model after another across its portfolio of brands with the help of its small army of 90,000 vehicle engineers.
Tesla will spend around $10B this year in combined training and inference AI, the latter being primarily in car.
Any company not spending at this level, and doing so efficiently, cannot compete.
Musk however seems to view his cars more as an iPhone on wheels, a
premium device for delivering high-margin software, that can be sold at
lower profit since revenue will be recouped by offering services around
the vehicle.
Only
18 months ago, the idea of Tesla struggling to find customers seemed
ludicrous, to borrow a favorite adjective of Musk. Yet China’s new
generation of EV rivals are in a class of their own when it comes to value for money, and his own personal brand has been tarnished.
The advantage flywheels
keep spinning and reinforcing each other to the point that the Pareto
distribution of profits - 20% of companies reap 80% of the profits - is
becoming Super-Pareto where 5% of the companies reap 95% of the profits
and is approaching Hyper-Pareto at maybe 2% of companies reaping 98% of profits.
It all comes down to having the resources to keep up.
I
watched Mr. Huang give the keynote and it's all a bit much to digest
before firing out comments that would make any sense at all so here are
some of today's headlines to give a taste of what the intro paragraph is
based on.
These are Nvidia's press releases via GlobeNewswire....
It's not some cutesy management* fad or pop insight like "Business secrets of Genghis Khan."
To
the rich go the profits and internalizing that fact makes the rest of
this portfolio construction/fund management/investing stuff easier to
conceptualize and execute.
And AI is accelerating the already extant dynamic.
*****
*Although
people had been observing and discussing "rich get richer" and
"winner-take-all" dynamics for over a century, one of our favorite
pointers toward the current situation did come out of a business school.
We've been hammering on this for so long that I start to bore myself.
Here's a recapitulation from last year, linking to an article that was published seven years ago today:
HBR—From Pareto To Hyper-Pareto: "AI Is Going to Change the 80/20 Rule"
A prescient article from the Harvard Business Review, February 28, 2017:....
...Much more important than the direct monetization of big data is the strategic advantage it can bestow over time.
In a winner-take-all economy, as in a horse race, small differences in
superiority are rewarded all out of proportion to the actual advantage. A
top thoroughbred may only be a couple fifths of a second faster than
the field but those two lengths over the course of a season can mean
triple the earnings for #1 vs. #2.
In commerce the results can be even more dramatic because rather than
the 60%/20%/10% purse structure of the racetrack the winning vendor will
often get 100% of a customer's business.....
Just to
reiterate, every incremental advantage that a company can afford does
not affect income production in isolation. They accrete in sometimes
unforeseeable combinations:
A very handy conceptual framework first posted after the start of the U.S. lockdowns, April 2020. Schools were closed so it seemed natural to link to a superb mini-MBA module.
It really is a big deal that a company can afford to spend over a
billion dollars to build their own supercomputer and it really is a big
deal that the same company has all the training data from the billions
of miles of real-world driving and it really is a great example of the
concept of advantage flywheels and hyper-pareto distribution of rewards, i.e. the rich get richer.
Whether it is going to open-up the $10 trillion addressable market and add the $500 billion of market cap that Morgan Stanley foresees is still an open question....
And many more. If interested use the 'search blog' box, upper left.
It could have been the Financial Times. More after the jump.
From Barron's, April 27/29:
“Before Google was in the search business, we were in the search business,” CEO Steve Hasker told Barron’s.
You may think that
Thomson Reuters
is in the news business, and that’s true as far as it goes—but it doesn’t go nearly far enough.
News, i.e., the Reuters part of this Canadian company, accounts
for only some 10% of the company’s revenue. The other 90% comes from
data businesses like Westlaw, UltraTax, and ONESOURCE, which is
fortuitous, because, as British mathematician Clive Humby famously
opined in 2006, “data is the new oil.” In that case, perhaps it’s
understandable that Thomson Reuters has been on a remarkable—though
somewhat under-the-radar—run, with its stock far outpacing the market
over the past decade.
Just please don’t call Thomson Reuters a media company.
“We’re a tech stock, not a media stock,” Thomson Reuters CEO
Steve Hasker says quickly when I suggest the latter. “The distinctions
have been pretty clear in terms of performance. We take unique and
proprietary content, add [artificial intelligence] and machine learning,
and we deliver it through best-of-breed software.”
In fact, some of Thomson Reuters’ financials and market action
of its stock seem to back Hasker up. Thomson Reuters did $6.8 billion in
revenue last year and has a $69 billion market capitalization. Its
stock has gained 26% in the past six months, versus 21% for the market.
The share price hovers around $154, and BMO analyst Tim Casey rates the
stock Outperform with a $165 price target. Shares trade for 43.6 times
Casey’s 2024 earnings per share estimate of $3.53—very much a tech
valuation, no?
“Thomson Reuters offers a compelling mix of organic growth and
free cash flow conversion with a demonstrated track record of returning
capital to shareholders,” Casey wrote to me in an email. “Its core
businesses have high barriers to entry, and AI represents an attractive
growth opportunity.”
One key reason why data is becoming ever more valuable is that
the corporate world is becoming ever more complex. Banking on that
trend, —an underpinning of Thomson Reuters’ strategy—has turned out to
be a damned good business. “This idea of the complexity associated with
compliance, [gives us] a very significant tailwind,” says Hasker, an
affable Aussie and recovered McKinsey consultant who also ran Hollywood
talent agency CAA and was a top executive at measurement company Nielsen
Holdings.
“The number of laws, tax and accounting regulations, the
complexity of audits, entirely new forms of regulation and governance
around [environmental, social, and governance concerns], and climate,
this is something that just gets ever more complex,” Hasker says. “It’s
not a realistic or scalable option for companies to just add more
headcount to navigate that environment. They have to rely on
technology.”
A bit of intricacy comes with the territory at Thomson Reuters
itself, which is the product of Thomson, a family-owned Canadian
newspaper empire founded in Timmins, Ontario, in 1934, and the
London-based wire service Reuters, which German-British entrepreneur
Paul Reuter established in 1851.
(Some Reuters trivia: Paul Reuter employed carrier pigeons and
later was an early adopter of the telegraph, allowing his company to
become the first news source in Europe to report Abraham Lincoln’s
assassination in 1865. Paul Reuter’s granddaughter-in-law—Marguerite,
Baroness de Reuter—died in 2009 at the age of 96 as the last member of
the the Reuter family.)
Reuters, which remains a global bastion of trustworthy,
non-partisan news, was bought by Thomson in 2008. The Thomson family,
Canada’s richest, owns just under 70% of Thomson Reuters via its
investment company Woodbridge. The remaining balance is traded on the
New York and Toronto stock exchanges.
And then there’s this slightly complex transaction: In 2018,
Thomson Reuters sold 55% of its financial and risk analysis business,
which competes with Bloomberg and FactSet, to Blackstone for $20 billion
in cash, renaming it Refinitiv along the way. Three years later,
Blackstone and Thomson Reuters sold Refinitiv, whose name has since been
retired, to the London Stock Exchange Group for $27 billion in LSEG
stock. Since then, Thomson Reuters and Blackstone have been selling down
their stakes in LSEG....
on former FT Alphaville owner Pearson and its stock, Dec. 1, the day the
Financial Times was handed over to Nikkei, while appearing to be having
a normal conversation with Alphavillein Bryce Elder:
...PM
(So here’s our advice on the stock at 832p….)
PM
( Run )
BE
...Today, though, the message is dovish. So we’re all choosing to forget about 2016.
PM
( Scarper )
PM
( Get out )
PM
( Bin it )
-------- PM
( You don’t think another profit warning is coming? Oh course another profit warning is coming! )
-------- PM
( And I can tell you it’s a screaming sell.)
--------
PM
( I can tell you what happens next…)
PM
( Having focused the business down and down and down so that it’s pure corporatised education…)
------- PM
( And with corporatised education, er, falling slightly out of fashion…)
------- PM
( The next effort will be to slash costs — slashing with a blunt knife. A panic. )
------- PM
( My guess is 15 per cent of the workforce will go. )
-------
PM
( Across the board. )
PM
(except not in the boardroom, of course )
PM
(It’s a lucky escape for us, cos the 15 per cent cut would have hit us as well. 100 journo jobs would have gone. )
BE
Is that enough on banks? Actually, Goldman too. Just because.
--------
--------
PM
(If you look back to the late 90s, the FT had all the bits to construct Bloomgerg. )
PM
( Had a world class consumer offering in the form of the paper )
PM
(But it also had a newswire, and an online markets business — Market Watch.)
BE
Should we move on to other matters?
11:22AM
PM
(It had data, in the form of IDC)
PM
(Had Extel. Had what became factiva.)
PM
(Had a huge EM news business.)
BE
Okay …………. I think I have to do a quick bit of de-RAW here.
--------
BE
Coincidentally, we were chasing the same story from a slightly different angle.
BE
The rumour that reached us was that National Grid was working on a bid of around $45 a share for ITC …
PM
(People here complained of a lack of investment from Pearson. Investment???They were sucking the life-blood out of the thing. )
---------
BE
… However, that would all appear to be very, very premature..
BE
What we can say with some confidence is that National Grid’s in the ITC auction process, which kicked off a week ago …
BE
But NG only appointed a new CEO at the start of the month, and is in
transition between the old guy and the new guy for the rest of the year.
BE
And NG’s balance sheet doesn’t make ~$7bn-ish deals look very easy.
BE
So. If National Grid’s involved …
BE
… It’s much more likely to be in there to look at the numbers of a rival, rather than to launch an offer.
PM
(Sure, there was one short period, during the dot comedy, that the FT
was allowed to expand. It was a disaster, timing wise. But Pearson made
up all the associated losses with one disposal — Market Watch. That
covered everything.)
BE
Also, note, there’s no shortage of potential bidders. It’s a crowded process.
PM
(Anyway, ive said enough. We’re under new ownership now. )
PM
( Sell Pearson )
BE
Also likely to be in there are Berkshire Energy, Iberdrola’s Avangrid, Hydro One, NextEra Energy, American Electric Power ….
